Cannabusiness Prospects Light Up as White House Reclassifies Marijuana

President Trump hit the pen yesterday — his customized Sharpie marker, not a ballpoint — signing an executive order to ease federal restrictions on marijuana. The order downgrades marijuana from a Schedule I drug to Schedule III. 

Schedule I drugs are considered the most dangerous, with no medical applications, including substances like heroin and LSD. A reassignment to Schedule III puts marijuana in the same category as ketamine and Tylenol, drugs that have accepted medical uses and are considered less addictive. 

While the executive order doesn’t legalize marijuana at a federal level, it opens the doors for more medical research, lowers some taxes for the industry and could motivate more states to legalize the drug. Shares of cannabis companies, including Canopy Growth and Tilray, jumped on the news.

A Sticky-Icky Situation 

Cannabis is medically legal in 38 states and recreationally in 24. Sixty-four percent of Americans think marijuana should be legal, but support by legislators is less one-sided. The push to reschedule the drug began under former POTUS Biden in 2022 but progressed slowly thereafter. Trump’s order faces pushback from 18 GOP senators and 26 House Republicans. 

On the other side of the dispensary aisle, cannabis companies have lobbied Trump to push forward rescheduling efforts that may make it easier to run their businesses:

• The main impact rescheduling’s expected to have is letting cannabusinesses off the hook from IRS Code 280E, which doesn’t allow businesses that handle Schedule I or II substances to deduct standard business expenses. That could reduce the high tax burden cannabis companies face. Spherex told CBS that companies in the sector face tax rates up to 80%. 
• However, rescheduling won’t help cannabis businesses with their banking problems. Until marijuana is federally legalized, dispensaries will largely remain cash-and-debit facilities, since most banks are reluctant to risk the severe penalties that apply under existing law. Cannabis companies also have limited access to capital because of their federal status. 

Seeing green: Marijuana sales are expected to hit $35.3 billion this year and climb to $62.8 billion by 2030, MJBiz Factbook found. Those totals could swing depending on the federal government’s future stance. If the US does, in the words of Sean Paul, “legalize it,” the country could see an influx of cannabusiness. Companies are already making inroads in anticipation: Tilray announced yesterday that it’s expanding its medical marijuana biz stateside.