How Rescheduling Cannabis Could Reshape the Market

Apr 21 2025

Written by

Cannabis Risk Manager

Federal reclassification of cannabis raises questions about the future of cannabis regulation, interstate commerce, and business growth

As the U.S. government considers rescheduling or even descheduling marijuana under the federal Controlled Substances Act, cannabis executives, operators, and policy experts are grappling with the potential implications. The debate is reigniting long-standing concerns over regulatory consistency, federal tax burdens, and the feasibility of a national cannabis marketplace.

Despite the rapid growth of state-regulated cannabis programs—now spanning medical, adult-use, or both in dozens of states—federal law remains a formidable barrier to full-scale integration of the U.S. cannabis industry.

Industry report highlights how federal reform could reshape cannabis business strategy and compliance

In the recent report “Where Will Weed Win?” by Robin Goldstein, Director of the Cannabis Economics Group at the University of California, Davis, the future trajectory of cannabis hinges on key federal decisions. Whether marijuana is rescheduled, descheduled, or left untouched could significantly alter tax policy, investment potential, market dynamics, and public health regulation.

Goldstein emphasized how national regulatory clarity is crucial for unlocking growth and enabling efficient supply chains.

Rescheduling vs. descheduling: What’s the difference and why does it matter?

Rescheduling marijuana—from Schedule I to Schedule III—would lift the burdensome 280E tax code restriction, allowing cannabis businesses to deduct normal business expenses for the first time. However, experts caution that this change would not enable interstate commerce or provide full legal certainty.

On the other hand, descheduling marijuana would remove it entirely from the Controlled Substances Act, effectively legalizing cannabis at the federal level and potentially enabling cross-state trade. However, it may also usher in complex federal regulations and taxes that could stifle small operators.

Cannabis stakeholders divided on whether reform will occur under a Trump administration

Uncertainty looms over whether rescheduling or descheduling will happen anytime soon—especially under a possible second Trump administration.

Winners and losers: Who benefits most if cannabis is descheduled?

A descheduled cannabis market could open the floodgates for interstate commerce, benefiting low-cost cultivation states like California, Oregon, Washington, and possibly Oklahoma. These regions could become national production hubs, similar to how California dominates agriculture.

However, vertically integrated multi-state operators (MSOs) that have invested heavily in high-cost indoor grow facilities in states like New York or Illinois may find themselves at a disadvantage. Descheduling could render many of their investments obsolete if cheaper cannabis can be shipped legally across state lines.

States themselves could also lose out on tax revenue and job creation if in-state cultivation is no longer essential.

The pharmaceutical cannabis market might grow—but slowly and cautiously

Rescheduling marijuana to Schedule III could pave the way for a modest expansion in pharmaceutical-grade cannabis products. However, Goldstein’s report points out that the high cost of FDA approval, combined with the limited patentability of cannabis formulations, may hinder widespread pharmaceutical adoption.

Hemp-derived THC products pose new challenges for state-regulated marijuana markets

While marijuana remains federally restricted, intoxicating hemp-derived THC products—such as delta-8 and delta-10—are being legally sold in convenience stores, online shops, and gas stations across many states. According to Goldstein’s report, these products are eating into the legal cannabis market, often without testing or tax compliance.

States like California and Missouri are responding by seeking to restrict or ban intoxicating hemp sales, citing concerns about safety and youth access.

Can hemp and marijuana coexist in a legal market?

Despite opposition, the intoxicating hemp market continues to grow—faster than the regulated marijuana sector in some regions. Consumers are choosing convenience and accessibility, even if the products aren’t tested as rigorously.

Federal cannabis reform could unlock growth—or bring new challenges

Whether marijuana is rescheduled, descheduled, or left untouched, the outcome will have lasting implications for the $32 billion cannabis industry. While rescheduling could offer much-needed tax relief, true transformation would likely come from descheduling, allowing for national market integration, robust competition, and potentially stricter regulations.

Until then, cannabis businesses must remain agile, monitor policy developments closely, and plan for multiple scenarios as the legal landscape continues to evolve.