Trump Administration Reclassifies Cannabis to Schedule III, Opening New Research Pathways
Key Insights
The Trump administration moved cannabis from Schedule I to Schedule III classification, removing it from the same category as heroin and significantly reducing regulatory barriers for medical research.
The reclassification enables cannabis companies to deduct standard business expenses for the first time, potentially saving the industry billions in taxes that have reached 70% rates under IRS Section 280E.
Researchers will now face fewer regulatory restrictions when studying cannabis for therapeutic applications including chronic pain (search), PTSD (search), and neurological disorders (search).
The Trump administration announced Thursday a historic reclassification of cannabis under federal law, moving the drug from Schedule I to Schedule III status under the Controlled Substances Act. This represents one of the most significant federal policy shifts on marijuana in decades, with far-reaching implications for medical research and the cannabis industry.
Regulatory Transformation
The Department of Justice (search) announced that FDA-approved products containing marijuana and items regulated by state medical marijuana licenses will immediately move to Schedule III classification. Previously classified alongside heroin, LSD, and ecstasy as Schedule I substances with "no accepted medical use," cannabis now joins Schedule III drugs like ketamine, anabolic steroids, and Tylenol with codeine, which are recognized as having medical applications with moderate to low potential for dependence.
"Together, these actions provide immediate and long-term clarity to researchers, patients, and providers alike while still maintaining strict federal controls against illicit drug trafficking," the DOJ stated in its release.
The administration also announced an expedited hearing scheduled for June 29 to consider broader reclassification beyond state-licensed medical products.
Research Barriers Removed
The reclassification directly addresses longstanding obstacles that have hindered cannabis research. Under Schedule I classification, federal regulations made it difficult to conduct large-scale clinical studies on marijuana's medical properties, with many universities avoiding such research due to concerns about federal funding.
"These actions will enable more targeted, rigorous research into marijuana's safety and efficacy, expanding patients' access to treatments and empowering doctors to make better-informed healthcare decisions," said acting Attorney General Todd Blanche.
Scientists studying cannabis for therapeutic applications including chronic pain (search), PTSD (search), and neurological disorders (search) previously faced strict approval processes, limited supply access, and heavy compliance requirements. These federal barriers remained in place even as roughly half of states legalized marijuana for recreational use and even more approved it for medical use.
Economic Impact
The financial implications are substantial for the cannabis industry. The reclassification exempts cannabis companies from IRS Code Section 280E, which has prevented businesses dealing with Schedule I or II drugs from deducting normal business expenses since the early 1980s.
Whitney Economics estimates the industry has paid approximately $15 billion in additional taxes since 2018, with some businesses facing tax rates of 70% or more. Brian Vicente, a founding partner of Vicente LLP, a Denver-based cannabis law firm, described the potential relief as transformative.
"We're talking about billions of dollars in new economic activity, tens of thousands of new jobs — really a wind in the sail for this industry that's paid a very heavy tax burden for years," Vicente said.
The change also opens doors for banking access that was previously barred and may accelerate regulatory reform internationally, as governments review their classification systems.
Industry Response
Cannabis companies are positioning themselves to capitalize on the new regulatory environment. Tilray (search) CEO Irwin Simon expressed confidence in his company's readiness for expanded opportunities.
"We have the research to walk into the FDA. We have the research to walk into the DEA and show them what we've been doing," Simon told CNBC. He expects pharmaceutical companies to reach out for U.S. partnerships, similar to outreach from alcohol companies following demand for hemp-derived beverages.
Wendy Bronfein, co-founder and chief brand officer at Curio Wellness (search), noted that "while operators would still face a fragmented state-by-state system, the improved cash flow from rescheduling would support reinvestment, strengthen stability, and help build momentum for more consistent standards over time."
Political Opposition
The reclassification faces immediate political and legal challenges. Sen. Tom Cotton (R-Ark.) opposed the move, arguing that "marijuana today is much more potent than just ten or twenty years ago, leading to increased psychosis, anti-social behavior, and fatal car crashes."
Anti-legalization organization Smart Approaches to Marijuana, which has retained former Attorney General Bill Barr as its attorney, announced plans to pursue immediate legal action to block the order. CEO Kevin Sabet criticized the decision, stating, "With this move, we are now confronted with the most pro-drug administration in our history."
Limitations and Future Outlook
Despite the significance of the reclassification, recreational marijuana remains federally illegal. The change does not resolve ongoing conflicts between federal law and the 24 states that have legalized adult use, nor does it directly impact people currently incarcerated for cannabis-related offenses.
The reclassification process began under the Biden administration in 2024, following a Department of Health and Human Services scientific review recommending the move to Schedule III. That effort stalled before Biden left office, leading to Trump's executive order in December 2025 directing the DOJ to continue the process.
Shawn Hauser, partner at cannabis law firm Vicente LLP, emphasized the ongoing nature of reform efforts: "This rescheduling is not the finish line — it is the final stage of a race we have been running for decades."