What Does Cannabis Rescheduling Mean for Your Business?

For decades, cannabis has existed in a strange legal gray area - legal in many states, yet treated at the federal level as one of the most dangerous substances in the country. That may finally be changing.

With cannabis expected to move from Schedule I to Schedule III under the federal Controlled Substances Act, operators across the industry are asking the same question: What does rescheduling actually mean for my cannabis business?

Below, we break down what rescheduling is, what actually changes, and why this shift could be one of the most meaningful federal developments the cannabis industry has seen in over 50 years.

What Does Cannabis Rescheduling Mean?

Cannabis has long been classified as a Schedule I substance, alongside drugs like heroin and LSD. Schedule I drugs are defined as having no accepted medical use and a high potential for abuse.

Moving cannabis to Schedule III changes that designation. Schedule III substances - such as Tylenol with codeine and certain steroids - are recognized as having legitimate medical use and lower abuse potential.

Rescheduling does not legalize cannabis nationwide, nor does it override state laws. Instead, it signals federal recognition that cannabis has medical value and should no longer be treated as the most dangerous class of drugs.

The Biggest Cannabis Business Impact: The End of 280E

For cannabis operators, the most immediate and meaningful change is the potential elimination of IRS Code 280E.

What Is 280E?

280E is a federal tax rule originally designed to prevent drug traffickers from writing off business expenses. Because cannabis has been federally illegal, licensed cannabis businesses have been subject to this rule, even while operating legally at the state level.

As a result:

• Cannabis businesses cannot deduct normal operating expenses

• Expenses like rent, payroll, marketing, software, and even office supplies are not deductible

• Many operators face effective tax rates as high as 70–80%

In contrast, businesses in industries like alcohol or pharmaceuticals can make deductions - including major advertising expenses.

What Changes Under Schedule III?

If cannabis is officially rescheduled to Schedule III, 280E would no longer apply to state-legal cannabis businesses.

That means:

• Normal business deductions become allowable

• Effective tax rates drop significantly

• Cash flow improves almost immediately

• Operators gain breathing room to reinvest in growth, staff, technology, and marketing

For many businesses, this could be the difference between surviving and scaling. 

Improved Stability for Cannabis Operators

Today, there are over 40,000 cannabis businesses operating across the U.S., employing more than 500,000 workers. Yet despite this scale, the industry has been operating with one hand tied behind its back.

Rescheduling helps legitimize cannabis businesses as real American companies, not fringe operators. This recognition can:

• Improve long-term business planning

• Increase confidence among investors and lenders

• Reduce financial volatility caused by punitive taxation

While rescheduling does not instantly unlock traditional banking or interstate commerce, it is a meaningful step toward a more stable federal posture.

What Cannabis Rescheduling Does Not Do

It’s important to set realistic expectations. Cannabis rescheduling:

• Does not legalize adult-use cannabis federally

• Does not eliminate state-by-state regulations

• Does not cause dispensaries to open nationwide overnight

State programs will remain intact, and cannabis will continue to be one of the most heavily regulated consumer products in the U.S.

Rescheduling Is a Signal, Not a Finish Line

“Rescheduling cannabis to Schedule III is less about immediate operational relief and more about what it signals, that federal policy is finally beginning to align with economic and scientific reality. This move reframes cannabis from a fringe political issue into a legitimate industry that demands modern regulatory infrastructure, clearer capital pathways, and long-term planning. The real impact will show up in how investors, institutional partners, and regulators reassess risk, not overnight, but structurally. It is a step that encourages professionalism and discipline across the sector, while exposing which businesses are built for durability versus short-term arbitrage. In that sense, rescheduling is a forcing function for maturation, not a finish line.”

— Will Read, Founder & CEO, CannaPlanners

Marijuana Rescheduling and the Illicit Market

One of the most overlooked benefits of rescheduling is its potential impact on the illicit market.

Licensed cannabis businesses:

• Verify IDs

• Track every plant from seed to sale

• Follow strict compliance and reporting rules

Illicit operators do none of this.

Reducing excessive taxation and recognizing cannabis as a legitimate industry helps legal businesses compete more effectively - which ultimately reduces reliance on the unregulated market and improves consumer safety.

What Cannabis Businesses Should Do Now

If rescheduling moves forward, cannabis operators should be proactive:

• Talk to your CPA or tax advisor about how deductions may change

• Revisit your budget and forecasts for post-280E operations

• Plan reinvestment strategies for marketing, staffing, and technology

• Strengthen your digital presence - Google Business Profiles, websites, and email marketing will matter even more as competition increases

Businesses that prepare early will be best positioned to capitalize on the shift.

The Reality of Cannabis Rescheduling

Cannabis rescheduling isn’t about being pro- or anti-cannabis - it’s about aligning federal policy with reality.

Schedule III won’t solve every challenge facing the industry, but it represents the most significant federal progress cannabis businesses have seen in decades. Ending 280E alone could reshape the financial future of thousands of operators.

For cannabis businesses, rescheduling means fairer taxation, increased legitimacy, and a clearer path forward - and that’s a change worth preparing for. ■