The Federal-State Cannabis Divide: Where Things Stand in 2025
May 7, 2025
The relationship between federal and state cannabis laws has always been a mess, and 2025 is bringing its own twists to the story.
State vs. Federal: The Ongoing Tension
Cannabis exists in two parallel legal universes in the United State. At the state level, almost all states have some form of legal marijuana. But at the federal level? Completely illegal.
The biggest development we've seen is the DEA's effort to move cannabis from Schedule I (the most restricted category alongside heroin) to Schedule III under the Controlled Substances Act.
Rescheduling: Paused But Not Canceled
The cannabis rescheduling process was moving along with hearings set to start on January 21, 2025. But just before the transfer of power, DEA Chief Administrative Law Judge John Mulrooney pulled the plug on these hearings and put everything on hold.
Originally, testimony was supposed to run through early March, potentially leading to a final decision later this year. Now? The timeline is anyone's guess. There's no clear indication of when or if the process will restart.
During his campaign, President Trump voiced support for rescheduling cannabis to Schedule III and even backed a legalization effort in Florida. Since taking office in January, though, his administration has been sending mixed signals about where they stand on the issue.
Rescheduling May Sound Good, But . . .
Rescheduling has plenty of downsides.
FDA Involvement - Rescheduling would likely bring cannabis under FDA oversight, potentially leading to pharmaceutical-style regulations that small businesses would struggle to afford. Potentially, only pharmaceutical companies could grow and distribute cannabis, and only pharmacies could sell it.
Continued Legal Confusion - Rescheduling doesn't close the gap between state and federal approaches to cannabis. Most state laws weren't designed with Schedule III substances in mind, creating an awkward regulatory fit.
New Regulatory Burdens – Even if cannabis businesses are allowed to operate outside the pharmaceutical industry, they would have to register with the DEA like pharmacies and comply with strict reporting requirements that few are structured to handle.
No Help for Recreational Use - Rescheduling mainly recognizes medical applications, while recreational use would technically remain federally illegal - even in states with adult-use laws. In fact, recreational cannabis businesses could have to fold because of the DEA and FDA regulations classifying cannabis as a regulated pharmaceutical.
Limited Social Justice Impact - Rescheduling would have minimal effect on existing cannabis criminal records and wouldn't address social equity concerns that many advocates prioritize.
These complications explain why most advocates prefer full descheduling (removing cannabis from the controlled substances list entirely) or comprehensive federal legalization rather than the more limited approach of rescheduling.
Some Good Things About Rescheduling
If cannabis does eventually move to Schedule III, here's what could change in a good way:
Tax Breaks - Cannabis businesses would escape the crushing burden of IRS Code Section 280E, which currently prevents them from deducting normal business expenses. This would be a massive financial relief for the industry.
More Research - It would be easier for scientists to study cannabis and its potential medical uses.
Better Banking - While not solving all banking issues, rescheduling might make banks slightly less nervous about working with cannabis businesses.
States Still in Control - States would maintain authority over their own cannabis laws, meaning some could remain cannabis-free while others continue with legal markets.
Important to note: rescheduling wouldn't make cannabis federally legal - it would just acknowledge that cannabis has some medical value and isn't as dangerous as Schedule I drugs.
Federal Enforcement: The Current Situation
For now, the federal government is largely continuing the hands-off approach to state-legal cannabis operations that we've seen in previous administrations. There haven't been any major federal crackdowns on state-compliant cannabis businesses in the first months of 2025.
That said, cannabis remains illegal at the federal level, creating ongoing headaches:
No crossing state lines with products
Limited banking options
Heavy federal tax burden
Missing out on certain federal protections and benefits
The Power Players Shaping Federal Cannabis Policy
Several key appointments will likely determine which direction federal cannabis policy heads this year:
Terrance Cole - Nominated to lead the DEA in February, Cole has stated that looking at the cannabis rescheduling proposal would be "one of my first priorities" if confirmed. In his confirmation hearing, he acknowledged that "it's time to move forward" with the stalled process, though he didn't specifically endorse the rescheduling proposal.
Derek Maltz - Currently the Acting DEA Administrator, Maltz has previously called cannabis a "gateway drug" and doesn't seem enthusiastic about rescheduling.
Attorney General Pam Bondi - Trump's AG has a history of opposing cannabis legalization during her time as Florida's attorney general.
These appointments suggest we might see a more cautious approach to cannabis policy than some were hoping for based on Trump's campaign comments.
Bills to Watch in Congress
Several important cannabis-related bills have been reintroduced this year:
The STATES Act - Would remove cannabis from the controlled substances schedule entirely and let states make their own rules without federal interference
The SAFER Banking Act - Would protect banks that work with state-legal cannabis businesses
The PREPARE Act - Aims to create a federal regulatory framework for cannabis
These bills have support from both parties, but remember that similar legislation – especially for banking -- has been proposed for years and has yet to pass.