President Trump’s executive order to reclassify cannabis from Schedule I to Schedule III marks a historic shift for the U.S. marijuana industry. By removing cannabis from the category reserved for the most restricted substances, the policy opens the door to major tax relief—particularly through the end of 280E restrictions—which will help cannabis businesses retain more profit and reinvest in operations. It also accelerates medical research opportunities and signals future federal reform. However, the move does not legalize cannabis nationally nor instantly solve banking barriers; traditional lenders are expected to enter slowly as regulations evolve. Meanwhile, the change raises the possibility of Big Pharma entering the medical cannabis space, increasing competition and pushing the industry toward consolidation. Overall, the order begins a new era of legitimacy, investment potential, and structural growth for cultivators and retailers across the country.
“This reclassification is a watershed moment for the cannabis industry,” said Todd Rowe, President of BITX Capital. “For cultivators and retailers, it materially improves the financing landscape by reducing compliance risk and expanding the pool of capital willing to engage with cannabis businesses in 2026. While broader banking reform remains critical, lenders and investors are increasingly comfortable stepping into the space, and BITX Capital continues to be the go-to source for tailored cannabis financing—providing growers and retailers with the capital, strategic advisory, and confidence they need to scale in an evolving market.”
President Donald Trump has taken a historic step in federal cannabis policy by issuing an executive order to reclassify marijuana from a Schedule I to a Schedule III controlled substance under the federal Controlled Substances Act. Marijuana Moment
That may sound like bureaucratic jargon, but this change could reverberate across the entire industry: from the profitability of local growers and dispensaries to questions about banking access, institutional investment, and whether Big Pharma will try to dominate the market.
Under federal law, marijuana has been listed as a Schedule I drug — the same category as heroin and LSD — meaning it’s officially judged to have no accepted medical use and a high potential for abuse. Wikipedia
By shifting marijuana to Schedule III, cannabis is recognized as having accepted medical use and a lower potential for abuse, similar to drugs like ketamine and certain pain medications. Wikipedia
This does not mean federal legalization, but it does have several meaningful implications:
1. Federal Tax Relief for Cannabis Businesses
For years, state-licensed cannabis companies have been hamstrung by Internal Revenue Code Section 280E, which blocks typical business deductions for Schedule I drug sellers. That means even profitable cannabis companies pay tax on gross revenue, rather than real net income.
Once reclassified to Schedule III, those companies should be able to take standard deductions — a huge positive for margins and cash flow. MJBizDaily
In plain terms, dispensaries and growers will keep more money in their pockets — allowing them to hire more staff, invest in branding, and scale operations rather than constantly fighting for survival.
2. Research Barriers Come Down
Reclassification also opens the door for research institutions and universities to study cannabis without running afoul of federal funding rules that previously restricted studies of Schedule I drugs. MJBizDaily
This is significant for legitimacy: rigorous, federally backed research can uncover therapeutic uses or help establish standards for dosing and safety.
But What It Doesn’t Do — Yet
It’s crucial to set expectations realistically. Even with this order:
Federal legalization is still off the table. Cannabis remains illegal at the federal level, and this change does not erase criminal penalties overnight. Marijuana Moment
Banking access doesn’t automatically improve. Cannabis companies still fall under broad federal reporting laws. Many banks may remain cautious without explicit legislative reform. MJBizDaily
Interstate commerce remains murky. Rescheduling doesn’t create a coherent federal market; transporting cannabis across state lines can still trigger legal trouble. MJBizDaily
In essence, reclassification clears some hurdles, but it does not fully unlock mainstream finance or national markets the way full federal legalization would.
Bank Lending and Investment: A Long Road Ahead
One of the cannabis industry’s most persistent problems has been its reliance on cash.
Because banks risk federal penalties for working with businesses tied to federally illegal drugs, many cannabis companies have been shut out of traditional lending — leading to high costs and limited growth. MJBizDaily
Reclassification removes some of the legal gray area, and it could encourage a broader group of financial institutions to cautiously enter the market. Indeed, reports suggest that rescheduling has already sparked stock rallies in cannabis equities. Barron’s
But here’s the nuance: most major banks and institutional lenders are still unlikely to offer broad credit products unless Congress passes explicit banking reform or regulators issue clear guidance. MJBizDaily
So for most growers and retailers, access to capital may improve slowly, not instantaneously.
Will Big Pharma and Other Giants Move In?
Now that cannabis has a recognized medical use at the federal level, the door is open for big pharmaceutical companies and mainstream consumer health giants to bring their resources and capital to bear.
Some industry insiders worry this could lead to:
Prescription-only synthetic cannabis products, which might compete directly with natural flower and extracts. MJBizDaily
Greater FDA involvement, potentially imposing new approval pathways or standards that favor large, well-funded players. NORML
On the other hand, some cannabis operators see corporate entry as inevitable — and believe strong brands and nimble operators can compete effectively. Large multistate operators like Curaleaf, for instance, have openly discussed the need to “build businesses that will compete” with entrenched corporates. MJBizDaily
The bottom line? Big Pharma could enter portions of the market, especially therapeutic and prescription-oriented products — but the broader consumer cannabis ecosystem (budtenders, local farmers, boutique brands) still has room to thrive if policy and regulatory frameworks evolve thoughtfully.
What Happens Next?
Reclassification is a major milestone — but it’s arguably only the beginning of federal reform.
Industry leaders, lawyers, and policymakers agree that this action lays the groundwork for:
Potential banking reforms
Interstate commerce frameworks
Unified federal THC regulation
Expanded research and clinical trials
However, each of these steps requires additional legislative or regulatory action — meaning the industry could still face years of transition.
In the meantime, cannabis businesses should be planning for a future where federal recognition opens doors, but competitive pressures and regulatory complexity increase.
Timeline of Policy Changes, or Implications State by State
Timeline: Key Federal Cannabis Policy Changes (Historic to Present)
This timeline places the new executive order in context:
Year
Policy Milestone
1970
The Controlled Substances Act classifies marijuana as Schedule I (highest restriction). Wikipedia
1996
California legalizes medical marijuana — first state-level reform. (not federally mandated)
2020s
States expand recreational and medical legalization, but federal status remains Schedule I.
2024
Federal health officials recommend rescheduling; administrative rulemaking begins but stalls. Wikipedia
Late 2025
Trump publicly signals strong consideration of reclassification. NORML
Dec 18, 2025
Trump signs an executive order directing the rescheduling of marijuana to Schedule III, easing certain federal restrictions and boosting research and tax relief. Marijuana Moment
State-by-State Implications of Federal Rescheduling
Even though cannabis remains illegal federally, the executive order will affect states differently depending on their existing laws. Below is a framework of likely impacts across common categories.
A. Legal States (Recreational + Medical)
Stronger Federal Recognition: States like California, Colorado, Massachusetts, and others with legal adult-use markets gain federal legitimacy for businesses.
Tax Benefits: Retailers and growers in these states will be able to deduct ordinary business expenses on federal tax returns once implementation guidance is issued. Marijuana Moment
Banking Pressure: Rescheduling may make large banks somewhat more receptive, but SAFE Banking/SAFER Banking Act passage is still required for full normalization. Wikipedia
B. Medical-Only States
Research Catalysts: States with medical programs (e.g., Florida, Minnesota) might see broader physician participation and potential for Medicare reimbursement pilots for CBD-related therapies. Marijuana Moment
Program Expansion Pressure: Federal recognition of medical use can reinforce state-level expansion efforts.
C. Prohibition States
Policy Leverage: States that have not legalized cannabis (e.g., parts of the South or Midwest) may face increased political pressure to modernize cannabis laws.
Law Enforcement Shifts: While cannabis is still illegal federally, enforcement priorities could shift, leading to less aggressive prosecution in some jurisdictions as federal categorization changes.
D. Banking & Finance Across All States
Financial Institutions: Smaller and regional banks may start pilot programs or cautiously serve state-legal cannabis businesses, but wide institutional lending participation depends on legislative reform, not just rescheduling. Wikipedia
Capital Markets: Rescheduling has already boosted investor sentiment, evident in cannabis stock rallies. Reuters
E. Research and Healthcare
Clinical Trials: Universities and pharmaceutical companies can pursue cannabis research more readily under Schedule III, given lower federal regulatory hurdles. Reuters
FDA Role: Reclassification may also increase the FDA’s involvement in setting safety standards and approval pathways for certain cannabis-derived medications.
Conclusion: A Major Shift — But Not the Finish Line
President Trump’s executive order to reclassify cannabis to Schedule III represents one of the most consequential federal changes to cannabis law in decades. It delivers immediate tax relief, unlocks research avenues, and begins to erode entrenched legal barriers. Marijuana Moment
Yet it stops short of full legalization or a banking breakthrough, leaving many core industry challenges unresolved. And with big corporate players eyeing new opportunities, the competitive landscape is set to change — for better or for worse.
For cannabis growers, retailers, and investors, this moment demands a strategic mindset: take advantage of the relief that is here, prepare for regulatory evolution, and stay alert as the intersection of federal policy and private capital continues to shift.
How does reclassifying cannabis to Schedule III benefit grow and retail businesses?
Reclassification removes the restrictive 280E tax rule, allowing cannabis companies to deduct ordinary business expenses for the first time. This change will improve profitability, cash flow, and reinvestment capacity across cultivation and retail, helping operators scale faster and operate more competitively.
Will the new federal stance make it easier for cannabis companies to access bank loans and credit?
Access will improve, but not overnight. Rescheduling lowers perceived lending risk and opens the door for more regional and private lenders to participate in cannabis financing. However, until full banking reform passes, many traditional banks will still avoid the sector. Businesses will continue relying on specialized lenders like BITX Capital for structured funding.
Does this executive order mean Big Pharma will enter and dominate the cannabis industry?
Pharmaceutical companies are likely to enter the medical cannabis space because expanded research access and federal recognition make product development more appealing. However, retail dispensaries and cultivation markets should remain driven by independent operators and established cannabis brands—not replaced by pharma giants.
What does this federal move mean for existing cannabis entrepreneurs?
The order signals long-term stability and legitimacy. Entrepreneurs can expect lower tax burdens, new research opportunities, stronger valuations, and more investor confidence. In short, it positions cannabis as a mature industry rather than a fringe market, opening new pathways for growth in 2026 and beyond.
Todd Rowe, President of BitX Funding LLC Based in Fairfield, CT. Contact Information: [email protected] 203-763-1430 Ext 101
Todd Rowe is a seasoned financial expert with a 35-year track record of empowering small businesses. As the President of BitX Capital, based in Fairfield, CT, he has dedicated his career to providing innovative financial solutions and fostering economic growth. With a portfolio exceeding 500 loans and a total lending amount surpassing $50 million, Todd has solidified his reputation as a trusted advisor to entrepreneurs. His deep understanding of the unique challenges faced by small businesses enables him to deliver tailored financial strategies that drive success.
President Trump’s executive order to reclassify cannabis from Schedule I to Schedule III marks a historic...
