'$47 billion industry': How marijuana reclassification under Trump could reshape the US cannabis industry

In one of the most consequential changes to American drug policy in decades, the US Department of Justice has moved to reclassify state-licensed medical marijuana as a less dangerous substance. The order, signed by acting Attorney General Todd Blanche under the direction of President Donald Trump, marks a departure from decades of federal positioning that placed cannabis alongside drugs such as heroin. While the move stops short of legalisation, it signals a clear shift towards broader federal acceptance of cannabis use.

The decision proposes moving medical marijuana from Schedule I to Schedule III under the Controlled Substances Act. This places it in a category reserved for drugs with low to moderate potential for abuse, alongside substances such as ketamine and certain painkillers. Crucially, marijuana remains illegal under federal law, and possession or distribution continues to carry criminal penalties.

The reclassification could have immediate financial consequences for the cannabis industry, projected to reach $47 billion in legal sales by 2026 according to market researcher BDSA. Under current rules, businesses dealing in Schedule I or II substances cannot claim standard tax deductions. Moving to Schedule III may allow companies to deduct expenses such as rent, wages and marketing, significantly improving profitability.

Despite federal restrictions, cannabis use has expanded significantly at the state level. Medical marijuana is now legal in 40 states and Washington DC, while 24 states permit recreational use. Only Idaho and Kansas prohibit it entirely. This divergence has created a complex regulatory environment in which businesses operate legally under state law but remain constrained by federal rules.

However, practical complications persist. Many cannabis firms sell both medical and recreational products, making it difficult to separate tax-deductible costs. As Chicago-based attorney Irina Dashevsky told the Associated Press, “in a lot of ways, it’s kind of nonsensical because these medical products are the same cannabis, the same methods of creation.”

Federal reclassification is also expected to ease restrictions on scientific research. Blanche stated that the move “allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information.” This could accelerate studies into cannabis-based treatments for pharmaceutical used in conditions such as chronic pain, cancer symptoms and anxiety.

Cannabis stocks initially rose following the announcement, with companies such as Tilray Brands and Canopy Growth seeing gains before markets stabilised. According to Reuters, US-listed shares of cannabis companies jumped between 6 per cent and 13 per cent following the decision, but later reversed their gains. Tilray chief executive Irwin Simon described the move to Reuters as “a pivotal moment for the United States”. The Trump administration also said it was jump-starting the process for reclassifying marijuana more broadly, setting a hearing to begin in late June.