Cannabis stocks exploded Wednesday on news the Trump administration is finalizing the rescheduling of marijuana from Schedule I to Schedule III—potentially as soon as today. The main U.S. cannabis ETF, $MSOS, halted trading and is now up 25%. Individual names like Green Thumb Industries ($GTBIF), Trulieve ($TCNNF), and Curaleaf ($CURLF) are up well over 20%.
Most headlines will focus on the stock prices. I'm here to tell you why this actually matters: taxes.
The 70% Tax Problem
Here's what everyone's missing. Cannabis businesses currently operate under IRS Code 280E, which prohibits companies trafficking in Schedule I or II substances from deducting ordinary business expenses. That means a dispensary can't write off rent, salaries, marketing, or utilities the way every other business can.
The result? Effective tax rates over 70% in many cases. You read that right—cannabis companies have been paying more than two-thirds of their revenue to the federal government while technically operating in a legal gray area. It's why so many licensed operators struggle to turn a profit while competing with the untaxed black market.
Rescheduling to Schedule III changes that overnight. Cannabis businesses would finally be able to deduct normal expenses like any other company. For context, a typical corporation pays around 21% federal tax. Going from 70%+ to something closer to normal rates is not just a stock market story—it's a fundamental business model shift.
"This would be the most significant cannabis reform at the federal level in over 50 years," one Reddit poster noted in r/stocks, and they're not exaggerating. The rescheduling process began under President Biden back in 2022 and has been crawling through administrative channels ever since. President Trump signed an executive order last year directing agencies to finish the job.
What Schedule III Actually Means
Rescheduling does legalize cannabis federally. It doesn't free anyone from prison for possession. What it does is recognize that marijuana has , which changes how the and other agencies treat it.
