President Trump signed an executive order on Thursday directing the Department of Justice to expedite the reclassification of marijuana as a less dangerous drug. The move would shift cannabis from Schedule I to Schedule III, easing regulatory and tax burdens that have long weighed on US cannabis operators’ margins and limiting medical research.
The decision follows weeks of speculation and reportedly came after meetings with cannabis industry executives. Trump framed the order largely around medical use, saying the administration has heard from patients who have been seeking relief for years.
Why rescheduling matters for cannabis businesses
Moving marijuana to Schedule III would significantly reduce the tax burden on US cannabis operators. Under current law, cannabis businesses face effective tax rates that can exceed 50% because they are barred from deducting most ordinary business expenses. Rescheduling would allow companies to expense costs like rent, payroll, and marketing, immediately improving profitability.
Despite this, cannabis stocks were volatile on the news. The AdvisorShares Pure US Cannabis ETF $MSOS ( ▲ 2.56% ) dropped sharply, while major Canadian names such as Tilray $TLRY ( ▼ 8.75% ) , Canopy Growth $CGC ( ▼ 11.54% ) , Cronos Group $CRON ( ▼ 0.34% ) , and SNDL $SNDL ( ▼ 5.64% ) also swung lower, even though those companies do not sell cannabis in the US market.
Industry executives say taxes are the single biggest constraint on growth. One New York dispensary CEO said more than half of her company’s revenue goes to taxes and called the change a “huge win” for an industry where few operators are profitable.
What it does not fix yet
While rescheduling would be a major step, it does not fully normalize the industry. Banking access remains limited, forcing many cannabis businesses to rely on a small pool of service providers and pay higher fees. Executives say payments and financial services are still among the biggest operational challenges.
The Biden administration previously recommended reclassification in 2024, but the process stalled. Trump’s executive order accelerates the timeline, though the broader path toward full legalization remains uncertain and politically sensitive within the Republican party.
For US cannabis operators, rescheduling would not solve every issue overnight, but it would mark the most meaningful structural improvement the industry has seen in years.