US move to reclassify medical marijuana eases tax rules but keeps the drug illegal federally
Washington just handed cannabis companies a tax break without legalizing their product.
The Trump administration is immediately shifting FDA‑approved marijuana products and state‑licensed medical cannabis from Schedule I to Schedule III under federal drug law, according to the US Department of Justice.
Reuters reported that US President Donald Trump’s December executive order instructed the attorney general to “quickly” reclassify marijuana, while Acting Attorney General Todd Blanche said the government will also fast‑track a broader push to classify all uses of the plant as less dangerous.
Despite the change, the policy does not amount to full legalization.
For now, the order covers only FDA‑approved cannabis drugs and products operating under state medical marijuana frameworks, not the broader adult‑use market, creating uneven benefits across the sector, FundCanna CEO Adam Stettner said.
Medical operators could gain clearer federal alignment and potential tax relief, while adult‑use‑focused companies remain under existing restrictions, including limited access to capital and regulatory fragmentation.
NewLake Capital Partners CEO Anthony Coniglio called the move “a partial measure, not full reform,” as per Reuters.
He noted it does not extend to adult‑use cannabis, does not federally legalize marijuana and does not resolve the industry’s banking challenges.
The tax impact is immediate and material.
Cannabis firms that fall under Schedule III will no longer be subject to Section 280E, a US federal tax rule that prevents businesses dealing in Schedule I and II substances from claiming normal credits and deductions.
CNBC said this change allows operators to deduct expenses like rent and payroll for the first time, improving free cash flow and balance sheets.
Pablo Zuanic of Zuanic & Associates told BNN Bloomberg that by moving medical marijuana to Schedule III, companies can pay tax on profit before tax instead of gross profit, which is “very significant to cash flow and also to their credit standing.”
Capital access is another pressure point.
According to Reuters, decades of federal restrictions have kept most banks and institutional investors on the sidelines, forcing cannabis producers to rely on costly loans or alternative lenders.
Safe Harbor Financial CEO Terry Mendez said he expects the rescheduling and the broader review to drive increased interest from banks and credit unions as perceived federal risk moderates.
Mark Lewis of LUT said dispensaries still have to work around a system that does not fully support their business, including basic issues like payroll, payments and cash flow, and warned that “won’t change overnight, if at all with rescheduling.”
Markets have already shown how sensitive valuations are to policy nuance.
Reuters reported that Cronos Group, Aurora Cannabis, Canopy Growth and Tilray Brands reversed early gains and fell between 6 percent and 10 percent after investors recognized the limited scope of the move.
BNN Bloomberg said cannabis stocks are down about 8 percent on the day but up roughly 30 percent over the past week.
In a Reuters article, Dan Ahrens of the AdvisorShares Pure US Cannabis ETF said the sector’s weakness was partly a “sell the news” move and short‑term profit taking, but mainly investors digesting the next procedural steps to complete rescheduling, including for adult use.
Todd Harrison of CB1 Capital Management said most of the market did not understand “the nuances involved, the opposition or the legal challenges.”
According to the same article, He added that the way the change was implemented “confused some people.”
The policy path ahead is formal but still uncertain.
CNBC reported the DOJ said it will hold an expedited DEA hearing on June 29 to consider whether to extend Schedule III status beyond medical products.
At the same time, Trump signed a separate executive order on psychedelics that directs agencies such as the US Food and Drug Administration to speed research and “Right to Try” access for psilocybin, MDMA and ibogaine, while leaving their scheduling unchanged.
According to CNBC, Shawn Hauser of Vicente LLP said the “science‑, patient‑, health‑care‑first approach” on psychedelics should be a model that cannabis advocates “study and adopt more aggressively.”
She added that the two regulatory tracks are reinforcing each other as they help legitimise plant‑based alternative medicines.
