In a move that could significantly reshape America’s approach to marijuana, President Donald Trump revealed on August 11, 2025, that his administration is actively evaluating whether to downgrade marijuana’s classification under federal law. In remarks at a White House press briefing, Trump said the government is weighing the option of downgrading marijuana from its Schedule I designation, the strictest level in the Controlled Substances Act, to Schedule III. I—the most restrictive level under the Controlled Substances Act (CSA)—to Schedule III, which applies to substances deemed to pose lower risks.
The president indicated that this decision may arrive in a matter of weeks, underscoring the urgency and weight of the discussions taking place behind the scenes.
Trump admitted the conversation is far from simple, saying he’d heard “notable praise” for marijuana’s medical potential while also stressing worries over “unwanted side effects” from larger-scale use. The comments quickly became a talking point in political, economic, and healthcare arenas.
Why Reclassification Matters
At present, marijuana sits in the same federal category as heroin and LSD—Schedule I drugs, which are considered to have a high potential for abuse and no accepted medical application.
Shifting cannabis to Schedule III would place it alongside substances such as ketamine and certain anabolic steroids. This reclassification signals that the government would recognize some accepted medical uses and view its abuse potential as lower.
The implications are far-reaching:
Banking and investment opportunities could expand, as financial institutions currently restricted by federal law may engage more freely with cannabis businesses.
Institutional capital could flow into the sector, supporting rapid growth.
Tax relief would come through exemptions from IRS Code Section 280E, allowing companies to deduct normal business expenses for the first time.
Market consolidation through mergers and acquisitions could accelerate.
Industry analysts warn that this single regulatory change could open doors to billions in new economic activity.
Wall Street Reacts: Cannabis Stocks Surge
The mere suggestion of federal reclassification sent cannabis-related equities soaring. Canopy Growth’s stock price spiked by roughly 13% following the announcement. Other prominent companies—including Aurora Cannabis, Tilray, Organigram, and SNDL—posted gains ranging from 3% to 12%.
Investor enthusiasm was not limited to individual stocks. The AdvisorShares Pure U.S. Cannabis ETF (MSOS), a fund heavily concentrated in the cannabis sector, surged nearly 25% in a single trading session on the back of Trump’s comments.
Such swift market reactions underscore how sensitive the industry remains to shifts in federal policy—and how much capital is waiting on the sidelines for greater legal clarity.
Historical and Political Context
Biden’s Earlier Push
The conversation about reclassifying marijuana did not begin with Trump. In 2024, the Biden administration initiated a formal review, during which the Department of Health and Human Services (HHS) recommended moving cannabis to Schedule III.
Despite the endorsement, the proposal stalled in the hands of the Drug Enforcement Administration (DEA), bogged down by internal reviews and legal appeals. The delay left the industry in limbo, with policy uncertainty slowing investment and innovation.
Trump’s Evolving Stance
Donald Trump’s approach to marijuana has shifted considerably over the years:
2016 Campaign – Emphasized the importance of allowing states to regulate marijuana, whether for medical or recreational use.
2018–2021 Administration – Rolled back the Obama-era Cole Memorandum, which had reduced federal prosecutions in states where marijuana was legal. 3.However, he also signed the 2018 Farm Bill, which legalized hemp production.
2024 – Endorsed Florida’s Amendment 3, a ballot measure aimed at statewide marijuana legalization, though the proposal ultimately failed at the polls.
Now, in 2025, Trump appears more open to reforms—particularly those tied to medical applications and broader industry viability.
Legislative Moves: The ‘1-to-3 Act’
In response to Trump’s remarks, Representative Greg Steube (R-Fla.) announced plans to reintroduce the “Marijuana 1-to-3 Act.” The bill’s goal is straightforward: amend the CSA to shift marijuana from Schedule I to Schedule III.
While symbolically powerful, some legal analysts note that even with a new classification, certain barriers would remain. A key challenge is the Medical Marijuana and Cannabidiol Research Expansion Act, which enshrines Schedule I research restrictions for cannabis regardless of its reclassification, potentially limiting federal funding and creating research bottlenecks.
How the Rescheduling Process Works
Under the CSA, marijuana’s status can be changed in two primary ways:
Legislative pathway – Congress can directly reclassify marijuana by voting to amend the Controlled Substances Act.
Through Administrative Action – The Attorney General, often via the HHS and DEA, conducts a review and initiates rulemaking.
In practice, the administrative route is more common.HHS has put forward its recommendation, but legal hurdles caused the DEA’s past review to stall.
Moving forward, the Trump administration would need to push the DEA and Department of Justice to finalize and implement the reclassification.
Potential Impacts of Moving to Schedule III
- Criminal Penalties
Reclassification would lower federal penalties for marijuana-related offenses. However, the drug would still be illegal at the federal level, meaning interstate commerce in marijuana would remain prohibited, and states would maintain control over their individual markets. - Banking and Finance
Schedule III status could unlock the doors for banks and credit unions to work openly with cannabis companies, enabling access to loans, lines of credit, and mainstream payment processing. - Taxation Relief
Currently, Section 280E of the IRS code prevents companies dealing in Schedule I or II drugs from deducting ordinary business expenses, leading to effective tax rates that can exceed 70%. Reclassification would remove this burden, dramatically improving profitability for cannabis operators. - Scientific Research
While a lower schedule should make research easier, existing laws may continue to impose Schedule I-level restrictions on cannabis studies. As a result, any benefits to research access may be largely symbolic without further legislative amendments. - Regulatory Landscape
Moving marijuana to Schedule III would not change the fact that it remains federally unlawful.
Broader reforms—such as legalizing interstate commerce, establishing national distribution standards, or adjusting federal tax codes—would require separate legislation.
Supporters vs. Critics
Supporters
Industry leaders and investors see the move as a long-overdue recognition of marijuana’s legitimacy. Easier banking access, tax relief, and the ability to attract institutional capital could strengthen companies and expand consumer access to regulated products.
Trump himself has framed the idea as an “80-20 issue,” suggesting that it enjoys overwhelming public support.
Critics
Some conservative figures, including commentator Charlie Kirk, have raised alarms about normalizing marijuana use—particularly in public settings and around minors.
Public health advocates like Kevin Sabet warn that easing restrictions could inadvertently benefit criminal networks, harm public health, and increase addiction rates. They caution against moving too quickly without more comprehensive safeguards.
What’s Next?
Trump has signaled that a decision could be made within weeks. Should the administration move forward, the process would likely involve HHS finalizing its recommendation and forwarding it to the DEA for formal rulemaking.
In parallel, Rep. Steube’s “1-to-3 Act” could put additional political pressure on federal agencies to act, especially if the legislative push aligns with executive branch momentum.
Still, the debate is far from settled. While investors and many members of the public welcome change, ideological divisions remain strong.
Conclusion: Opportunity and Uncertainty
President Trump’s consideration of marijuana reclassification represents one of the most consequential cannabis policy developments in recent history. Moving from Schedule I to Schedule III could ease the legal and financial burdens on an industry already generating billions in economic activity and employing hundreds of thousands of Americans.
Yet the transition is far from guaranteed. Research limitations, ongoing federal prohibition, and entrenched political resistance could temper the reform’s real-world impact.
As the clock ticks toward a possible decision, stakeholders—from Wall Street to state regulators—will be watching closely. Whether this shift ushers in a new era for the U.S. cannabis market or becomes another unrealized policy promise will depend on the interplay between executive will, agency action, and congressional cooperation.