How the reclassification of marijuana in the United States could help businesses in the c sector.

by Mariam Sunny and Suzanne McGee

The Justice Department reclassifies FDA-approved, state-authorized marijuana as a less dangerous drug, U.S. interim Attorney General Todd Blanche stated on Thursday.

This announcement does not legalize marijuana throughout the entire American territory.

In a post on X, Blanche stated that the Justice Department “immediately reclassifies FDA-approved marijuana and state-authorized marijuana from Schedule I to Schedule III.”

In December, President Donald Trump signed a decree ordering the relaxation of federal regulations on marijuana to reclassify it from Schedule I to Schedule III.

According to high-ranking administration officials, Mr. Trump’s decree ordered his Attorney General to quickly proceed with the reclassification of marijuana, a process that could lead to the listing of the psychoactive plant as a less dangerous drug, along with ketamine and testosterone, which are common pain relievers.

This reclassification, which could be the biggest policy change in marijuana regulation since 1970, would likely reshape the cannabis industry by reducing tax burdens and facilitating funding for businesses, while also speeding up clinical research.

Cannabis-related companies such as Canopy Growth, Organigram Global, SNDL, Aurora Cannabis, Trulieve Cannabis, and Tilray Brands are likely to benefit from this evolution.

Here’s what such a measure could mean for businesses.

Under the U.S. Controlled Substances Act, marijuana is currently categorized as Schedule I, like heroin, indicating a high potential for abuse and no recognized medical use at this time.

Last year, the Biden administration asked the Department of Health and Human Services to review marijuana’s classification, and the agency recommended moving it to Schedule III, a category of substances with a moderate to low risk of physical or psychological dependence, similar to steroids.

The Drug Enforcement Administration must review the recommendation and decide on the reclassification.

One of the main benefits of reclassification would be that cannabis sector companies would no longer be subject to Section 280E of the U.S. federal tax code.

This provision prevents companies selling regulated substances from Schedules I and II from claiming tax credits and deductions for their business expenses.

A Schedule III classification could unlock access to banks for cannabis producers, attract institutional investors, reduce taxes, and stimulate mergers and acquisitions.

Financing remains one of the biggest challenges for cannabis producers, as federal restrictions prevent most banks and institutional investors from entering the sector, forcing producers to turn to costly loans or alternative lenders.

The Congress has also been debating new measures for some time. The Secure and Fair Enforcement Regulation Banking Act (SAFER) bill, introduced in 2023, would ensure that all businesses, including state-sanctioned cannabis businesses, have access to deposit accounts, insurance, and other financial services.

According to experts, key issues such as market potential, number of players, scientific validation, regulatory impact, and sustainability of profits will determine the long-term outlook for the cannabis sector.