The cannabis industry shook after President Donald Trump signed an executive order in December directing the DEA to move marijuana from Schedule I to Schedule III, a change enacted by Acting Attorney General Todd Blanche in April. The shift only affects medical cannabis; recreational use remains in Schedule I.
Medical moved
Schedule I marks the most dangerous substances with minimal medical value, while Schedule III reflects accepted therapeutic use and reduced abuse risk. This reclassification removes medical marijuana from the strictest regulatory category.
Only medical cannabis was rescheduled, leaving recreational markets untouched. The distinction matters for companies that operate across both segments.
The move eliminates the IRS Section 280E limitation that barred Schedule I businesses from deducting rent, utilities and other ordinary expenses, allowing medical firms to treat operations like any other business. As a result, they can claim full deductions on their income statements.
However, Schedule III imposes new compliance requirements, including detailed reporting and strict record‑keeping, which can be burdensome for firms that sell both medical and recreational products. This added administrative load partially offsets the tax benefit.
Incremental at best
Canopy Growth, the Toronto‑based producer, reported over C$25 million ($17.7 million) in quarterly medical sales, representing nearly half of its total revenue. Its stock slipped 0.79% to $0.88, giving it a market cap of roughly $370 million.
Tilray Brands’ medical segment is smaller, though its international medical sales jumped 73% YoY to more than $24 million in Q3 2026. The share price rose 1.12% to reflect the growth.
Canopy USA, a marketing affiliate that sells medical marijuana, will not be consolidated into Canopy Growth’s financials after Nasdaq objected. Therefore, the rescheduling will not affect Canopy Growth’s reported numbers.
Green Thumb Industries, a U.S. multi‑state operator, does not separate medical from recreational revenue in its disclosures, leaving the policy’s impact on its fundamentals unclear. Its shares fell 2.65% to reflect the uncertainty.
Rescheduling rescheduled?
The DEA is concluding an administrative hearing on the broader recreational rescheduling proposal, a process expected to be lengthy and subject to vigorous lobbying from both pro‑ and anti‑reform groups. No decision is imminent, but political momentum suggests eventual change.
Industry observers view the medical rescheduling as a modest win for tax relief, yet warn that the new compliance demands could temper enthusiasm. Overall, the three firms’ valuations are unlikely to shift dramatically from this development.
