Marijuana reclassification would sprout many benefits for businesses, industry leaders say

Cannabis industry leaders in Chicago hope President Donald Trump keeps his word after saying last week his administration was looking at reclassifying marijuana as a less dangerous drug.

The move, which Trump said could happen “over the next few weeks,” would be historic and could help normalize a cannabis industry that still has been operating under federal prohibition and state regulations that vary.

Weed would remain illegal under federal law even if it’s reclassified, though it is fully legal in 24 states, including Illinois, and medically legal in 38 states.

But shifting marijuana from a Schedule I to a Schedule III drug would remove a heavy tax burden on weed companies, it could attract investors and lead banks to allow cashless payments at dispensaries, among other changes, including the potential for advertising and a “rebirth” for medical cannabis, industry leaders say.

During a news conference Aug. 11 at the White House, Trump said, “We’re looking at reclassification, and we'll make a determination over the next few weeks.”

Rescheduling marijuana would also signify a momentous action by the GOP, which has long fought against cannabis legalization and pushed for lengthy prison sentences for cannabis trafficking through the War on Drugs.

Tiffany Chappell Ingram, executive director of the Cannabis Business Association of Illinois, said, “Our hope is this administration finds the courage and leadership to act where others have failed.”

The federal government has classified marijuana as a Schedule I drug since 1970 when the Controlled Substances Act was signed into law.

The Drug Enforcement Administration defines Schedule I drugs as highly addictive and having no medical use. Cannabis is classified in the same category as heroin, ecstasy and LSD.

In 2022, President Joe Biden asked the U.S. Department of Health and Human Services and the DEA to review marijuana classification. A year later, HHS recommended reclassifying marijuana to Schedule III. Last year, Biden’s administration formally proposed the move.

But not all groups are back shifting cannabis to Schedule III.

Kevin Sabet, president of the national organization Smart Approaches to Marijuana, says the change could lead to more crime, and he worries about the drug's potential negative health effects.

Rescheduling "will roll out a giant welcome mat to all the dangerous criminal elements this administration is trying to stop," Sabet said in a statement. "The president should consider that no major law enforcement association supports scheduling marijuana down to III, because it is a public safety and public health nightmare."

Leveling the business playing field

The most notable change that reclassification would make for weed companies is removing a tax burden that currently prohibits them from reporting ordinary business expense deductions from their taxable income.

Jordan Tritt, chief executive of the cannabis market research firm BDSA, said giant multi-state operators, some of which are based in Chicago, could see up to $1 billion in savings by paying less in taxes.

“I would estimate just roughly around a few hundred million dollars in basically found money that would come into these companies,” Tritt said. And for smaller operators, the tax savings “could be the difference between negative cash flow and positive cash flow,” he added.

Taking advantage of this tax treatment “would go a long way” for cannabis businesses and for improving conditions in the industry, “especially in Illinois where cannabis license holders face high taxes and regulatory burdens,” Ingram said.

“Rescheduling would also ease some restrictions on cannabis research and banking, including opening access to traditional lines of financing and the ability to raise capital,” Ingram said.

George Archos, chief executive of Verano — one of the larger cannabis operators based in Chicago — said the company was “encouraged” the Trump administration was reviewing cannabis reclassification. He said the move would be the “first critical step at the federal level” to pave the way for further medical research and remove the “onerous” restrictions that inhibit the industry’s growth.

“We hope to see the administration take decisive action to reschedule cannabis and finally allow America’s next great homegrown industry to reach its full potential by serving patients, creating jobs, unlocking economic growth and reversing decades of harmful prohibitionist policies,” Archos said in a statement.

Medicinal ‘rebirth’

Classifying marijuana as a Schedule III drug would be the next step in standardizing medicinal cannabis use and putting it “on par” with other accepted drugs, Tritt said.

Industry leaders say the federal government would finally be recognizing the plant for the medicinal value it serves to the millions of Americans who use it to treat a variety of conditions, such as chronic pain, anxiety, epilepsy and post-traumatic stress disorder.

“Rescheduling would provide a tremendous boost in normalizing cannabis and destigmatizing a plant that has never had a documented overdose death and offers a safer health and wellness alternative to other legal pharmaceuticals that have negatively impacted society, including addictive opiates,” Archos said.

Tritt said the formal recognition could sprout more meaningful medicinal use, whereas in the past medical legalization in states was seen as a gateway to legalizing recreational use.

“I think the medical side of cannabis is going to see, like, a big rebirth,” Tritt said. “And that fits in with insurance coverage and education with the physicians and medical community. But I think that's something that very, very few brands and companies are, as a whole, paying attention to and focused on, is the health and wellness category.”