Congress Drops Cannabis Rescheduling Blocker From 2026 Spending Bill
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For years, a little-known appropriations rider quietly prevented the Department of Justice from using federal funds to reschedule marijuana. That barrier is now gone. In a significant shift that has reverberated across the cannabis industry, Congress chose not to include the rescheduling-blocking provision in the fiscal year 2026 spending bill, clearing a critical procedural hurdle on the path toward marijuana's potential reclassification to Schedule III [Quick Definition: A mid-level federal drug classification including ketamine and testosterone].
The move signals a sea change in how federal lawmakers view cannabis policy — and it could accelerate the rescheduling timeline that President Trump set in motion with his December 2025 executive order.
Key Takeaways
- Rescheduling to Schedule III would eliminate IRS Section 280E [Quick Definition: IRS code barring cannabis businesses from deducting normal expenses like rent and payroll], potentially saving the cannabis industry billions in tax liabilities annually.
- The move aligns with President Trump's December 2025 executive order directing agencies to begin the rescheduling process.
- Congress removed the appropriations rider that blocked the DOJ from rescheduling cannabis, clearing a major procedural hurdle for Schedule III reclassification.
Table of Contents
- What Was the Rescheduling Blocker?
- Why Congress Changed Course
- What This Means for the Rescheduling Timeline
- The Broader Legislative Landscape
- What Industry Leaders Are Saying
- What Comes Next
What Was the Rescheduling Blocker?
Each year, Congress attaches policy riders to its annual appropriations bills — spending instructions that can quietly shape federal policy without going through the standard legislative process. For several budget cycles, one such rider specifically prohibited the DOJ from using appropriated funds to initiate or finalize the administrative process of rescheduling marijuana under the Controlled Substances Act.
The provision effectively gave Congress a veto over executive branch action on cannabis classification, regardless of what the DEA, FDA, or the White House might recommend. Even as public opinion shifted decisively in favor of reform, and even after the Department of Health and Human Services recommended rescheduling in 2023, this spending rider kept the process bottlenecked.
Why Congress Changed Course
Several converging forces explain why lawmakers chose to drop the blocker in 2026. First, President Trump's executive order directing federal agencies to begin the rescheduling process created political pressure on congressional Republicans who had previously supported the rider. Opposing the president's stated policy became increasingly untenable.
Second, the bipartisan momentum behind cannabis reform has grown impossible to ignore. Thirty-eight states now permit medical cannabis, and twenty-four have legalized adult-use sales. Recent polling shows that over 70 percent of Americans support marijuana legalization, including strong majorities among Republican voters.
Third, the cannabis industry's economic footprint has expanded to the point where blocking rescheduling carries real fiscal consequences. The industry generated an estimated $115 billion in total economic impact in 2025, supporting hundreds of thousands of jobs. Congressional representatives from cannabis-legal states faced mounting pressure from constituents and business interests alike.
What This Means for the Rescheduling Timeline
With the appropriations blocker removed, the DOJ now has a clear runway to complete the administrative rescheduling process. Here is what the path forward looks like.
The DEA is expected to publish a proposed rule to move marijuana from Schedule I [Quick Definition: The most restrictive federal drug classification, currently including heroin and cannabis] to Schedule III, triggering a public comment period that typically lasts 60 to 90 days. After reviewing comments, the agency would issue a final rule. Industry analysts project that rescheduling could be finalized by late 2026 or early 2027, though the timeline remains uncertain.
Moving cannabis to Schedule III would not legalize it federally, but it would have enormous practical implications. Most significantly, it would eliminate the application of IRS Section 280E, which currently prevents cannabis businesses from deducting standard operating expenses from their federal taxes. That single change could save the industry billions of dollars annually and push many struggling operators into profitability.
Schedule III classification would also open the door to more federally funded research, potentially easing the persistent evidence gap that has hampered medical cannabis policy. It could facilitate banking access and make it easier for cannabis companies to access capital markets.
The Broader Legislative Landscape
The removal of the spending rider comes amid a flurry of federal cannabis activity. Representatives Guy Reschenthaler (R-PA) and Troy Carter (D-LA) recently filed the CLIMB Act, a bipartisan bill that would allow state-legal cannabis businesses to list on major stock exchanges like the NYSE and Nasdaq. The bill would also protect companies providing financial, accounting, and insurance services to the cannabis industry from federal penalties.
Meanwhile, the STATES 2.0 Act, reintroduced by Representatives David Joyce (R-OH) and Dina Titus (D-NV), would go even further by ending federal criminal penalties for state-legal cannabis activities and permitting interstate commerce between legal jurisdictions. While neither bill has received a hearing yet, their bipartisan sponsorship reflects the shifting center of gravity on Capitol Hill.
A new congressional report on rescheduling, released March 18, also suggests that federal agencies are taking the process seriously, even as some lawmakers have expressed skepticism about whether Schedule III is the right classification. Some advocates argue that cannabis should be descheduled entirely rather than moved to Schedule III, which would still subject it to DEA oversight and prescription-based distribution frameworks.
What Industry Leaders Are Saying
The removal of the appropriations rider has been received cautiously by industry stakeholders who have watched previous reform efforts stall. Cannabis trade organizations have emphasized that while the development is encouraging, the industry still faces massive headwinds including price compression, regulatory fragmentation, and a persistent black market.
However, the market has responded positively to the news. Cannabis stocks saw modest gains in the days following the spending bill's passage, and analysts at ATB Capital Markets have forecast four percent revenue growth for multi-state operators [Quick Definition: Cannabis companies licensed in multiple states] in 2026, with potential upside from rescheduling-related catalysts in the second half of the year.
What Comes Next
The ball is now firmly in the DOJ's court. Without the appropriations rider blocking action, the only remaining barriers to rescheduling are administrative — and the executive branch has signaled its intent to act. The question is no longer whether Congress will allow rescheduling, but how quickly the federal bureaucracy can complete the process.
For cannabis businesses, patients, and advocates who have waited decades for federal policy to catch up with state-level reality, the removal of this spending rider represents a quiet but profound milestone. It may not make headlines the way a legalization vote would, but it removes one of the most significant procedural obstacles standing between marijuana and a new federal classification.
Pull-Quote Suggestions:
"The industry generated an estimated $115 billion in total economic impact in 2025, supporting hundreds of thousands of jobs."
"That single change could save the industry billions of dollars annually and push many struggling operators into profitability."
"It could facilitate banking access and make it easier for cannabis companies to access capital markets."
Why It Matters: Congress removed a rider blocking DOJ cannabis rescheduling [Quick Definition: The federal process of moving cannabis from Schedule I to a less restrictive category] from the FY2026 spending bill. Learn what this means for Schedule III and the industry.