LEXINGTON, Ky. — The U.S. Department of Justice on Thursday downgraded the federal status of state-licensed medical marijuana, a move that could ease regulations for Kentucky's nascent cannabis program while opening the door to broader changes in federal drug policy.

The Kentucky Lantern reported that Acting Attorney General Todd Blanche signed an order moving state-licensed medical marijuana products from Schedule I — the Drug Enforcement Administration's most restrictive classification — to Schedule III, which includes prescription drugs like Tylenol with codeine. The shift applies to medical cannabis products in states that have legalized medical use.

The reclassification provides tangible benefits for medical cannabis businesses, including allowing them to deduct business expenses from federal taxes and enabling researchers to study state-approved products more easily. Previously, only cannabis grown in federal facilities could be studied.

Kentucky's Medical Cannabis Program, which began accepting patients in 2025, currently operates under the state-license framework now covered by the federal order. The state has approved medical use for patients with qualifying conditions including cancer, chronic pain, epilepsy, and post-traumatic stress disorder. At least one dispensary has already opened in Beaver Dam, and additional locations are planned statewide.

The order likely has limited immediate impact on Kentucky cannabis businesses' access to banking, however. Federal law still restricts financial institutions from serving even state-legal cannabis businesses without risk of prosecution on money laundering charges.

The Justice Department action follows President Donald Trump's December 2025 executive order directing the DOJ to accelerate rescheduling efforts. The DEA has also scheduled an administrative hearing beginning June 29 to explore reclassifying all marijuana products, potentially including recreational use.

Industry observers called the move significant but limited. "The federal government, historically, has denied the existence of medical cannabis, even as a concept," said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws. "The order finally acknowledges and recognizes not only the legitimacy of marijuana as a medicine, but also the legitimacy of these state programs."

Kentucky has not legalized recreational marijuana. Proposed legislation in 2026 would allow voters to decide whether to legalize adult-use cannabis, but those measures have not advanced beyond committee.

Recreational marijuana remains a Schedule I controlled substance under the federal order. Possession of even small amounts remains illegal under Kentucky state law, punishable by up to 45 days in jail and a $250 fine for a first offense.