The Trump administration moved Thursday to ease decades-old federal restrictions on marijuana, with Acting Attorney General Todd Blanche signing a directive that places state-licensed medical marijuana and FDA-approved cannabis products into Schedule III of the Controlled Substances Act — shifting them out of the same legal category as heroin and LSD for the first time since 1970.
The directive follows an executive order President Trump signed in December 2025 titled “Increasing Medical Marijuana and Cannabidiol Research,” which directed the Attorney General to expedite a reclassification process that had languished for years. Blanche’s order fulfills the next step in that process, applying Schedule III status immediately to two categories of products: those approved by the Food and Drug Administration and those distributed through a state-sanctioned medical marijuana license.
The practical difference between Schedule I and Schedule III is substantial. Schedule I designates a substance as having no accepted medical use and a high potential for abuse — a category shared with heroin, ecstasy, and peyote. Schedule III, by contrast, recognizes accepted medical uses and carries a moderate-to-low potential for physical or psychological dependence. It includes substances such as ketamine, anabolic steroids, and Tylenol with codeine.
For cannabis businesses operating under state law, the financial implications could be significant. Under Internal Revenue Code Section 280E, companies trafficking in Schedule I or II substances are barred from deducting ordinary business expenses — rent, payroll, marketing — from their federal taxable income. Analysts estimate that restriction has pushed effective federal tax rates for state-licensed cannabis operators to roughly 60 percent or more of gross revenue. Moving medical marijuana to Schedule III removes it from 280E’s scope, potentially transforming the economics of licensed dispensaries and multi-state operators overnight.
The order does not legalize marijuana for recreational use under federal law, and products sold outside a state-licensed medical program or FDA approval remain Schedule I controlled substances. State-licensed operators seeking to operate under the new classification must register with the Drug Enforcement Administration through an expedited fast-track process established in the order. Registered entities will be subject to Schedule III requirements including DEA disposal rules, security protocols, and labeling standards.
Beyond the immediate reclassification, Blanche also announced that the DEA will convene an administrative hearing in late June to consider the broader reclassification of all marijuana — including recreational products — from Schedule I to Schedule III. That process involves formal rulemaking and, once a rule is published in the Federal Register, a 30-day window before it takes effect. Legal challenges are widely anticipated and could delay full implementation for months or years.
The shift places South Carolina in a complicated position. The state remains one of a small number that has not enacted a medical marijuana program, meaning South Carolina patients and any hypothetical businesses would have no state-issued license to qualify under the new federal classification. The South Carolina Compassionate Care Act — Senate Bill 53, active in the 2025–2026 legislative session — would create a licensing framework for therapeutic cannabis dispensaries, cultivators, and processors if the General Assembly approves it. Without that state infrastructure, the federal reclassification offers little immediate benefit to South Carolinians seeking legal medical cannabis access.
South Carolina Attorney General Alan Wilson has taken an aggressive enforcement posture toward unregulated cannabis products in recent months. Operation Ganjapreneur, a statewide investigation coordinated between Wilson’s office, the South Carolina Law Enforcement Division, and the DEA, resulted in December 2025 arrests of 12 defendants and the seizure of approximately 15 tons — 30,000 pounds — of allegedly illegal THC products from Midlands-area warehouses and vape shops. Wilson’s office announced further indictments in March 2026, noting that 261 of 270 product brands tested by the SLED laboratory came back positive for illegal THC levels. The federal reclassification of licensed medical marijuana does not alter Wilson’s enforcement approach to products sold outside any licensed program.
Senator Lindsey Graham, South Carolina’s senior senator and a member of the Senate Judiciary Committee, has previously drawn a clear line between medical and recreational cannabis — expressing openness to the medical benefits of the substance while opposing broader legalization, a position consistent with the targeted scope of Thursday’s order. Representative William Timmons, who represents the Greenville-Spartanburg district in the U.S. House, sits on the Financial Services Committee — the panel most directly relevant to any downstream changes in banking access that cannabis reclassification could trigger for licensed operators.
The reclassification process has been underway in various forms since 2022, when the Biden administration directed the Department of Health and Human Services to review marijuana’s scheduling. An FDA study released in 2023 recommended the Schedule III move, and the DEA opened hearings in 2024 before indefinitely postponing them. Trump’s December 2025 executive order and Thursday’s directive from Blanche represent the most concrete federal action on cannabis scheduling in more than five decades of federal prohibition.
