Author: Tracy Gallegos

On December 18, 2025, President Trump signed an Executive Order to expedite the administrative process of rescheduling cannabis, marking one of the most dramatic shifts in federal cannabis policy in the past few decades.

Under current federal law, cannabis is classified as a Schedule I controlled substance—the most restrictive category of drugs.  Schedule I controlled substances are defined as having no accepted medical use and a high potential for abuse.  Schedule I substances include inherently dangerous drugs, such as heroin and LSD.

The Executive Order directs the Attorney General to expedite rescheduling cannabis from Schedule I to Schedule III.  Schedule III controlled substances are defined as having a lower potential for abuse and currently accepted medical uses, including substances such as ketamine and Tylenol with codeine. 

The rescheduling process is handled through the Drug Enforcement Agency (“DEA”) and the Department of Health and Human Services (“HHS”).  In 2022, at the direction of President Biden, DEA and HHS commenced the rescheduling process.  Both HHS and the Department of Justice issued recommendations to reschedule cannabis, but the process eventually stalled, and there has been no movement on rescheduling since January 2025 until today. 

Rescheduling cannabis to Schedule III will not only allow for medical research into cannabis, one of President Trump’s main selling points in issuing the Executive Order, but may also provide long awaited relief to cannabis operators, owners, investors, and other industry participants.

One of the most prominent and immediate benefits of rescheduling will be the removal of cannabis from the clutches of Section 280E of the Internal Revenue Code.  Section 280E disallows standard business deductions for businesses engaged in the trafficking of Schedule I or II controlled substances.  Once cannabis is rescheduled, cannabis operators will likely decrease their current tax liabilities and improve their financial viability. 

What rescheduling will NOT do is open up the door for interstate commerce and may not immediately increase the number of federally chartered banks open to banking in the industry as many are still waiting for passage of the SAFER Banking Act or similar legislation. FinCEN guidance is not impacted by the Executive Order, which means that onerous reporting and other obligations for banks will remain in place. As such, any impact to banking will likely be minimal, as banks’ compliance obligations will remain the same until such time that the SAFER Banking Act or similar legislation is passed by Congress.

The Executive Order also seeks to expand research and access to CBD products.  This comes on the heels of the funding bill passed to end the government shutdown, which included a controversial provision to close the loophole created by the 2018 Farm Bill and reclassify low-THC hemp products as controlled substances.  The ban on low-THC hemp products goes into effect in November 2026. 

While not full federal legalization, today’s Executive Order could mark the beginning of the end in draconian federal cannabis policy.  The rescheduling process will take some time, and the Executive Order could still be challenged by Congress and stake holders in the cannabis industry, but operators should remain cautiously optimistic.

In June 2022, the Nevada Cannabis Compliance Board (CCB) approved regulations pertaining to the licensing and operation of cannabis consumption lounges in accordance with its authority under Assembly Bill 341 (2021). Following the CCB’s implementation of the regulations, the license application window was opened from October 14 – October 27, 2022. During the application period, the CCB received ninety-nine applications, and on November 30, 2022, the CCB identified forty applicants who would be prospective holders of consumption lounge licenses. Of the total forty applicants identified, twenty were applicants that already held cannabis retail licenses in Nevada and intended to operate consumption lounges attached to their retail dispensaries, ten were social equity applicants that intended to operate standalone consumption lounges, and ten were non-social equity applicants that intended to operate standalone consumption lounges.

While cannabis consumption lounges seemed to be moving in the right direction in Nevada, prospective operators have experienced hurdles that have delayed the opening of consumption lounges, including changes to the regulations. Now, those prospective operators are faced with more challenges, including concerns regarding indoor air quality at consumption lounges. Specifically, the regulations include stringent air quality standards that require, among other things, that air be circulated every two minutes – a requirement that is even more stringent than those imposed on cigar bars, taverns and hookah lounges. Installing ventilation systems that meet the requirements set forth in the regulations would be a costly undertaking for an operator, with some industry experts estimating that a compliant HVAC system would cost nearly half a million dollars to install. Moreover, monthly utility bills are expected to be in the thousands of dollars. With cannabis operators already experiencing difficulties accessing capital due to the status of cannabis under federal law, and the volatility in the economic market as a whole further exacerbating capital constraints, some prospective operators simply do not have the capital required to build out a consumption lounge that complies with the strict regulations.

Some operators who are already in the build-out phase have been forced to pause construction while they attempt to raise the funds required to address the air quality requirements. Other operators have elected to halt construction until a final version of the regulations has been adopted, in order to avoid having to revise their build-out plans if the regulations are further revised.

When the CCB first approved the regulations, many predicted that consumption lounges would be open in Las Vegas as early as the end of 2022. That time line was subsequently pushed back to the second quarter of 2023, with many hoping that consumption lounges would open by 4/20 and, if not, by early summer in time for the tourists flocking to Sin City for their summer vacations. As prospective operators struggle to complete their build-outs, industry insiders have again revised the time line to sometime in the third or fourth quarter of 2023.

For now, the only consumption lounge where tourists can legally consume cannabis products is NuWu Cannabis Marketplace, which also includes a retail dispensary. Because it is located on tribal land, it is not required to obtain a consumption lounge license from the state.