President Trump to Reschedule Marijuana, Potentially Transforming the Cannabis Industry

President Donald Trump is poised to reclassify cannabis under federal law, a move that could significantly alter the landscape of the $32 billion U.S. legal marijuana industry. The anticipated executive order would shift marijuana from a Schedule 1 to a Schedule 3 drug, acknowledging its medical use and reducing the regulatory burdens on cannabis businesses. However, the specific timeline and procedural steps following this decision remain uncertain, leaving industry stakeholders in a state of anticipation

The reclassification of cannabis is expected to bring immediate financial relief to marijuana businesses by alleviating tax burdens associated with the current classification under the Controlled Substances Act. Currently, businesses dealing with Schedule 1 and 2 drugs face restrictions under Internal Revenue Code Section 280E, which prevents them from deducting standard business expenses. "For plant-touching operators, that's immediate margin and cash-flow relief," noted Jason DeLand of dosist. This change could be the difference between survival and the ability to invest in growth and innovation for many companies

Despite the potential tax benefits, reclassification to Schedule 3 does not equate to federal legalization, and significant challenges remain. The cannabis industry would still grapple with issues such as banking restrictions and regulatory compliance under the Bank Secrecy Act. Terry Mendez of Safe Harbor Financial highlighted that without broader legislative reforms, the core challenges around cannabis banking and financial operations would persist, potentially deterring risk-averse investors from entering the market

The move to reclassify cannabis may also have implications for research and development. By acknowledging cannabis as having a medical use, the government could pave the way for increased research opportunities, particularly in public institutions that were previously hesitant due to federal funding concerns. This could lead to advancements in understanding cannabis' efficacy, as seen in studies conducted internationally, such as those by Curaleaf Holdings in the UK. However, some fear that existing legislative measures may still hinder progress

Industry insiders are divided on the implications of rescheduling. While some fear it might open the door for pharmaceutical companies to dominate the market with synthetic THC products, others see it as an inevitable step towards normalization. Josh Kesselman of RAW Rolling Papers expressed concerns about the potential for big pharma to monopolize the market, whereas Boris Jordan of Curaleaf Holdings views competition from large corporations as an opportunity for the cannabis industry to evolve and strengthen its market position

The rescheduling initiative follows a broader trend of cannabis reform efforts, including those initiated under former President Joe Biden. Biden's administration had previously recognized cannabis as having medical benefits, setting the stage for its potential reclassification. As the cannabis industry awaits the finalization of Trump's executive order, stakeholders are preparing for a landscape that could see increased institutional interest and a push towards more comprehensive reform measures

Looking ahead, the rescheduling of cannabis could serve as a catalyst for further legislative changes. Hemp operators, in particular, are hopeful that this move will lead to a reevaluation of restrictions on hemp-derived THC products. The potential integration of hemp and marijuana sectors into a unified THC industry could significantly expand market opportunities. As the industry braces for these developments, the focus will be on how Congress and federal agencies respond to the evolving regulatory environment