Rescheduling Cannabis to Schedule III: What It Would Really Mean

With President Trump saying that his administration will have a decision on rescheduling within “the next few weeks”, it’s left many wondering what the real-world implications would be of such a move. Below is a breakdown of some of the changes this would bring.

Right now, Section 280E of the federal tax code prevents any business handling Schedule I or II substances from deducting ordinary expenses. That includes basics like rent, payroll, utilities, marketing, and insurance—costs every other legal business in America writes off without thinking twice. As a result, many state-legal marijuana companies face effective tax rates of 60% or even higher, making profitability a constant struggle. Rescheduling to Schedule III would remove this penalty, letting businesses operate under the same tax rules as other industries. For large multi-state operators, this could free up millions of dollars annually. For smaller dispensaries and growers, it could be the lifeline that keeps them open. It would also encourage reinvestment in employees, infrastructure, and product quality, rather than forcing operators to send an outsized portion of revenue to the IRS.

Researchers have long described Schedule I as a brick wall. Studying cannabis under the current system requires a special DEA registration, layers of institutional approval, and sourcing from a limited number of federally approved suppliers—often criticized for low quality and lack of variety. Even once approved, researchers can face months or years of delays, and many must rely on testing certain compounds such as CBD rather than cannabis flower or oil. Moving marijuana to Schedule III would still require oversight, but it would treat cannabis more like other controlled substances that have recognized medical use. That means research institutions, hospitals, and private labs could access a wider range of marijuana products for clinical trials and observational studies. This could lead to faster development of new cannabinoid-based medications, more data on long-term effects, and better understanding of its therapeutic and potential risk profiles.

A common misunderstanding about rescheduling is the belief that it would instantly make marijuana available by prescription in every state. In reality, Schedule III substances can be prescribed, but only after clearing the FDA’s rigorous approval process for safety, effectiveness, and manufacturing standards. Currently, just a few cannabis-based medicines—like Epidiolex for certain seizure disorders and synthetic THC products such as dronabinol—have earned that approval. Rescheduling would smooth the path for more marijuana-derived medications to enter the FDA pipeline, potentially expanding treatment options over time. However, it wouldn’t mean raw flower or dispensary edibles would suddenly appear at your neighborhood pharmacy. State-legal marijuana programs would still operate independently, and federal law would continue to be at odds with them.

The lack of access to traditional banking is one of the industry’s most persistent challenges. Many marijuana businesses are forced to operate largely in cash, creating security risks and logistical headaches. Rescheduling could help—some financial institutions might see Schedule III as less of a legal risk and start offering more services. However, many banks will likely continue avoiding the industry without explicit congressional protections, such as those proposed in the SAFE Banking Act. Similarly, interstate commerce in marijuana would still be prohibited under federal law. So while rescheduling could open a few more doors for financing, loans, and payment processing, it wouldn’t fully normalize the industry’s relationship with the banking system.

Rescheduling could lead to lighter federal penalties for marijuana-related offenses. Since marijuana would no longer be in the most restrictive category, some federal sentences could be reduced, and certain defendants might be able to challenge their charges or sentences based on the change. However, marijuana would remain federally illegal, meaning prosecutors could still bring cases for cultivation, distribution, or possession outside of state-legal programs. Importantly, rescheduling does not automatically expunge past convictions or clear criminal records. Those changes require separate legislative action, either at the federal or state level.

States that have legalized medical or recreational marijuana would continue running their programs as they do now. Federal rescheduling doesn’t override state law—meaning a state that has banned marijuana would still prohibit it, regardless of federal classification. States with legal programs would keep operating under a patchwork of regulations, licensing requirements, and product rules that vary widely across the country. The conflict between state and federal law would shrink in some areas, especially in research and taxation, but it wouldn’t disappear entirely.

Currently, most insurance providers—private or public—do not cover medical marijuana, even in states where it’s legal, because of its Schedule I status. Moving marijuana to Schedule III could make it easier for insurance companies to consider coverage for FDA-approved cannabis medications. This could be a major shift for patients who rely on expensive cannabis-based treatments for chronic conditions. However, unless state laws mandate coverage, insurers could still choose to exclude most marijuana products, particularly those not formally approved by the FDA.

Rescheduling could also influence workplace drug testing policies. Many employers use federal guidelines to determine prohibited substances, and Schedule III classification might prompt some to reassess their approach to marijuana. While it’s unlikely to lead to immediate, sweeping changes—especially in safety-sensitive industries—it could provide legal support for employees in certain states to challenge disciplinary actions based solely on marijuana use. That said, employers in states without legalization, or in federally regulated sectors like transportation, could still enforce zero-tolerance policies.

Rescheduling is an administrative action, not a permanent act of Congress. That means it could be reversed by a future administration with a different political agenda. Under federal law, the Attorney General has the authority to move a substance between schedules or remove it entirely without new legislation. While such a reversal would be politically contentious, the possibility underscores that rescheduling is only as durable as the administration supporting it. Real long-term stability for the marijuana industry would require Congress to change the law directly. That said, given many Democrats support rescheduling (including former-President Biden who initiated the process), yet it’s Republican President Trump who may be enacting it, rescheduling may have become enough of a bipartisan issue that this isn’t much of a concern.

Rescheduling marijuana would be a powerful political symbol. For decades, federal law has treated cannabis as among the most dangerous substances, on par with heroin. Moving it to Schedule III would signal an official acknowledgment that the old classification was wrong. This shift could influence public opinion, making voters more receptive to broader reforms, and it could give political cover to lawmakers who have been hesitant to back legalization. At the same time, opponents of reform could use the change to argue that federal law is already “soft” on marijuana, potentially slowing full legalization efforts.

Rescheduling marijuana to Schedule III would be the most significant federal shift in marijuana policy since the enactment of the Controlled Substances Act over 50 years ago. It would deliver substantial tax relief, open the door to broader research, and signal official recognition of marijuana’s medical value. But it would not legalize marijuana nationwide, solve the industry’s banking problems, or harmonize state and federal law. It’s a step forward—an important one—but it leaves much of the existing prohibition structure in place.

In addition to rescheduling, there’s rumors that President Trump has established an advisory board to study descheduling. While rescheduling would ease some restrictions, fully removing marijuana from the federal Controlled Substances Act—known as descheduling—would be a far more sweeping change. Descheduling would treat marijuana like alcohol or tobacco, eliminating federal prohibition entirely. This would allow state-legal marijuana businesses to operate without conflict with federal law, open the door to nationwide interstate commerce, and make banking, loans, and investment access routine rather than risky. It could also allow the FDA and other agencies to regulate marijuana products much like other consumer goods, with safety and labeling standards applied uniformly. Importantly, descheduling could pave the way for Congress or federal agencies to establish national rules for taxation, advertising, and distribution, reducing the patchwork of state-by-state regulations.