Schedule III Changes Everything — This Is Just the Beginning

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Guest (Matt): There's a reason the FDA was invented, and it's because people got tired of taking drugs that weren't effective or weren't what they were supposed to be. Bryan Fields: What's up, guys? It's Bryan Fields. Welcome back to another episode of The Dime. I'm really, really excited to have kind of a unique opportunity for us — we're going to do maybe like a little emergency rescheduling podcast, something we haven't done before. Kellen is off today, but I've got two of my closest compadres and two of the most knowledgeable people in the space joining me. So Matt and Zach, thanks for taking the time. How are you doing today? Zach: Oh, living the dream, man. It's been an exciting day to follow along with all the news and developments coming out of Washington. Matt: Yeah, I'd say it's a historic day at the very least, but I think anyone in the space should be at least a little bit excited. Bryan Fields: I think that's the most important thing — we've all probably thought about Schedule III and how impactful that would be, but have you thought about what it would actually feel like? We fought so hard for this, and now it's signed. How does it feel? Matt: This is really just the start, in my opinion. None of this has actual rules in it yet — it's all guidance for other people to come up with rules. There are still hurdles to get through, and there'll be litigation on all of it. So it's not over yet, but the train is rolling. Bryan Fields: Fair to say the train is rolling. Zach? Zach: Totally. All of that's absolutely true. Also, this is the first time we've ever had movement in the scheduling of cannabis since it was scheduled — so it's definitely historic, and if nothing else, it's generating huge momentum around other policy shifts. On top of that, a lot of the messaging out of the Oval Office today was really positive for hemp, which is maybe unexpected given the trajectory of the last six months. As someone who thinks it's important to have open access with informed consent, a lot of today's talking points were exciting — we advocate regularly for product purity and GMP compliance in manufacturing, and a lot of this is really positive. It's about as clear as mud how this all gets implemented, and we're about to get into the political meat grinder of rulemaking, which sucks — we're all sick of politics — but this is a huge step forward that opens the door incrementally in each commercialization silo, whether pharmaceuticals or state adult-use and hemp markets, and internationally too, with harmonization likely helping the US catch up. Bryan Fields: Let's talk about the hemp piece — that caught me by surprise, it took a bigger spot in the conversation than expected. Was that anticipated given hemp's rollercoaster the last few months? And what do you think the impact will be going forward? Zach: Matthew, you want to comment, or should I jump in? Matt: There was a lot more discussion about hemp in the executive order and the meeting than I expected. I suspected they'd touch on it, but there's a significant amount related to hemp, and I think that's good — good for product specifications, GMP, and giving people the actual molecules they ask for. Bryan Fields: Why do you think it's a good move? Matt: There's a reason the FDA was invented — people got tired of taking drugs that weren't effective or weren't what they were supposed to be. That's been true for over a hundred years. We've had this space where people go outside what the FDA says is appropriate because it's a USDA product, not an FDA product. This will consolidate specifications and keep people from selling substandard products. Bryan Fields: Is that in regard to the medical market specifically? Matt: The medical markets already have pretty good standards. It's more the hemp recreational markets that are the concern. Bryan Fields: High level — who today needs to strategically take an inward look at their business model given new entrants coming with Schedule III? Zach: Supply chain guys — growers, extraction and purification operators — have the most to comprehend, because the nuts and bolts of rulemaking affect them most drastically. Brands will largely be able to adjust to new regulatory schemas over time. Grow and processing infrastructure capex is already set, so depending on what specification requirements emerge — FDA level, international specs, or evolving state-use compliance and contaminant testing — there could be large strategic decisions needed quickly. Look at the migration from Category III to Category IV testing in California — a lot of current state-level specs may not be adequate in an FDA environment. Bryan Fields: The complexity is they have to plan and invest while anticipating changes they can't fully know yet. So today there's not much to do except get in the war room and acknowledge the business will likely need to evolve. Matt: That's accurate. Nothing announced today is a set-in-stone rule — the president doesn't have authority to do that here. It has to go through rulemaking at DOJ, FDA, DEA, HHS — wherever these agencies touch the molecule and its distribution. That'll be negotiated over the next several months. But overall, I don't feel like we're being given a gotcha — I feel like we're being given a pathway to legitimize the industry with needed standards, and there's a frank acknowledgment that recreational and medicinal standards might differ. Bryan Fields: Can you give an example? Zach: On the second page of the executive order, it discusses GMP manufacturing requirements — 21 CFR Part 211 is specific about what's required for pharmaceutical GMP manufacturing. State programs have approximated that to varying degrees, but none fully meet Part 211, particularly in QC/QA, track-and-trace, and downstream monitoring. Those would need to be addressed to move into the 211 side of the business or pursue insurance reimbursement. Bryan Fields: Let's expand on that — what exactly is CFR, and that program? Matthew? Matt: CFR is the Code of Federal Regulations — our massive stack of rules for everything. Parts 111 and 117 relate to food or nutraceutical manufacturing; 211 relates to pharmaceutical manufacturing. None of these are hard-to-find rules — they compel people to work with DOJ, DEA, and Congress to establish rules for this market that already exist elsewhere. The next couple of months will be negotiations on how to regulate these molecules, whether as supplements or drugs, and if there's ever going to be insurance, Medicare, or VA reimbursement, they won't allow anything without a cGMP background — they're not going to let you poison patients. Bryan Fields: To be clear — would those new rules apply to adult-use operators, medical producers, or both? Matt: Medical producers, and — right now, if it goes Schedule III, state-legal programs will probably continue operating as they have in-state. Schedule III actually removes a lot of the federal burden on medical marijuana programs. Bryan Fields: Are there any companies you know of that are currently prepared for this shift, given the capital investment required for infrastructure and QA/QC? Zach: They're absolutely already thinking about it, to varying degrees, largely tied to their exposure to the international cannabinoid trade — issues we're debating here have already been settled internationally, particularly around purity. Most state operators and marijuana producers in the US aren't prepared, outside those with international business experience or a really astute GR team. A few operators built businesses from the ground up as GMP/GACP growers and extractors of Schedule I compounds through DEA and FDA from day one — those are primed to benefit most in the short term. But MSOs and large state producers have infrastructure that largely overlaps, so it's not necessarily a ground-up rebuild — a lot of the gap is documentation, testing, full-scale track-and-trace, and correct PAT (process analytical technology) throughout the system. PAT is just starting to gain traction in cannabis, but it's table stakes in pharma because errors are too expensive. Bryan Fields: Music to my ears — what seemed like a luxury now becomes a mandatory requirement. Zach, do you think Canadian operators who've already eyed European expansion might now activate US relationships to double down on this opportunity? Zach: Certainly, maybe. Canada exports a lot of input material — biomass, crude, extract — into the EU, which gets purified and sold through scheduled systems. I'd expect that kind of competition to fire up here in the US. There are also producers in Central and South America, Africa, New Zealand, and Australia — it becomes a global trade once you move into a fully scheduled system recognized by government. Shipping a Schedule I substance internationally between licensed parties is already well secured and reliable via DEA quota transfers. The rules are set and the bar is high in those markets, and now we're just starting to comprehend building similar rules here. Bryan Fields: Matt, explain what people might be missing about current Schedule III producers — direct-to-consumer operators who already understand these government rules. Should we watch for them entering cannabinoids as just another product line? Matt: Absolutely — compounding pharmacies are probably the number-one new entrants. Schedule III makes off-label prescription much more accessible, and an operator that already formulates Schedule III compounds and ships direct to your house is a great business model for how most people want to consume cannabinoids. They're already FDA/DEA compliant, already do this with hormones and ketamine — no reason they wouldn't add THC. They already have track-and-trace, audit systems, tools, and technology to produce a consistent, pure compound. They're ready to rock, with a six-to-twelve-week head start, since getting a facility GMP-certified doesn't happen overnight no matter how much money you have. Cannabis is really just a plant, and we have to find the best ways to exploit it — THC is just a drug, and other drug companies will find ways to exploit it the same way. Bryan Fields: That part continues — the game operated one way for years, and now, December 18th, 2025, it's a whole new game. Zach: 100%. I've been doing this about a decade, and the last decade has been about getting all the chess pieces on the board — now we click the timer and make the first move. I don't want to minimize the trudge it took to get here, or the sacrifices people made. There'll be commentary saying this doesn't matter, that it's in-name-only, that MSOs have already solved banking through shell corporations so 280E doesn't matter to their cash flow — that's going to dump on LinkedIn and be gross for the next six days. But take a deep breath: the federal government just changed the classification of THC and acknowledged, for the first time in about a century, that it has medical benefit. Is it the descheduling we all wanted? Can people in Texas or Idaho light up in the streets today? No. But we've opened a wide door to generate data and answer questions the industry itself has been asking — like why CHS is an issue and how to address it, so we never make anyone sick by accident from an interaction we didn't know about. Removing quota for marijuana, marijuana extracts, and THCs, and letting states regulate them as Schedule III with more relaxed research access, means much better data quality and sample sizes. We'll also get data from extremely pure single-molecule compounds, which the FDA likes, and compare that with data compiled through HHS from state-level programs and prescriptions — which was a really exciting, unexpected piece of the announcement. I'm curious how they'll compile data around flower, inhalables, and smoking, since that's very different from what the FDA is used to reviewing. Bryan Fields: Matt, want to expand on the research excitement? Matt: Nowhere in the document does it specify which drug codes are addressed — marijuana, marijuana extract, Nabilone, or all THCs. Best case, they all go Schedule III, letting us compare flower, extract, and purified natural D9 versus synthetic D9. Schedule I research is very prohibitive in facilities and paperwork — you ask permission every step. Schedule III, outside the quota system, just requires both parties to have a Schedule III license, or a patient prescription. That allows better real-world data instead of relying on critically ill hospital patients, whose safety profile may not translate to a healthy person smoking a joint — it might even be worse. We don't actually know, and Schedule III lets us collect real-world data instead of just relying on one critical disease-state population. Bryan Fields: That's underappreciated — we have assumptions about benefits, but what about risks? Do you think the government will incentivize research, or stay hands-off? Matt: I don't think the government's looking to fund a lot of that right now, but Schedule III makes investigator-initiated trials much more accessible — patients can go to their normal local doctor instead of traveling to a distant trial site, get a prescription, and report results online. That kind of study is crucial for finding new indications, and states have been doing versions of this for years — now that data can be used federally too. I hope this lets people access not just the drugs they want, but the ones that actually work for them, since marijuana, CBD, or THC may not be any one person's best option, but they are someone's, and that person needs access. Bryan Fields: Well said. One group the President pushed hard on was veterans. Zach, can you talk CBD supply and whether we have enough to meet that opportunity? Zach: There are about 15.8 million veterans alive in the VA system currently — I haven't verified that number, so don't hold me to it. Bryan Fields: Getting cancelled for that would be sad. Zach: Sorry if I'm wrong, but I think it's about right. Extrapolating a standard FDA-approved CBD dose of 100mg/day across that population comes to about 3 grams per patient per day, or roughly 47,000 kilos of CBD isolate a month at 100% VA prescription rate — unrealistic, but it shows the scale needed for that level of pharmaceutical distribution. This won't happen overnight; it has to go through rulemaking and the broader insurance overhaul, which is a complicated, thorny issue. But the volume of consumption it would create is dramatic enough to support a sizable market for farming, extraction, and refinement. I was also excited about the specific callout for full-spectrum hemp oil and revisiting legislation to allow hemp products with some THC and minor cannabinoids — the recent CR law is untenable for the hemp side, even for pure CBD isolate manufacturers, because it obliterates the supply chain. Consumer feedback strongly favors full-spectrum products with THC, CBG, CBC, and CBN for effectiveness, supported by entourage-effect data, so it's great the administration acknowledged the medical benefit of these minor cannabinoids. Bryan Fields: Two things — hemp feels like the Jon Snow of this space, slaughtered and now super back. And on supply — if demand hits those numbers, where are we today, 30%, 40%, 50%? How big is the gap? Zach: It largely depends on what happens to psychoactive isomers in the next 60-90 days and subsequent regulation. Most CBD produced today is used to manufacture other cannabinoids via isomerization — various THC forms, CBN, CBG, CBC, CBL, CBT. If that market continues, there's not enough capacity to serve both; if reduced, it'll likely balance out. My best estimate for US CBD isolate production capacity is close to 50,000 kilos a month running flat out. On biomass, most growers planted more acreage in 2025 than 2024 after a rough crop-failure year, while also budgeting for lower yields per acre to hedge — but 2025 was one of the wettest years on record, producing much higher yields than projected, maybe 3,500-4,000 lbs/acre versus the 2,500 lbs/acre estimate, on roughly 50% more acreage (about 30,000 to 40,000 acres). So there's a significant current supply, but the hemp industry has a real whipsaw/bullwhip effect where overproduction crashes pricing, clears out supply, and then leaves shortages again. Without clarity on regulation in the next 60 days, farmers may hesitate to plant, but we likely have 6-9 months of supply, and beyond that it's unclear. Bryan Fields: That's the bullwhip effect — the market's early and stabilizing takes time and calculated bets. Matt, if you produce hemp, extract it, and have the license, can you distribute across state lines? Matt: Correct, for CBD — yes. Right now all hemp products are allowed in interstate transfer; it's the marijuana side you can't move interstate, and I don't think medical licenses will get leeway there either. If they do, FDA-approved players may push to stop it, since interstate operation as a federally licensed facility is one of their competitive advantages over state-licensed operators. Bryan Fields: That gets sticky — you're restricted to California, but without that restriction you could distribute nationally. Matt: Yeah, and we've seen that maybe already happening a little. Bryan Fields: Not here in New York. Or Massachusetts, right? Matt: No, no — not us. We get Massachusetts. Bryan Fields: A whole other topic, trying to put the genie back in the bottle. Last question — was there anything today you think most people will miss, something underappreciated people should watch? Matt: They made a lot of claims around indications — what these things can treat and support — which you wouldn't put on a label, but could be very good for the market. Bryan Fields: Referring to what the President said? Matt: The executive order specifies several indications HHS says marijuana can treat, some matching the actual approved indications of Marinol. Bryan Fields: So before you couldn't say it treats pain, but now they're saying you can? Matt: I don't know exactly what leeway this gives doctors, but it's not bad for the market. Bryan Fields: No, it's good for the market. Zach, same question? Zach: I think the point most people miss is that today's message wasn't a victory for marijuana over hemp, or vice versa — it was a victory for both. The overarching message aligns with the "one plant" advocacy we've heard for years, and the science backs it up: the FDA is used to single-molecule, high-purity formulated drugs, and will need a new regulatory framework for variable botanical inputs used medicinally. It's likely that framework will mirror, if not overlap considerably with, the FDA drug pathway. Bryan Fields: Exciting, crazy times to be part of this — I look forward to seeing what unfolds. Appreciate you guys taking the time. Let everyone know your roles and where they can find you. Zach: My name is Zach Edge. I'm the owner of RHO Advisory and a partner in Madron Process Development. I'm also VP of Commercial Operations for Sun Theory, based here in Austin, Texas — we focus on custom synthesis and purification of botanical compounds. Matt: My name is Matthew Moore. I work with Zach at RHO, and I'm one of the co-owners of Madron — more on the technical side, making sure the molecule is clean. Bryan Fields: I love it. Thanks for taking the time, guys — this was a lot of fun, really appreciate it. Zach/Matt: Great to see you.