The federal government has been treating marijuana businesses like criminals for decades.
One outdated policy has been crushing legal operators while the black market thrives.
And Donald Trump just made one move on marijuana that will change everything.
Trump confirms executive order on marijuana is coming soon
President Donald Trump confirmed Monday that he's "strongly" considering issuing an executive order to reclassify marijuana from a Schedule I controlled substance to Schedule III.
"We are considering that because a lot of people want to see it, the reclassification, because it leads to tremendous amounts of research that can't be done unless you reclassify," Trump told reporters in the Oval Office.¹
"So we are looking at that very strongly," Trump added.
The announcement sent cannabis stocks soaring last week after reports broke that Trump was preparing to issue the order as early as this week.
The Amplify Seymour Cannabis ETF rallied more than 54% on Friday for its best day on record after news of Trump's plans leaked.²
Cannabis producers Tilray Brands and Canopy Growth jumped more than 44% and 52% respectively.³
Under current federal law, marijuana sits in the same category as heroin, LSD, and ecstasy as a substance with "no currently accepted medical use and a high potential for abuse."
Trump's reclassification would move marijuana to Schedule III alongside drugs like ketamine, anabolic steroids, and Tylenol with codeine.
That category is reserved for substances with "moderate to low potential for physical and psychological dependence."⁴
The President first floated the idea of reclassification in August when he posted on Truth Social that he wanted to "unlock the medical uses of marijuana."
A person familiar with White House discussions told CNBC that an executive order could be signed as soon as this week.⁵
Trump met with marijuana industry executives, Health Secretary Robert F. Kennedy Jr., and Centers for Medicare and Medicaid Services chief Mehmet Oz on December 9 to discuss the matter.⁶
Reclassification would eliminate crushing tax burden on legal businesses
The most immediate impact of rescheduling marijuana would be relief from IRS Code 280E.
That obscure tax provision has been destroying state-legal cannabis businesses for decades.
Section 280E was passed in 1982 after a cocaine trafficker successfully claimed tax deductions for business expenses like rent and employee salaries.⁷
Congress created the law to stop drug dealers from writing off their criminal enterprises.
But the provision prevents businesses handling Schedule I or II substances from deducting standard operating expenses.
Legal cannabis businesses operating in states where marijuana is allowed can't deduct rent, payroll, utilities, advertising, or any other normal business expense.
They can only deduct the cost of goods sold.
"Cannabis is still federally illegal — but even as a federally illegal substance, the move to Schedule 3 dramatically reduces the federal tax burden for operators," said Ryan Hunter, Chief Revenue Officer at Spherex.⁸
Some cannabis businesses face effective tax rates as high as 80% because they can't take normal deductions.⁹
Industry leaders say eliminating 280E could stabilize struggling businesses.
"As it stands today, retailers are not incentivized to operate legally," said Sasha Nutgent, VP of Cannabis Retail at Housing Works Cannabis Co.¹⁰
"Reclassification would change that for thousands of businesses," Nutgent added.
The crushing tax burden pushes operators toward the black market where they can avoid federal taxes entirely.
Reclassification would also help legitimize the sector for institutional investors who have been hesitant to invest.
Wall Street banks won't touch marijuana businesses because the drug remains federally illegal.
Moving to Schedule III would pave the way for more stocks to be listed on the New York Stock Exchange and Nasdaq.
Cannabis would shift from being valued on retail sentiment to fundamental cash flows like any other industry.
"The Schedule I classification is what has held back a lot of institutional investors," said Timothy Seymour, founder and chief investment officer of Seymour Asset Management.¹¹
"Having to go out and tell their shareholders that they own a company who's selling something that is on a par with heroin, LSD or cocaine is kind of a tough thing to swallow," Seymour explained.
The move would also make it easier for researchers to study marijuana's medical applications.
Trump's decision comes as a 2024 report found that more Americans reported using marijuana daily than reported drinking alcohol at the same frequency.¹²
It was the first time in 40 years that daily marijuana use exceeded daily alcohol consumption in the United States.
Twenty-four states, three U.S. territories, and Washington, D.C. have legalized recreational marijuana use.
The federal government classifying marijuana the same as heroin while the majority of states allow its use has created an absurd situation.
Legal businesses following state law are treated like criminal enterprises by federal tax authorities.
Trump's move would finally bring federal policy closer in line with reality.
The outdated War on Drugs classification of marijuana as having no medical value and being as dangerous as heroin has never made sense.
Trump promised during the campaign to end needless arrests for simple marijuana possession.
Reclassifying the drug to Schedule III wouldn't legalize marijuana federally for recreational use.
But it would remove the crushing tax burden that's been driving legal operators out of business while the black market thrives.
So ordinary Americans could still get in trouble for marijuania but Big Weed would get richer. Who doesn’t want that?
¹ "Trump says he's 'strongly' considering reclassifying pot via executive order," CNBC, December 15, 2025.
² "Trump expected to sign executive order to reclassify marijuana as soon as Monday," CNBC, December 12, 2025.
³ Ibid.
⁴ "Drug Scheduling," Drug Enforcement Administration, accessed December 16, 2025.
⁵ "Trump says he's 'strongly' considering reclassifying pot via executive order," CNBC, December 15, 2025.
⁶ "White House is considering reclassifying marijuana to ease restrictions on the drug," CNN Politics, December 15, 2025.
⁷ "What is 280E?," Marijuana Policy Project, accessed December 16, 2025.
⁸ "Trump could reschedule marijuana to Schedule III," CBS Atlanta, December 15, 2025.
⁹ Ibid.
¹⁰ Ibid.
¹¹ "What Trump's reclassification of pot and CBD could mean for seniors, research and stocks," CNBC, December 16, 2025.
¹² Ibid.
