Trump Reschedules Cannabis to Schedule III: What It Means

In a historic move that marks the most significant shift in federal marijuana policy since the Nixon era, President Donald Trump has signed an executive order directing the Attorney General to reschedule cannabis under the Controlled Substances Act (CSA). This directive moves cannabis from Schedule I—a category for drugs deemed to have "no accepted medical use" and a high risk of addiction, like heroin—to Schedule III, which includes substances with "moderate to low potential" for addiction, such as Tylenol with codeine and ketamine.

While the initiative originated during the Biden administration, Trump embraced the decision, framing it as a compassionate response to the needs of Americans suffering from chronic pain, aggressive cancers, and other debilitating conditions. "We have people begging for me to do this," Trump stated, highlighting the relief this could bring to veterans and older Americans. However, the implications of this executive order extend far beyond patient access, promising to reshape the cannabis industry, medical research, and the tax landscape.

Unlocking Research and Medical Legitimacy

For over five decades, the Schedule I classification effectively stifled federal research into marijuana. By moving it to Schedule III, the government acknowledges cannabis has a "currently accepted medical use." This reclassification is expected to open the floodgates for research funding, clinical trials, and pharmaceutical regulation.

Dr. Brooke Worster, chief medical officer at Ethos, is optimistic that this change will allow for regulated studies to determine specific formulations and dosing that are most helpful for patients, as well as to better understand potential side effects. There is also hope that this move could eventually lead to health insurance coverage for medical cannabis patients, legitimizing the industry as a bona fide part of the healthcare system.

The executive order also proposes allowing Medicare recipients access to cannabidiol (CBD), a non-psychoactive compound. This could be a significant boon for the CBD market, especially for seniors, a demographic Trump has specifically targeted with his messaging.

Economic Relief: The End of the 280E Tax Burden

Perhaps the most immediate and tangible impact for the cannabis industry is the relief from IRS Code Section 280E. This provision prohibits businesses "trafficking" in Schedule I or II substances from deducting standard business expenses. Consequently, state-legal cannabis operators have faced effective tax rates as high as 70 to 80 percent.

Moving cannabis to Schedule III eliminates this punitive tax burden. Vince Ning, CEO of Nabis, predicts this will return 10 to 15 percent to companies' bottom lines, fueling a surge in marketing, research, and development. "There’s going to be a lot more innovation, because now those are all deductible costs," Ning explained. This financial reprieve could be a lifeline for small cannabis businesses that have struggled to survive under the weight of federal tax codes.

The Double-Edged Sword: Regulation and Big Pharma

Despite the jubilation, experts urge cautious optimism. Rescheduling is not full legalization or decriminalization. It does not automatically make products safer or more affordable for consumers, nor does it protect patients from housing or employment discrimination based on cannabis use.

Furthermore, the entry of federal agencies like the FDA into the regulatory picture creates a new "wild card." Jeffrey Miller, CEO of HoneyProjects, warns that while the demise of 280E is a victory, reclassification could become a tool for "Big Pharma or federal regulators to preempt state-legal systems." There is a palpable fear among some entrepreneurs that strict FDA regulations could favor large pharmaceutical companies over existing state-legal operators, potentially altering the landscape of the $38 billion sector.

Ultimately, while Trump's executive order is a monumental step towards aligning federal policy with political and scientific realities, it leaves many questions unanswered. Whether this reform will primarily benefit patients and small businesses or pave the way for corporate consolidation remains to be seen. For now, however, the cannabis industry is breathing a collective sigh of relief as it steps out of the shadow of Schedule I.