The marijuana business is growing up
A new policy targets the specific financial chokepoints that have kept a $30 billion industry operating like a shadow economy
.webp)
Cannabis Has Heard Promises Before. This One Is Different.
The cannabis industry has learned to be skeptical.
For years, federal legalization was always just around the corner—until it wasn’t. Bills stalled in Congress. Regulatory reviews dragged on. Investors chased headlines and got burned. Stock prices collapsed, and the sector became shorthand for broken promises and political theater.
That history is exactly why President Donald Trump’s December executive order to reschedule marijuana from Schedule I to Schedule III deserves a closer look. Not because it legalizes recreational cannabis nationwide—it doesn’t. And not because it solves every problem facing the industry—it won’t.
It matters because, for the first time, federal action is aimed squarely at the financial choke points that have forced a $30 billion industry to operate like a shadow economy.
The Tax Problem That Never Made Sense
The most immediate impact of rescheduling is tax-related.
Under current federal law, businesses that “touch the plant” are barred from deducting ordinary business expenses like rent, payroll, and utilities. This rule—Section 280E of the tax code—exists because marijuana is classified alongside heroin as a Schedule I substance.
The result is punitive effective tax rates of 60% to 90% for cannabis companies.
That burden has quietly hollowed out balance sheets across the industry. Between 2019 and September 2025, the eight largest multistate cannabis operators paid only about $600 million of the roughly $2.6 billion they owed in taxes, according to GreenWave Advisors. The unpaid liabilities continue to accumulate, creating a slow-moving financial crisis even for companies that appear profitable on paper.
Rescheduling marijuana to Schedule III would eliminate Section 280E overnight. One cannabis CEO told NPR his company alone set aside $38 million in 2024 to cover potential IRS enforcement, interest, and penalties. Under the new classification, that money could instead be deployed toward expansion, hiring, or research.
A Cash Industry in a Digital Economy
Taxes are only part of the story. The larger issue is cannabis’s exile from the U.S. financial system.
Walk into most dispensaries today, and you’ll see ATMs near the door—not as a convenience, but out of necessity. Most cannabis retailers cannot accept credit or debit cards because payment processors refuse to service businesses tied to a Schedule I substance. Banks see them as unbankable.
That forces dispensaries to operate largely in cash, creating serious security risks. Robberies typically target the register, not the inventory. Cash-heavy operations also make it harder to obtain loans. From a bank’s perspective, collateral tied to federally illegal proceeds is a legal nightmare.
Rescheduling won’t instantly fix everything. Banks will still need to update compliance frameworks, and interstate commerce will remain illegal. But the core legal contradiction that has paralyzed financial institutions—state-legal businesses operating under federal criminal law—would largely disappear. Payment processors and traditional lenders could finally participate without fear of prosecution.
Why the Market Shrugged
Given all this potential upside, you might expect cannabis stocks to surge on the news. Instead, they fell sharply. The AdvisorShares Pure US Cannabis ETF dropped 27% the day the order was signed and has continued to slide.
Part of that is classic market behavior. Prices had doubled in the days leading up to the announcement, and the actual news triggered profit-taking.
But the deeper reason is trust—or the lack of it. Cannabis investors have been burned too many times. They’ve watched legislation die quietly. They’ve seen rescheduling proposals stall in administrative hearings. The Biden administration began a similar process, and it went nowhere.
Trump’s order still requires implementation by the Justice Department. It could face legal challenges from anti-marijuana groups. And it doesn’t address other industry priorities like interstate commerce or access to major stock exchanges.
Why This Time May Actually Be Different
Despite the skepticism, the fundamentals argue this moment stands apart.
Colorado alone has surpassed $1 billion in marijuana sales in 2025, generating nearly $200 million in state tax revenue. Nationwide, the industry employs more than 400,000 people across nearly 15,000 licensed dispensaries. These are not speculative startups—they are real businesses serving real customers, constrained by regulations originally designed to combat drug cartels.
More importantly, this administration has shown a willingness to act where others stalled. In July, Trump signed the GENIUS Act, establishing the first federal framework for cryptocurrency—another industry long shut out of traditional banking. Marijuana rescheduling isn’t even his only shift on drug policy. His FDA commissioner has called psychedelics research a “top priority,” and the VA is now running clinical trials on psilocybin for veterans.
Not a Miracle—But a Meaningful Shift
The executive order won’t normalize the cannabis industry overnight. But it does something previous efforts didn’t: it targets the structural barriers that made profitability, banking, and compliance nearly impossible.
For an administration that keeps delivering for industries long written off as lost causes, betting against follow-through hasn’t been a winning strategy.