Trump Orders Marijuana Reclassification, Unlocking Tax Relief for Cannabis Sector

2025-12-19 politics

Washington D.C., Thursday, 18 December 2025.
President Trump’s executive order moves marijuana to Schedule III, effectively dismantling IRS Code 280E. This historic regulatory pivot promises substantial tax relief for cannabis enterprises and expands medical research, though it stops short of federal legalization.

A Historic Shift in Federal Drug Policy

On Thursday, December 18, 2025, President Donald Trump signed the executive order to reclassify marijuana, effectively initiating the transfer of the substance from Schedule I—where it sat alongside heroin and LSD—to Schedule III, a category reserved for drugs with moderate to low potential for dependence, such as ketamine, anabolic steroids, and Tylenol with codeine [1][2][7]. This directive, which the president fast-tracked to facilitate immediate regulatory adjustments, represents the most significant alteration to American drug policy since 1971 [2][7]. While the order does not legalize recreational use nationwide, it is poised to dramatically alter the financial landscape for the industry by introducing new tax implications for state-authorized dispensaries, which have long operated under punitive fiscal constraints [2]. Tim Barash, chairman of the Coalition of Cannabis Scheduling Reform, noted that this pivot will empower the 425,000 individuals currently working in the U.S. cannabis sector, potentially attracting new capital and talent to the market [2].

Political Friction and Public Sentiment

Despite the administration’s decisive action, the move has exposed a fracture within the Republican party. Leading up to the signing, a coalition of Republican senators, spearheaded by Senator Ted Budd of North Carolina, urged the president to maintain the Schedule I classification [1]. In a letter to the White House, the senators argued that rescheduling would “undermine” efforts to strengthen the nation, asserting that “the only winners from rescheduling will be bad actors such as Communist China, while Americans will be left paying the bill” [1]. This political resistance contrasts sharply with the evolving public consensus; Gallup polling data reveals a substantial long-term increase in support for legalization. In 2005, only 36% of Americans favored legalization, a figure that surged to 68% by 2024—a dramatic increase of 88.889% over nearly two decades [1]. More recent polling from November 2025 indicates that support remains robust at 64% [2].

Operational Risks in Transportation

Beyond the political arena, the reclassification introduces complex logistical challenges for the logistics and transportation sectors. Industry stakeholders have expressed deep concern that moving marijuana to Schedule III could strip the Department of Transportation (DOT) of its legal authority to test approximately 4 million commercial driver’s license (CDL) holders for cannabis use [3]. Under current Department of Health and Human Services (HHS) guidelines, Schedule III substances are not included in the standard testing panel authorized for federal workplace programs [3]. The trucking industry has been lobbying for a “safety carve-out” to preserve the DOT’s ability to screen for marijuana, citing the historical precedent of the 1987 Amtrak crash in Chase, Maryland—caused by a marijuana-impaired engineer—which resulted in 16 deaths and catalyzed the creation of mandatory drug testing protocols [3]. Without specific regulatory exemptions, carriers fear they may lose the “legal teeth” that have kept impaired operators off the highways for over three years [3].

The Path to Pharmaceutical Innovation

The executive order places a heavy emphasis on unlocking medical potential, with President Trump noting that the reclassification is essential for conducting “tremendous amounts of research” that were previously stifled by Schedule I restrictions [5][6]. By lowering regulatory hurdles, the administration aims to allow the Food and Drug Administration (FDA) to study the medicinal applications of cannabis more freely, potentially expanding access for veterans and seniors [7]. Currently, the FDA has approved only a limited number of cannabinoid-based drugs, such as Epidiolex for seizure disorders, while therapeutic hemp products have lacked a clear regulatory approval pathway [4]. The reclassification is expected to ease funding for clinical trials, although experts caution that the approval process for new pharmaceutical products will remain rigorous [4][6].

Sources

Cannabis regulation Corporate taxation