President Donald Trump’s executive order to legally reclassify marijuana as a less dangerous drug stands to benefit Colorado cannabis businesses’ bottom lines at a time when the industry in this state is struggling, local proprietors and advocates said Thursday.
The largest effect of rescheduling the drug from the strictest Schedule I — which includes heroin and LSD — to Schedule III would be that marijuana cultivations, dispensaries and manufacturers would pay lower taxes, potentially freeing up capital to invest in personnel and company growth, according to Colorado Leads, an industry trade group.
The move would also be symbolically significant, further aligning federal policy with recent shifts in public opinion toward marijuana. However, rescheduling would not legalize the substance and therefore would not solve some major challenges facing the industry, including limited access to banking.
Gov. Jared Polis, who hailed Colorado’s cannabis industry as “the gold standard ensuring that products are safe and regulated,” applauded the federal move while also expressing frustration that reclassification has taken so long.
“To be blunt, it’s far past time for the federal government to catch up to Colorado and many other states and get rid of arcane federal policies on cannabis that aren’t based in reality and hurt Colorado small businesses and public safety,” Polis said in a statement.
Mason Tvert, spokesperson for Colorado Leads, said the change “represents an extremely meaningful step toward aligning federal policy with scientific evidence, public opinion and decades of our state’s experience with cannabis. It acknowledges what many experts have known for decades, which is that cannabis does not belong on Schedule I.”
Alana Malone, co-founder and CEO of Boulder-based manufacturer Green Dots Labs, echoed that sentiment, saying the order begins to address long-standing financial barriers to success in the industry.
“We look forward to a federal framework that supports access to banking, sustainable industry growth, and patient and consumer access while building on the progress made at the state level since the early 2000s,” Malone said in a statement.
‘Legitimate in terms of medical applications’
Trump signed the order Thursday in the Oval Office while flanked by doctors and patient advocates, including Paige Figi, whose daughter Charlotte helped make cannabidiol, or CBD, a household name.
The order directs the attorney general to expedite the completion of reclassifying marijuana and also asks Congress to reconsider its classification of hemp-derived CBD products, which were effectively banned under a provision in the bill to end the government shutdown in November.
Ahead of signing it, Trump touted that rescheduling would enable more marijuana research. He also validated advocates’ claims about the substance’s medicinal potential.
“We have people begging for me to do this, people that are in great pain. For decades, this action has been requested by American patients suffering from extreme pain, incurable diseases, aggressive cancers, seizure disorders, neurological problems and more,” he said. “The facts compel the federal government to recognize that marijuana can be legitimate in terms of medical applications when carefully administered.”
Trump signs executive order that would reclassify marijuana as a less dangerous drug
Since the passage of the Controlled Substances Act in 1970, cannabis has been listed on Schedule I alongside LSD, heroin and other drugs deemed to have no accepted medical use and a high potential for abuse.
The Drug Enforcement Agency considers drugs in Schedule III to have “moderate to low potential for physical and psychological dependence.” Substances in that category include ketamine, anabolic steroids and some products containing codeine.
Last year, health officials in the Biden administration recommended that the DEA reschedule marijuana; however, the issue stalled out in administrative hearings, and reclassification did not come to fruition before President Joe Biden left office.
Financial impact from rescheduling
At that time, Colorado Leads surveyed proprietors in the local industry and found the biggest impact from rescheduling would be financial.
Federal tax code, in section 280E, dictates that companies working with Schedule I or Schedule II substances are prohibited from deducting many standard business expenses from taxable gross income, such as payroll, rent, utilities and insurance.
“Due to section 280E, most state-licensed marijuana businesses are paying an effective tax rate of 70% to 80%, which is approximately twice the rate paid by other legal businesses,” the trade group said in a report submitted to the DEA during its public comment period in 2024.
Effective tax rates vary by business, but Colorado Leads cited one vertically integrated company with retail marijuana locations across the state that expects its rate would fall to 26% from 71% under Schedule III — “allowing it to retain approximately $6.5 million in additional revenue per year,” the report said.
That money could help bolster a struggling industry. Marijuana sales have plummeted since the pandemic, when consumers purchased a record amount of weed. Sales peaked in 2021 at more than $2.2 billion and have dropped every year since, according to the state Marijuana Enforcement Division. Year-end totals are not yet available for 2025, but sales from January through September equated to $890 million, the agency reported.
Reducing cannabis businesses’ tax burden would allow companies to add more retail locations, invest in employee hiring and benefits, and allow more social equity applicants to enter the industry, Colorado Leads said. At the very least, it might permit some companies to turn a profit.
One manufacturer told the group that the tax reduction would “offset recent increases in business costs and make them profitable, noting they would ‘finally be out of the red.’ Otherwise, it anticipates it and other similarly sized manufacturers ‘will end up shutting our doors within a couple years,’” the report said.
Tvert noted that critical issues would remain unsolved, including access to banking, lines of credit and traditional merchant processing. “It just comes down to, is marijuana federally illegal? And under Schedule III, it is still federally illegal,” Tvert said, so the incentive for banks to get involved in the industry wouldn’t necessarily change.
Conflicts between federal, state law
Rescheduling also wouldn’t rectify the conflicts between state and federal laws. For example, marijuana must be grown and processed in the same state where it is sold, and cannot cross state lines.
“Any step that reduces barriers for research, protects patients, or eases access for workers and businesses is welcome. But Coloradans and all Americans deserve more than halfway measures that leave core issues of justice, equity, and economic opportunity unresolved,” Wanda James, owner of Simply Pure dispensary in Denver and a Democratic candidate challenging U.S. Rep. Diana DeGette in the 1st Congressional District, said in a statement.
If elected, James vowed to introduce legislation to legalize marijuana nationwide.
Sam Kamin, a law professor at the University of Denver who was involved in the rollout of Colorado’s recreational market, previously told The Denver Post that access to medical marijuana might become trickier after a reclassification because the government could now force those businesses to adhere to federal regulations for development and distribution of Schedule III drugs.
“You can’t buy anabolic steroids without a prescription. If you do so, you’re committing a federal crime,” Kamin said last year. “You can imagine an administration saying, ‘You wanted a lawful path to marijuana. We’ve given you a path, that is the only path.’ That would be really disruptive.”
Still, the overwhelming sentiment among marijuana advocates is that rescheduling is progress.
“This monumental change will have a massive, positive effect on thousands of state-legal cannabis businesses around the country,” Brian Vicente, a partner at Vicente LLP, said in a statement. Vicente was integral to the passage of Amendment 64, which legalized cannabis for recreational use in Colorado. “Rescheduling releases cannabis businesses from the crippling tax burden they have been shackled with and allow these businesses to grow and prosper.”
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