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The basics:

• DOJ shifts medical marijuana from Schedule I to Schedule III under federal law
• Move enables tax deductions, expands research for cannabis operators
• Order legitimizes state medical programs, including New Jersey
• Recreational marijuana remains illegal at the federal level

The White House took another step toward easing federal restrictions on marijuana.

Acting U.S. Attorney General Todd Blanche moved state-licensed medical cannabis out of the government’s most restrictive category under an April 23 order.

The change shifts the substance from the tightly regulated Schedule I category, which includes heroin and LSD, and into a tier that includes drugs like Tylenol and steroids.

As a Schedule I controlled substance, federal law previously considered cannabis a drug that has a “high potential for abuse” and “no currently accepted medical use.” By reclassifying it as a Schedule III, the government recognizes medical cannabis as having a moderate to low potential for physical and psychological dependence.

The newly signed order effectively legitimizes medical programs in 40 states, including New Jersey.

Additionally, the order establishes a registration system with the Drug Enforcement Administration for state-licensed producers.

Other high points of the action include:

• Makes clear that cannabis researchers won’t be penalized for obtaining state-licensed marijuana or marijuana-derived products for use in their work
• Allows state-licensed medical marijuana companies to deduct business expenses on their federal taxes, for the first time
• Moves U.S. Food and Drug Administration-approved marijuana-derived medicine into Schedule III

However, it does not legalize or decriminalize marijuana at the federal level for recreational or general medical use. According to officials, new administrative hearings to debate a broader rescheduling are slated for June.

It is unclear how the change will impact dual-use states, such as New Jersey, where both recreational and medical products are legally on sale.

The order comes more than four months after President Donald Trump told his administration to fast-track the reclassification.

How we got here

In a statement Blanche said, “The Department of Justice is delivering on President Trump’s promise to expand Americans’ access to medical treatment options. This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information.”

The Associated Press noted the legal mechanism used by Blanche sidesteps a lengthy review process initiated under the prior administration. According to the outlet, the acting AG relied on a provision of federal law that allows the attorney general to determine the appropriate classification for drugs that the U.S. must regulate pursuant to an international treaty.

The effort to reschedule marijuana started under President Joe Biden in 2022, when he asked federal health and law enforcement officials to take another look at the drug’s classification.

By 2023, health officials said cannabis has legitimate medical uses and recommended moving it to a lower category, but the process has since slowed. While a president alone can’t change the classification, the White House can push agencies to move it forward — though legal challenges could still delay any final change.

While on the 2024 campaign trail, Trump voiced support for cannabis, “smart regulations” and ending “needless arrests and incarcerations.” He also said that, as president, he would favor reclassifying marijuana as a Schedule III controlled substance and “work with Congress to pass common sense laws,” including banking reform for cannabusinesses. And the Republican reiterated his belief in each state’s right to approach legalization.

Last week, as the president signed an unrelated executive order about psychedelics, he seemed to express frustration at how long cannabis reclassification was taking.

High hopes

Mandelbaum Barrett PC Chair of the Cannabis, Hemp and Psychedelics practice group Joshua Bauchner told NJBIZ, “We share in the Administration’s frustration that the federal bureaucracy’s delay in rescheduling is depriving millions of Americans of safe access to medicine, harming small businesses struggling to survive in the face of 280E tax liability and the inability to access traditional banking services, and allowing a thriving black market to sell un-tested product to children.”

He went on to say, “The real answer, of course, is to deschedule and allow the States to continue their own regulatory and licensing schemes absent federal interference.”

Jessica Gonzalez, associate attorney at Rudick Law Group and president of the Latino Cannabis Alliance, remarked, “From a legal standpoint, this is a significant shift and one that raises as many questions as it answers for our clients and the industry at large. But I cannot celebrate a half measure dressed up as progress.”

“This order does not decriminalize cannabis on the federal level. It does not expunge a single record, and it does nothing for the people who are sitting in custody right now because of this plant. It also does not protect a non-citizen from deportation, inadmissibility, or being barred from citizenship because of this plant,” she said.

‘Momentum, not completion’

Gonzalez also feels the order does not go far enough to address the documented harms of cannabis prohibition, particularly for communities that faced the most intense policing and incarceration.

“On the business side of things, certain state-licensed medical operators will likely see long-overdue relief from the crushing weight of 280E, subject to additional guidance from the IRS. However, adult-use markets, where many of our people-built businesses, took risks, and invested — everything are still left in legal limbo under Schedule I. This bifurcation between medical and adult-use doesn’t bring clarity.

“As an attorney, I can tell you it creates new layers of legal and operational uncertainty for operators, advocates, and communities already navigating a fractured system,” she said

If Schedule III status applies broadly enough, the real headline isn’t rescheduling — it’s the possible erosion of 280E, which has been the single biggest drag on cannabis profitability.
—Ryan Magee, partner, McCarter & English LLP

Ryan Magee, a partner at McCarter & English LLP said, “By prioritizing FDA-approved and medical cannabis, the federal government is drawing a line that could still disadvantage large portions of the adult-use market. This is a clear signal that federal reform may come through a medical lens first, not through full legalization.”

“The real impact of this order will depend on how aggressively DOJ and DEA follow through — this is momentum, not completion. We’re not at the finish line — but we’re potentially entering the most consequential phase of administrative rulemaking,” said Magee, whose specialties at the Newark law firm include cannabis law. “If Schedule III status applies broadly enough, the real headline isn’t rescheduling — it’s the possible erosion of 280E, which has been the single biggest drag on cannabis profitability.”

Operator insights

Following Blanche’s announcement, several multistate operators who have a presence in New Jersey said they were hopeful that momentum will continue.

Verano Holdings founder and CEO George Archos believes the move “will provide countless health and wellness benefits for Americans nationwide.

“Completing the historic rescheduling of cannabis to Schedule III promises to unlock the full medical, research and commercial potential of this miracle plant and support the growth and normalization of America’s next great industry in the United States,” he said. Verano is the parent company of Zen Leaf, a retail dispensary with four locations across New Jersey (Elizabeth, Neptune, Lawrence and Mount Holly).

Curaleaf Chairman and CEO Boris Johnson called it “the biggest legislative change for cannabis in 55 years, and a clear signal that federal policy is beginning to catch up with science, public opinion, and economic realities.”

“This decision carries meaningful implications for the future of the industry and provides medical patients with the critical access that they need,” said Johnson. “ … For decades, cannabis was misclassified in a way that created unnecessary barriers for legal operators and slowed meaningful progress. Rescheduling will accelerate research, expand patient access, help protect consumers from the illicit market, and create a more stable and transparent operating environment. It also addresses long-standing industry challenges such as punitive tax structures and capital constraints.”

He went on to say, “The process outlined provides tax relief today to state-licensed medical operators, with relief expected for the broader state-licensed market later this year. This will help bring clarity for thousands of businesses that have faced years of financial uncertainty under past legislation.”

Locally, Curaleaf has three shops in New Jersey, in Edgewater Park, Bordentown and Bellmawr.

An important step

Ascend Wellness Holdings CEO and Director Sam Brill feels the order “has the potential to meaningfully reduce barriers to research and supports the development of evidence-based medicinal applications, moving federal scheduling policy in the right direction. While re-scheduling is not legalization, and it does not resolve all structural challenges in the industry, it is an important step toward a more transparent and accountable market that supports compliant operators.”

“We believe a well-regulated, research-driven cannabis industry benefits consumers, communities, and public health, and remain committed to operating within this evolving framework to help realize the industry’s full potential,” he said.

Ascend has four sites in New Jersey: Fort Lee, Little Falls, Rochelle Park and Wharton.