The moment many in the cannabis industry have been waiting for has finally arrived. Operators, investors, and advocates are cautiously celebrating President Trump’s executive order directing the Department of Justice to finalize the rescheduling of cannabis to Schedule III, an action many hope is a stepping stone toward full federal descheduling.

Full descheduling would free the industry by treating cannabis like alcohol or tobacco by eliminating federal scheduling, ending arrests, removing state vs. federal silos, and enabling interstate and international trade. This would allow national supply chains, economies of scale, access to banking, and provide greater appeal to institutional investors.

Industry Caution

Not everyone in the industry is celebrating. Josh Kesselman, publisher of High Times and founder of RAW® Rolling Papers, warns that rescheduling could introduce new federal risks for state-legal operators.

“I, among others in the industry, am very concerned that this rescheduling could be a false flag,” Kesselman says. He argues that moving THC to Schedule III could allow large pharmaceutical companies to dominate the market with synthetic THC products available only by prescription, while exposing dispensaries and cultivators to a new category of federal criminal liability under the Food, Drug, and Cosmetic Act (FDCA).

Kesselman cautions that businesses could face charges including selling a prescription drug without a license, dispensing without a prescription, misbranding a drug, illegal distribution, and conspiracy. “In fact,” he adds, “the penalties under Schedule III actually increase, not decrease, depending on what a federal prosecutor chooses to charge a seller or grower with.”

The Case for Patients and Veterans

Harrison Bard, CEO and co-founder of Custom Cones USA and DaySavers, sees rescheduling as a long-overdue recognition of cannabis as a legitimate therapeutic option—particularly for veterans.

“For years, veterans have faced stigma, inconsistent access, and significant out-of-pocket costs managing chronic pain, PTSD, and other service-related conditions,” Bard says. “Veterans have carried the weight for the rest of us. It’s time our policies—and our industry—carry some of it back.”

Gennaro Luce, founder and CEO of CannaLnx, echoes the sentiment but emphasizes that rescheduling alone is not enough to improve patient access.

“Moving cannabis to Schedule III is an important step,” Luce says. “But without insurance verification, compliance, and eligibility frameworks, patients will still struggle to receive coverage for medical cannabis.”

The Biggest Impact of All

Financial executives see both promise and caution in rescheduling.

Terry Mendez, CEO of Safe Harbor Financial, notes, “Reclassifying cannabis as Schedule III acknowledges its medical legitimacy and corrects decades of misguided federal policy, but rescheduling is not reform.” Compliance burdens, cash dependency, and Bank Secrecy Act obligations would remain, keeping many financial institutions cautious.

Anthony Coniglio, CEO of NewLake Capital, highlights one immediate benefit tied to rescheduling: relief from the financial constraints that have distorted cannabis operators’ balance sheets for years. “This isn’t about legalization,” he says.

Adam Stettner, CEO of FundCanna, agrees. “Eliminating 280E changes the math overnight,” he says. “It also accelerates research, encourages standardized formulations, and nudges the industry toward institutionalized compliance and reporting.”

Headset’s latest analysis shows that while the U.S. cannabis industry continues to grow in consumer demand, it is operating under increasing financial strain. Retail margins have compressed significantly—falling from 52.6% in 2021 to about 42.7% year to date in 2025—leaving operators focused on cash preservation rather than expansion. This pressure does not stop at the retail level; it ripples across brands, distributors, and service providers that depend on healthy retail purchasing and payment cycles.

At the center of this strain is Section 280E, which prevents many cannabis businesses from deducting ordinary operating expenses for federal tax purposes. Headset’s modeling of more than 2,100 stores across 24 states shows that under the current 280E treatment, the median retailer in nearly half of those states operates at a negative after-tax profit. In some markets, federal tax obligations exceed total net profit, constraining hundreds of thousands of dollars per store each year and increasing fragility throughout the supply chain.

If cannabis is rescheduled to Schedule III and 280E is removed, the impact on cash flow could be substantial. Headset estimates that the typical median retailer would recover roughly $268,000 per year in federal tax drag, with high-volume stores seeing as much as $805,000 annually. At the industry level, this translates to an estimated $1.6 billion to $2.2 billion in incremental after-tax cash flow at current sales levels.

While retailers would feel the most immediate relief, Headset notes that the broader ecosystem would benefit through more consistent inventory purchasing, improved payment timelines for brands and distributors, increased investment in marketing and product innovation, and greater operational stability. For an industry supporting roughly 425,000 full-time equivalent jobs, improved cash flow is less about rapid expansion and more about sustainability—supporting restored hours, reduced turnover, and long-term reinvestment.

The Case for Small Businesses

Small operators see rescheduling as a potential lifeline.

Levar Thomas, co-founder of CPG brand Silly Nice, says, “Access to banking and meaningful tax relief could finally level the playing field.” He emphasizes that rescheduling makes funding, scaling, and basic compliance far more achievable, and hopes it will accelerate expungements and releases for those still incarcerated.

Nonprofits and Social Justice

Betty Aldworth, co-executive director of MAPS and chair of the Marijuana Policy Project (MPP), cautions that rescheduling alone will not undo the harms of prohibition.

“Rescheduling is a symbolic victory,” Aldworth says. “But cash-only operations remain dangerous, consumers still face housing, immigration, and workplace risks, and patients lack regulatory clarity for insurance coverage.” She adds, “Cannabis policy must catch up to political reality. Anything less isn’t reform—it’s delay.”

What Does Implementation Look Like?

Cannabis Regulations Association (CANNRA) submitted a comment on the proposed federal rule rescheduling marijuana, highlighting the process that still needs to happen once President Trump flips the switch. They stated that the comment does not take a position on rescheduling, but rather focuses on the implementation of the proposed federal rescheduling in U.S. states and territories.

The comment calls for additional federal guidance in six areas to support state and territorial regulators in being able to implement the policy:

1. Guidance is needed on how federal priorities, including enforcement priorities, will change under the proposed rescheduling.

2. Guidance is needed on how federal agencies will engage with states and territories under the proposed rescheduling.

3. Guidance is needed on how state governments can interact with each other under the proposed rescheduling.

4. Guidance is needed on how research processes and protocols will change under the proposed rescheduling.

5. Guidance is needed on how to regulate cannabinoids that appear in two different places on the schedule due to the federal legalization of hemp.

6. Guidance is needed on how the proposed rescheduling will impact banking and finance directives and policies.

Global Impact

Even short of full descheduling, U.S. policy shifts are already resonating globally. JP Doran, CEO of Crucial Innovations Corp., notes, “While rescheduling stops short of legalization, it reduces research barriers, modernizes oversight, and formally acknowledges medical value.”

Because the U.S. is the world’s largest pharmaceutical market, this move may prompt regulators in the UK, EU, South Africa, and other markets to reassess outdated frameworks, harmonize quality standards, and expand patient access. “As global markets respond, rescheduling has the potential to accelerate the development and distribution of next-generation cannabis medicines,” Doran adds.

Looking Ahead

 According to multiple reports, Trump also plans to establish a federal commission by summer 2026 to study full descheduling as “phase two,” signaling that additional reforms could follow the initial administrative action.

Vince C. Ning, co-CEO and co-founder of Nabis, says. “The next transformation comes when interstate commerce barriers fall, allowing a national cannabis infrastructure to scale responsibly, innovate faster, and deliver safer, more efficient access for consumers.” As Ning puts it, “This is a watershed moment. Now it’s up to operators, advocates, and policymakers to sustain momentum and shape what comes next.”

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