Trump Administration Poised to Reschedule Marijuana

The White House has stated that President Donald Trump has made “no final decisions” regarding the rescheduling of marijuana, following a Washington Post report that the administration was nearing a decision to reclassify the drug from Schedule I to Schedule III. The report has triggered anticipation within the $32 billion state-regulated cannabis industry, which sees rescheduling as the biggest potential change to U.S. drug laws since 1970.

The report, published on Thursday, detailed a phone call between President Trump and House Speaker Mike Johnson (R-Louisiana), an opponent of rescheduling, while industry executives and cabinet members, including Health Secretary Robert F. Kennedy Jr. and Centers for Medicare and Medicaid Services chief Mehmet Oz, were present in the Oval Office to pitch their opinions.

What Schedule III Means

Currently, marijuana is classified as a Schedule I substance, a category reserved for drugs like heroin and LSD that federal authorities claim have no accepted medical value. Moving cannabis to Schedule III — a category that includes drugs with accepted medical use but still potential for addiction, such as steroids and codeine — would not federally legalize or decriminalize the substance. The billionaire industry across 40 states would still operate in conflict with federal law.

The rescheduling process was initiated by former President Joe Biden in October 2022, who tasked the Department of Health and Human Services (HHS) and the Attorney General to “expeditiously” review the drug’s status. In August 2023, the HHS completed its review, recommending the move to Schedule III after concluding marijuana possesses legitimate medical benefits. The process has been stalled since that recommendation was sent to the Drug Enforcement Administration (DEA).

Tax Relief and Regulatory Unknowns

For the cannabis industry, the primary and most immediate benefit of rescheduling lies in tax reform. For decades, cannabis companies have been mandated by the 280E tax code, which prohibits standard business deductions available to other industries, resulting in effective tax rates often around 60% of gross revenue. As a Schedule III substance, cannabis businesses would be able to claim normal tax deductions.

Rescheduling drugs presents significant regulatory unknowns. Schedule III drugs are overseen by the FDA, and it remains unclear how the agency would regulate the established state markets, especially since Schedule III drugs are legally confined to prescription use filled at pharmacies. Paul Armentano, deputy director of the advocacy group NORML, points out that the Schedule III designation does not resolve the existing federal-state conflict, which contradicts the stance expressed by both Trump and Biden that individual states should determine their own cannabis regulations.

[H/T] Forbes

*Cover image credit: Abe McNatt / White House