Trump Administration Moves Cannabis to Schedule III in Partial Win

The Trump administration has rescheduled cannabis to Schedule III of the Controlled Substances Act, marking a significant but incomplete shift in federal drug policy that falls short of the full descheduling many industry advocates had hoped for.

The Drug Enforcement Administration finalized the move Wednesday, reclassifying cannabis from Schedule I—where it has sat alongside heroin since 1970—to Schedule III, the same category as ketamine and anabolic steroids. The change acknowledges cannabis's accepted medical use but maintains federal restrictions that continue to hamper interstate commerce and banking access.

"This is progress, but it's not the finish line," said Aaron Smith, co-founder of the National Cannabis Industry Association. "Schedule III cannabis is still federally illegal cannabis."

What Changes (and What Doesn't)

The rescheduling delivers immediate tax relief to state-licensed cannabis businesses, which have operated under the burden of IRS code 280E since the modern industry's inception. That provision, which prohibits businesses trafficking in Schedule I or II substances from deducting ordinary business expenses, has effectively imposed tax rates exceeding 70% on profitable cannabis companies.

Under Schedule III, licensed operators can now deduct rent, payroll, and other standard business expenses—a change industry analysts estimate could save the sector $1.5 billion annually.

But the partial rescheduling leaves major obstacles intact. Cannabis businesses still can't access traditional banking services or interstate commerce. State-licensed operators remain cut off from federal trademark protection. And critically, cannabis possession and distribution outside state-legal frameworks remain federal crimes carrying potential prison time.

Industry Response: Relief Mixed with Frustration

Multi-state operators welcomed the tax implications while expressing disappointment at the administration's half-measure approach. Several major companies saw modest stock gains in after-hours trading, with Curaleaf up 4% and Green Thumb Industries rising 3%.

Yet smaller operators and social equity advocates expressed concern that Schedule III status—while beneficial to established businesses—does nothing to address the hundreds of thousands of Americans still incarcerated for cannabis offenses or facing criminal records that bar them from the legal industry.

"We're creating a two-tiered system where corporations get tax breaks while people are still in prison for the same plant," said Amber Senter, executive director of Supernova Women, a California-based social equity organization.

The rescheduling also leaves unresolved questions about FDA regulation. Schedule III substances require FDA approval for medical use, potentially subjecting cannabis products to pharmaceutical-style testing and approval processes that most state-licensed products haven't undergone.

Political Calculations

The timing and scope of the rescheduling appear calibrated to thread a political needle. Trump campaigned on cannabis reform but faces opposition from traditional law enforcement constituencies and some conservative lawmakers who view any liberalization as capitulation.

Schedule III allows the administration to claim progress on reform while avoiding the political firestorm that full descheduling or legalization would trigger. The move also preempts Democratic efforts to make cannabis reform a campaign issue heading into the 2026 midterms.

What Happens Next

Industry groups are already pivoting to push for full descheduling, with NORML and the U.S. Cannabis Council announcing plans for coordinated advocacy campaigns targeting Congress and the White House.

Several bills currently in committee would deschedule cannabis entirely, though none have shown momentum for floor votes. The SAFER Banking Act, which would grant cannabis businesses access to financial services, has stalled in the House despite passing the Senate.

Meanwhile, implementation questions abound. The DEA hasn't issued guidance on how Schedule III classification affects existing state programs, research protocols, or federal enforcement priorities. Industry lawyers expect months of regulatory clarification before the practical impacts become clear.

For now, cannabis remains federally controlled—just slightly less so than before.

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This article is based on original reporting by cannabiswire.com.