President Donald Trump on Thursday signed an executive order directing federal agencies to reclassify marijuana, a move that would significantly loosen decades-old federal restrictions and mark the biggest shift in U.S. cannabis policy in more than 50 years.
Under the order, marijuana would be moved out of Schedule I of the Controlled Substances Act — the most restrictive category, shared with drugs like heroin and LSD — and placed into Schedule III. Substances in Schedule III are recognized as having accepted medical use and a lower potential for abuse, a category that includes drugs such as ketamine and Tylenol with codeine. The change will take effect once it is finalized by the Drug Enforcement Administration.
Speaking from the Oval Office, Trump said the action was driven by patients who rely on cannabis for medical relief. He cited Americans suffering from severe pain, incurable diseases, cancer, seizure disorders and neurological conditions, as well as veterans with service-related injuries and older Americans living with chronic illnesses that significantly reduce their quality of life.
At the same time, the administration announced a new healthcare initiative tied to the policy shift. The Centers for Medicare and Medicaid Services, led by Dr. Mehmet Oz, is expected to launch a pilot program in April that would allow certain Medicare-covered seniors to receive free, doctor-recommended CBD products. According to senior White House officials, the products must comply with all state and local laws, come from legally compliant sources, and undergo third-party testing to verify CBD levels and screen for contaminants.
Despite the historic nature of the announcement, cannabis stocks fell sharply on Thursday, as investors appeared concerned about increased competition, including potential entry by international and pharmaceutical companies. Trulieve shares dropped roughly 23%, Green Thumb Industries fell more than 16%, and Tilray Brands declined about 4% by market close. The AdvisorShares Pure US Cannabis ETF slid nearly 27%.
Industry leaders largely welcomed the move. Green Thumb founder and CEO Ben Kovler called the reclassification a historic step, noting that millions of registered patients — many of them veterans — rely on cannabis to manage chronic and debilitating symptoms. He described the announcement as only the beginning of broader reform.
Analysts say the reclassification could be a major financial boost for the cannabis industry. Moving marijuana to Schedule III would exempt cannabis companies from IRS Code Section 280E, allowing them to deduct ordinary business expenses such as rent and payroll for the first time. The shift could also ease access to banking services and institutional investment that has long been restricted due to federal compliance concerns.
Wall Street analysts also expect the policy change, combined with the Medicare CBD pilot program, to attract large pharmaceutical companies seeking access to federally insured healthcare markets.
Even as CBD products have become increasingly common in consumer goods ranging from beverages to skincare, the Food and Drug Administration has remained cautious. Studies have shown mixed results regarding CBD’s effectiveness, and FDA-funded research has raised concerns about potential liver toxicity and interactions with other medications when CBD is used long term. To date, the FDA has approved only one CBD-based medication, Epidiolex, for the treatment of rare forms of epilepsy.
Trump emphasized that the executive order does not legalize marijuana or approve its recreational use. He said the action is limited to reclassification and does not change federal laws governing marijuana possession or consumption.
Experts and industry insiders told CNBC that the new classification could open the door to expanded research into cannabis and CBD, potentially leading to clearer medical guidance and future regulatory decisions.