Justice Department Finalizes Cannabis Rescheduling to Schedule III, Easing Major Financial Burdens

WASHINGTON – The Trump administration, acting through the Department of Justice, on Thursday finalized a landmark decision to reclassify cannabis from a Schedule I to a Schedule III substance under the Controlled Substances Act. The move, announced April 23, 2026, signals a historic shift in federal drug policy, formally recognizing the medical uses of cannabis and easing significant financial and research restrictions that have hampered the legal cannabis industry for decades. This reclassification is the most substantial federal cannabis policy reform in over 50 years, though it stops short of full federal legalization. For the thousands of small and mid-sized businesses operating in state-legal cannabis markets, the immediate financial implications are profound. The change effectively nullifies Internal Revenue Code Section 280E for cannabis businesses, a punitive tax provision that has long prevented them from deducting ordinary business expenses because they were classified as trafficking in a Schedule I substance. In our experience, the burden of 280E has been the single greatest obstacle to profitability for cannabis operators, often resulting in effective tax rates exceeding 70% and severely limiting their ability to reinvest in growth, talent, and infrastructure. In a statement, the Department of Justice confirmed it would immediately move products approved by the Food and Drug Administration that contain marijuana, as well as products regulated under a state medical marijuana license, to Schedule III. This action follows a December executive order from President Donald Trump that directed the attorney general to initiate the rulemaking process for rescheduling. “The Department of Justice is delivering on President Trump’s promise to expand Americans’ access to medical treatment options,” said Acting Attorney General Todd Blanche in a press release. “This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information.” The announcement was met with widespread applause from cannabis industry stakeholders who have long advocated for such reform. Jushi Holdings Inc., a vertically integrated, multi-state cannabis operator, was among the first to commend the administration. “We have been working hard for years to advance sensible cannabis reform, and we thank President Trump and his administration for their leadership, hard work and commitment to getting this done for the American people,” said Jim Cacioppo, CEO of Jushi. This sentiment was echoed by trade groups. The National Cannabis Industry Association (NCIA) lauded the decision as a “significant and long-overdue first step in aligning federal policy with science, patient needs and the realities of today’s regulated cannabis marketplace.” Other industry leaders expressed optimism about the future, with Boris Jordan of Curaleaf stating, “We are incredibly optimistic about what comes next and look forward to working with policymakers to ensure this momentum leads to lasting, positive change.” Beyond the tax implications, the move to Schedule III is expected to significantly lower barriers to scientific and medical research. As a Schedule I substance, cannabis was categorized alongside drugs like heroin and LSD as having no accepted medical use and a high potential for abuse, making clinical studies exceptionally difficult to conduct. The new classification acknowledges its therapeutic potential and places it in the same category as Tylenol with codeine and ketamine, which should streamline the process for researchers seeking to study its efficacy for various medical conditions. While the elimination of 280E is a monumental victory, it also introduces immediate and complex financial challenges for cannabis businesses. Companies must now rapidly pivot their entire accounting and tax compliance frameworks. This is not a simple adjustment; it requires a complete overhaul of financial strategy, from chart of accounts to long-term capital planning. Businesses that have spent years structuring their operations around the severe limitations of 280E now have the opportunity to operate like any other legal enterprise, but this transition demands expert guidance. This is precisely where our outsourced CFO services are essential for navigating such a significant regulatory shift. At C&S Finance Group LLC, we specialize in helping businesses realign their financial operations to capitalize on new regulatory landscapes, ensuring they are structured for sustainable growth. Business owners can learn more at csfinancegroup.com. DEA Administrator Terry Cole confirmed the agency is aligned with the policy shift. “Under the direction of President Trump and Acting Attorney General Blanche, DEA is expeditiously moving forward with the administrative hearing process — bringing consistency and oversight to an area that has lacked both,” Cole stated. This move is also consistent with the administration's recent executive order aimed at accelerating research into psychedelics like psilocybin and MDMA, suggesting a broader reevaluation of controlled substances based on scientific evidence. Despite the significance of the change, it is crucial to note that cannabis remains a controlled substance at the federal level, and this action does not legalize recreational marijuana nationwide. The existing patchwork of state laws will continue to govern where and how cannabis products can be sold and consumed. The reclassification primarily impacts federal tax law, banking regulations, and research protocols. The Department of Justice also announced it will hold an expedited hearing in June to consider the formal reclassification of cannabis more broadly at the federal level. The industry will be closely watching this administrative process, as its outcome could further define the federal government's long-term stance and potentially expand the rescheduling beyond just medical and FDA-approved products.