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Cannabis Rescheduling Explained: What We Know, What We Don’t, and What’s Next

Last week, President Trump made history when he signed an executive order (EO) directing the Attorney General to expedite the process of reclassifying cannabis to Schedule III and removing barriers to research to “increase medical marijuana and CBD research to better inform patients and doctors.” 

There’s no disputing that this is a game-changing moment for the cannabis industry and how the plant is viewed writ-large, but there’s still many questions and unknowns. Let’s take a look at some of the most frequently asked questions I’m getting about what’s next and what it all means:

What Did the Cannabis Rescheduling Executive Order Actually Say?

The EO directs the Attorney General to expedite completion of the process of rescheduling marijuana to Schedule III of the Controlled Substance Act (CSA). It also directs the White House Deputy Chief of Staff for Legislative, Political, and Public Affairs to work with the Congress to allow Americans to benefit from access to appropriate full-spectrum CBD products while still restricting the sale of products that pose serious health risks. Additionally, the EO directs the Department of Health and Human Services (HHS) to develop research methods and models utilizing real-world evidence to improve access to hemp-derived cannabinoid products in accordance with Federal law and to inform standards of care.

When Will Cannabis Rescheduling to Schedule III Take Effect?

What This Means for 280E Relief and Cannabis Businesses

The truth is, we really don’t know. There is no deadline, and we know that it will be at least 30 days due to the Administrative Procedure Act (APA). As of publication, the Attorney General has not filed any type of final rule and neither the DEA nor the DOJ has responded to the public comments that were received on the proposed rule in 2024.

We also have to consider litigation that will surely be filed by our opponents. For instance, Smart Approaches to Marijuana (commonly known as Project SAM) had already stated that they plan to file against the Administration (likely on procedural grounds). 

The APA establishes the framework for judicial review of agency actions and while the APA itself does not specify a statute of limitations for general review, the default period for a civil action against the United States is generally six years after the claim first accrues, however, specific statutes for judicial review of certain agency actions may impose shorter deadlines, sometimes requiring a petition to be filed within 30 days after the final agency action. 

In short, we have to wait and see (frustrating, I know!). 

How Cannabis Rescheduling to Schedule III Affects Banking

A move to Schedule III does not solve the cannabis industry’s banking problems completely. Such a move would/will likely result in lower perceived legal risk for banks, more compliance comfort, expanded access to traditional services, and possibly even improve capital markets access; but it would/will not provide safe harbor for cannabis businesses or automatically change FinCEN guidance. That’s why it’s more important now than ever that we continue to advocate for the introduction and passage of bills like the SAFER Banking Act and the CLAIM Act.

NCIA’s Position on Cannabis Rescheduling to Schedule III

NCIA supports President Trump’s decision to officially direct the Attorney General to reclassify cannabis as a Schedule III substance. Medical professionals, patients, and millions of Americans have long understood that cannabis has accepted medical use and does not belong in the same category as the most dangerous controlled substances. By taking this step, the Administration is recognizing the realities of today’s regulated markets and the work states have done to responsibly oversee them.

That said, Schedule III cannot be the final word. NCIA urges policymakers to build on today’s decision by establishing a framework that respects states’ rights, supports responsible operators, and provides clear federal enforcement guidelines in order to provide certainty to the thousands of businesses operating openly and in compliance with state law. NCIA will continue working to ensure that this industry can thrive under policies that are fair, consistent, and reflective of modern realities.

After more than half a century of prohibition, the importance of this moment cannot be understated- but our association knows that this is just the beginning of a new day for cannabis. As we close out the year, NCIA is thankful to our members for their support and urges those of you who aren’t members to join today or make a donation. Together, we’ll continue to move this industry forward and ensure that progress continues in Washington, DC and beyond. 

Wishing you and yours a wonderful holiday season and happy new year!

Turning Advocacy Wins into Operator Wins

The word “advocacy” is a loaded term. It evokes different emotions in different people. However, in the cannabis industry, it’s a case of goose and gander, as a win for advocacy is a win for operators as well — with policy wins ultimately translating into financial benefits for operators. Thus, it would stand to reason that whenever possible, operators should lend their support to the side of advocacy. In this article, we’ll explore how the two can work together to their mutual benefit.

From Bill Passage to Bank Balance

Due to its quasi-legal status, every positive legislative change can be a massive boon for the cannabis industry. As many are aware, the industry can often operate on a cash-only basis due to federal restrictions. Thus, something like the SAFER Banking Act, which advocates have been pushing for, can be highly beneficial to the industry.

To recap: this act would help provide federal protection to financial institutions, including preventing the depository institution from being penalized for providing banking services to a state-sanctioned cannabis business. Further, the Act prohibits a federal banking service from requesting or requiring a depository institution to cancel a deposit account.

While this act is still waiting to be passed by the Senate, it could represent a significant step forward for the industry by offering essential banking services such as loans, credit lines, and cash management services, such as armored deposit services.

Another big issue for cannabis advocacy is rescheduling. Going from a Schedule I narcotic to a Schedule III narcotic would also open many doors for the industry. One of the most significant advantages of this shift would be the elimination of IRC 280E, which restricts what operators can deduct under the tax code. Unshackled from this prohibitive tax code, operators would have a wealth of items they could deduct, such as wages, rent, utilities, insurance, marketing, and administrative costs.

The benefits of rescheduling wouldn’t stop there. This shift could also herald more research and development opportunities for cannabis, as there would be a greater legal recognition of the plant’s medicinal value.

TL;DR: Advocacy could help operators in many ways; here are but a few examples:

  • The SAFER Banking Act would provide federal protections, allowing banks to safely offer essential services, such as checking accounts, loans, and cash management, to state-legal cannabis businesses. This would reduce cash-only risks and improve industry stability.
  • Rescheduling cannabis to Schedule III would eliminate the restrictive tax code 280E, enabling cannabis businesses to deduct regular business expenses and promoting more research, development, and legal recognition of cannabis’s medical value.

Now, let’s discuss how the industry is already working together to be most effective for everyone.

Coalition Building

Fortunately for the cannabis industry, supporters are passionate and proactive. We can examine several examples of how the industry has leveraged partnerships across different segments to the benefit of everyone.

California NORML – (CA NORML)

The oldest chapter of NORML, established in 1972, the National Organization for the Reform of Marijuana Laws — California chapter continues its legacy from the Compassionate Use Act of 1996 to the recent passage of AB 564, a tax-reducing policy.

California NORML unites the cannabis industry by coordinating lobbying, publishing resources, and building a business directory — acting as a bridge between consumers, legislators, and cannabis businesses to promote equitable laws and industry cohesion.

The Minority Cannabis Business Association (MCBA)

Favoring a grassroots approach, the MCBA seeks, in their words:

“To create equal access for cannabis businesses and economically empower communities of color through policy, programming, and outreach initiatives to achieve equity for the communities most impacted by the War on Drugs.”

Through advocacy and events, the MCBA creates partnerships through many industry segments (retail, cultivation, etc.) for maximum impact.

Besides working together, let’s explore how we can utilize one state’s win as a model for others.

National Cannabis Industry Association (NCIA)

NCIA brings together various players in the cannabis industry by providing national advocacy, policy coordination, education, networking, and a member directory across all verticals — ensuring businesses and stakeholders speak with one informed, powerful voice.

Scaling Local Success 

We can look to states such as California, Oregon, and Washington as (limited) success stories. These states have passed legislation enabling their governors to enter into interstate agreements, allowing border-transversing sales of cannabis between states where it is legal. This enables operators to reach far-flung markets beyond their home state. We see how these states follow each other’s lead while also working collaboratively to secure the best return on investment, although full-scale interstate commerce remains limited pending federal changes.

We can also turn back the clock nearly thirty years from today to when California passed the Compassionate Use Act of 1996. Other states would follow California’s model, and by 2023, 37 states had medical marijuana laws.

Or we can turn to Colorado and Washington, rewinding the clock not quite as far to 2012, when the states legalized recreational cannabis use. This would also serve as a model for other states, and by 2023, 19 states had followed Colorado’s example.

It goes without saying that when one state makes progress for cannabis reform and has quantifiable results, other states are likely to follow suit.

Conclusion

There is no cannabis industry without advocacy. Every step advocacy makes, operators are in lockstep with it. Fortunately, as competitive as the industry is, groups like the National Cannabis Industry Association are arduously working for legislative changes that benefit many in the industry. At the same time, we have other organizations like the Minority Cannabis Business Association toiling to help specific groups that have been historically disadvantaged. However, when these minority groups benefit, everyone benefits — as these social equity initiatives support whole communities by providing jobs and using tax revenue for mental health support, legal services, and other community reinvestment programs.

And speaking of tax revenue, when one state’s cannabis laws are effective — whether medical or recreational — it’s easier to get the ball rolling on similar laws in other states.

Committee Blog: The Digital Dollar Dilemma – How a U.S. CBDC Could Reshape Cannabis Banking

Published by NCIA’s Banking & Financial Services Committee (BFSC)

Executive Summary

A potential U.S. Central Bank Digital Currency (CBDC) represents one of the most disruptive technologies on the horizon for the financial world, with profound implications for the cannabis industry. While a “digital dollar” could theoretically solve the industry’s payment rail issues overnight, it also introduces significant threats related to privacy, data security, and direct federal oversight, creating a high-stakes dilemma for cannabis businesses and the institutions that bank them. However, recent developments have fundamentally altered this landscape, particularly the January 2025 Executive Order 14178 halting U.S. CBDC development and ongoing progress with cannabis banking legislation.

Current State Analysis

The conversation around a U.S. CBDC has evolved dramatically from academic theory to active research, most notably through the Federal Reserve’s collaboration with MIT on “Project Hamilton,” which completed its Phase 1 research in February 2022. However, in January 2025, President Trump issued Executive Order 14178, explicitly prohibiting federal agencies from “undertaking any action to establish, issue, or promote a CBDC” and revoking previous digital asset policies. This makes the United States the only major economy to halt CBDC development through executive action. Despite this policy shift, understanding the potential impacts of CBDCs remains relevant, as policy positions can change with administrations, and other countries continue rapid CBDC development that could influence global financial systems. For the cannabis industry, banking challenges persist despite the executive order. The core issue remains the industry’s reliance on private-sector workarounds. Fintechs and banks have invested heavily in BSA/AML programs to manage the risks of handling cash deposits.

Legislative Developments

Simultaneously, significant progress has occurred with cannabis banking legislation. The SAFE Banking Act evolved into the SAFER Banking Act (S.2860), which passed the Senate Banking Committee with a bipartisan 14-9 vote and awaits a Senate floor vote. This legislation would provide safe harbor protections to financial institutions serving state-legal cannabis businesses, potentially resolving many banking challenges independent of any CBDC considerations. Additionally, cannabis rescheduling efforts at the federal level could fundamentally alter banking access. While rescheduling alone wouldn’t resolve all banking issues, it would reduce regulatory burden and risk perception for financial institutions considering cannabis banking services.

Regulatory Landscape

The introduction of a CBDC, if policy were to reverse, would create a direct and unavoidable conflict with the Controlled Substances Act (CSA). Every transaction involving a CBDC would be recorded on a central ledger managed by the Federal Reserve, raising critical policy questions about privacy versus surveillance. The Federal Reserve’s previous white papers presented various models, from anonymous, token-based systems (similar to cash) to account-based systems that would link every transaction to a verified identity. If the U.S. were to adopt an identity-based CBDC in the future, the federal government would have a real- time, unalterable record of every dollar spent at every state-licensed dispensary in the country.

Alternative Pathways

With CBDC development currently halted, the cannabis industry must focus on alternative pathways to banking normalization:

1. Legislative Solutions: Continued advocacy for the SAFER Banking Act and similar legislation that would enable traditional banking services.

2. Existing Compliance Frameworks: Further investment in robust compliance programs under current FinCEN guidance, which remains relevant despite policy shifts.

3. Private Sector Innovation: Development of alternative payment solutions that can operate within current regulatory frameworks.

4. State-Level Banking Solutions: Some states are exploring state-chartered banking options specifically for cannabis businesses.

Key Takeaways

• The January 2025 Executive Order significantly altered the U.S. CBDC landscape but hasn’t resolved cannabis banking challenges

• The SAFER Banking Act represents the most immediate potential solution for cannabis banking issues

• Banks should continue investing in current compliance technologies rather than waiting for CBDC or legislative solutions

• The cannabis industry must actively engage with multiple parallel policy debates that impact banking access

• Privacy concerns remain central to any digital payment solution for the cannabis industry, whether government or privately issued

• Cannabis rescheduling efforts represent another potential pathway to improved banking access independent of payment technology development

Navigating the Cannabis Landscape: Federal Cannabis Reform Outlook for 2024

A month into 2024, Congress is (still) grappling with a number of urgent, must-pass bills related to issues like border security, aid for Ukraine and Israel, and the federal budget. At a time when the government seems more dysfunctional than ever, it’s important to remember that this chaos results in cannabis issues (and unfortunately, many others) having difficulty in gaining traction in Congress. As a result, cannabis legislation and priorities have been slow moving so far this year- but I feel confident that there’s light at the end of the tunnel!

SAFE Banking 

To recap: the ever-elusive SAFE Banking Act was reintroduced in 2023 by Senators Jeff Merkley (D-OR) and Steve Daines (R-MT) alongside Representatives Earl Blumenauer (D-OR) and Dave Joyce (R-OH). Soon after, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing titled “Examining Cannabis Banking Challenges of Small Businesses and Workers” discussing both the bill and the topic of cannabis banking broadly. 

As the momentum for SAFE Banking increased, so did some Senators’ concerns– primarily surrounding a provision that would bar federal banking regulators from taking discriminatory enforcement action against any industry. 

As a result, an updated version of the bill called the SAFER (Secure and Fair Enforcement Regulation) Banking Act was introduced, marked up by the Committee, and passed out of Committee by a vote of 16-14 in late September 2023. 

That brings us to 2024. Although SAFER has not been scheduled for a floor vote yet, NCIA is cautiously optimistic on its chances this year — whether that be as a standalone bill or attached to another larger financial services related package. That being said, the bill will undoubtedly face an uphill battle no matter how it arrives at the GOP-controlled House of Representatives.

Other Congressional News

Outside of SAFE(R) Banking, there has been some additional congressional cannabis news in 2024 including a Senate letter urging descheduling, a bicameral letter regarding Chinese-related illicit grow operations, and a new Congressional Research Service (CRS) report on the impact of moving cannabis from Schedule I to III in the federal Controlled Substances Act.

In late January, Senators Elizabeth Warren (D-MA) and John Fetterman (D-PA), led nine of their Democratic colleagues (including Senate Majority Leader Chuck Schumer [D-NY]), in sending a letter to Attorney General Merrick Garland and Drug Enforcement (DEA) Administrator Anne Milgram. The letter urged Milgram and Garland to remove marijuana from Schedule I of the Controlled Substances Act entirely, commonly known as descheduling. 

Then, just days ago, Senators Joni Ernst (R-IA) and Angus King (I-ME) alongside Congressmen Pete Sessions (R-TX), Jared Golden (D-ME), and David Valadao (R-CA) led 48 of their colleagues in calling on Attorney General Merrick Garland to prevent any national security risk and end any illicit human trafficking connected to Chinese-linked marijuana farms in the United States. 

In the bipartisan, bicameral letter, the lawmakers pointed out that Chinese nationals (some with potential ties to the Chinese Communist Party), are operating marijuana farms across the country and even potentially engaging in human and drug trafficking in conjunction with these operations. The lawmakers asked the Department of Justice for a briefing on the topic by the end of the month and posed several specific questions for the agency. 

In mid-January, the Congressional Research Service (CRS) released a new report titled “Legal Consequences of Rescheduling Marijuana” that primarily focused on “Legal Consequences If Marijuana Moved to Schedule III” and considerations for Congress. CRS works for members of Congress and their committees and staff on a confidential, nonpartisan basis and is highly regarded here in Washington, D.C. 

Biden Administration

In 2022, the Biden Administration announced that it would ask the Secretary of Health and Human Services (HHS) and the Attorney General to initiate the administrative process to review how marijuana is scheduled under federal law. 

As a result, in August 2023, news broke that the Department of Health and Human Services (HHS) recommended to the Drug Enforcement Administration (DEA) that cannabis be rescheduled and placed in Schedule III, meaning that it has moderate to low abuse potential, a currently accepted medical use, and a low potential for psychological dependence. Since then, the DEA has been conducting their review of where marijuana should be placed in the Controlled Substances Act, which will then be followed by a public comment period. 

To be clear, NCIA supports ending the criminalization of our industry by removing cannabis (including THC) from the federal Controlled Substances Act altogether so that our businesses are treated like all other lawful American businesses. That being said, it’s likely that the DEA will follow the HHS recommendations and choose to place marijuana in Schedule III.

While NCIA continues to draft our response to the inevitable announcement — whatever it may be — we also want to hear from our members about their views on this critical issue. If you are a member of NCIA, check your inbox for a link to our online survey in order to make your voice heard. If your business isn’t yet a member but you want to get off the sidelines of the cannabis reform movement, join today!

NCIA is proudly the only organization focused on representing independent businesses in our nation’s capital and the work we do moving policy reforms forward is only possible because of the hundreds of businesses that make up our membership.

It goes without saying that 2024 is shaping up to be a big one for federal cannabis policy reform. Stay connected and engaged by attending one of our upcoming Stakeholder Summits where you can engage and learn from state officials, federal policymakers, and even me!

If you really want to play a bigger role in advancing cannabis policy reform, we hope you’ll also join us in Washington, D.C. for our 12th Annual Cannabis Industry Lobby Days this May. See you there!

SAFER Banking Act Clears Senate Committee

NCIA (and myself personally!) have been talking about the SAFE Banking Act for years. 

After the Senate Banking Committee’s hearing on the topic of financial services and the cannabis industry in May, it became clear that in order for the bill to continue on in the legislative process and receive a markup that changes to a few sections needed to be made. 

As a result, a slightly new (and improved?) version of the bill was introduced as the SAFER (S. 2860: Secure and Fair Enforcement Regulation) Banking Act last month. Most of the changes in the bill pertained to Section 10, which bars federal banking regulators from taking discriminatory enforcement action against any industry (not just cannabis). 

Once SAFER was formally introduced, the Senate Banking Committee announced that a markup was scheduled for September 27. It’s important to note that this was the first time ever that a Senate committee held a markup on a pro-cannabis bill. 

During the markup session, multiple amendments were offered. The first, offered by Chairman Brown (D-OH) was what’s known as a “manager’s amendment” and primarily made technical changes to the bill. That amendment also made changes so that the Treasury secretary would be given one year (instead of 180 days) to issue updated guidance to financial institutions that work with cannabis businesses that was first released during the Obama administration in 2014. It also stipulated that federal home loan banks are now included under a list of financial institutions that would be protected from being penalized by federal regulators simply for working with state-legal cannabis businesses.

Another amendment, from Sen. Warnock (D-GA) would have created a 5-year sunset for the legislation unless a report from the Treasury Department certified that it had decreased the racial wealth gap and ameliorated other negative economic impacts of the war on drugs. This amendment ultimately failed. 

Additionally, amendments from Senators Hagerty (R-TN), Rounds (R-SD), Crapo (R-ID) were also offered but were ruled out of order, withdrawn, and failed, respectively.

Republican members of the committee voiced concern that the bill allowed for financial institutes to utilize reputational risk to de-bank certain accounts they do not align with ideologically and argued that no financial regulator should be able to pressure any financial entity to refuse to provide service to a lawful entity.

Some Democrat members, particularly Sen. Warnock (D-GA), voiced concern that the bill does not adequately address the disproportionate impacts of marijuana criminalization and its exacerbation of the racial wealth gap in the United States. Other members of the committee encouraged amendments and future legislation intended to improve the quality of life for those most negatively impacted by marijuana criminalization in addition to creating safer conditions for banks and other financial institutions. Sen. Warnock was the lone Democrat who voted “No” on the bill during the markup. 

Ultimately, the bill passed out of the committee markup by a bipartisan vote of 14-9. This sets the stage for a full Senate floor vote, which Majority Leader Schumer (D-NY) has committed to scheduling as soon as possible, with the possibility of adding the HOPE and GRAM Acts to the bill before passage.

I don’t know about you, but I’m not done making history yet! Stay tuned for the latest on the SAFER Banking Act and how you can help get the bill passed! 

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