President Donald Trump has announced plans to reschedule marijuana from a Schedule I drug to Schedule III — a shift that would formally recognize cannabis as having accepted medical use under federal law for the first time.

The move marks one of the most significant changes to U.S. marijuana policy in decades, potentially affecting taxation, medical access, banking, and federal enforcement. 

While some industry leaders see long-awaited relief, others caution that rescheduling could expose existing cannabis businesses to new federal risks without providing full legalization.

What does Schedule III mean for marijuana?

Schedule III substances are considered to have medical value and a lower potential for abuse than Schedule I or II drugs. Medications in this category include ketamine, Tylenol with codeine, and anabolic steroids.

Reclassification would not legalize marijuana federally, but it would remove cannabis from the most restrictive category under the Controlled Substances Act — a change with far-reaching implications.

Major tax relief for cannabis businesses

One of the most immediate benefits of rescheduling marijuana would be relief from IRS Code 280E, which prevents businesses handling Schedule I or II substances from deducting standard operating expenses.

“Cannabis is still federally illegal — but even as a federally illegal substance, the move to Schedule 3 dramatically reduces the federal tax burden for operators,” said Ryan Hunter, Chief Revenue Officer at Spherex. He noted that under the current law, some cannabis businesses face effective tax rates as high as 80%.

Industry leaders say eliminating 280E could stabilize struggling operators and make investment more feasible — though banking barriers would remain without additional federal reform.

Medical cannabis access could expand

Supporters say Schedule III status could legitimize medical cannabis and bring it into mainstream healthcare.

“At Schedule 3, it’s much more practical for mainstream physicians to prescribe cannabis products,” Hunter said, adding that patients in states without medical marijuana programs could benefit most.

Mark Lewis, President of Specialty Banking at Lüt, called rescheduling “the single most important drug policy move in decades,” citing expanded research opportunities and broader access for patients nationwide.

Industry warns of new federal legal risks

Despite the potential benefits, some cannabis leaders warn that Schedule III could introduce new criminal exposure under federal drug and pharmaceutical laws.

“I, among others in the industry, are very concerned that Trump’s news of rescheduling is a false flag,” said Josh Kesselman, publisher of High Times and founder of RAW Rolling Papers.

Kesselman warned that moving THC to Schedule III could allow pharmaceutical companies to dominate the market with synthetic THC while subjecting dispensaries and growers to enforcement under the Food, Drug, and Cosmetic Act.

“These new federal crimes include selling a prescription drug without a license, misbranding a drug, illegal distribution, and conspiracy,” he said.

Chris Fontes, Founder and CEO of High Spirits, echoed those concerns, saying many cannabis businesses would be unable to legally operate in a Schedule III framework without FDA approval and licensure.

Push toward pharma-grade cannabis standards

If marijuana is officially treated as medicine, industry leaders say operators will be expected to meet pharmaceutical-level quality and compliance standards.

“Whether rescheduling happens next month or next year, the direction is clear: cannabis is moving toward pharma-grade standards,” said Alex Gonzalez, President and Co-Founder of Calyx Containers.

That shift, he said, will require major investments in infrastructure, quality systems, and regulatory readiness — changes that could favor large operators and squeeze smaller businesses.

Equity, small businesses, and the War on Drugs

Some advocates argue rescheduling could encourage legal participation, particularly among communities disproportionately harmed by marijuana prohibition.

“As it stands today, retailers are not incentivized to operate legally,” said Sasha Nutgent, VP of Cannabis Retail at Housing Works Cannabis Co. “Reclassification would change that for thousands of businesses.”

Others warn the move could further disadvantage small operators.

“Rescheduling will further stack the odds against small operators,” said Harrison Bard, CEO and Co-Founder of Custom Cones USA and DaySavers, though he emphasized the importance of expanded recognition for veterans who rely on medical cannabis.

Hemp market complications loom

Several leaders pointed to contradictions between marijuana rescheduling and potential restrictions on hemp-derived THC products.

“With hemp THC products set to be effectively banned next year without new legislation, loosening marijuana restrictions while eliminating hemp is completely illogical,” said Joe Gerrity, CEO of Crescent Canna.

Gerrity said rescheduling could push lawmakers toward a clearer national framework — or deepen regulatory confusion.

A historic step, not full legalization

For many operators, the move represents overdue acknowledgment after decades of stigma.

“Treating cannabis as a Schedule I drug has restricted banking, crushed margins, and prolonged stigma that no longer reflects reality,” said Sierra Elaina, CEO of Lehua Brands.

Still, industry leaders largely agree on one point: rescheduling marijuana to Schedule III is historic — but it is not legalization.

Without additional reforms addressing banking, insurance, FDA pathways, and federal enforcement, cannabis businesses and patients remain caught in a complex and uncertain legal landscape.