The cannabis industry's new best friend? President Trump
By some measures, the legal cannabis industry is flowering. It has grown to around $30 billion today from less than $20 billion just six years ago. But investors have remained wary of its high taxes, marijuana’s illicit status at the federal level and the operational costs of complying with a patchwork of state regulations.
Now the Trump administration is pushing major policy changes that could hand marijuana companies a huge windfall and unlock new investment in the industry.
Last week, the government relaxed federal controls on medical marijuana. While that does not make medical marijuana legal under federal law, it moves the product from a class of highly addictive drugs, such as heroin, to a category of lower-risk medicines, like prescription Tylenol, that are overseen by the Drug Enforcement Administration. The Trump administration has also started a process to reclassify cannabis more broadly.
For some cannabis businesses, reclassification could cut tax bills in half. Companies that sell marijuana are currently taxed largely on their income, rather than their profits, resulting in effective tax rates of around 70%, more than double those of other businesses. Under the new category, those licensed to sell medical marijuana can claim common tax deductions for expenses like rent and payroll, according to accountants and tax lawyers. A broader reclassification would do the same for recreational marijuana.
The Treasury is considering making the tax relief retroactive, which would be a boon for the industry. Legal cannabis companies owed the Internal Revenue Service $2.24 billion in 2025, according to Whitney Economics, a cannabis research firm. A handful of publicly traded companies, including Trulieve, Florida’s largest medical cannabis company, and Curaleaf, a global juggernaut based in New York, owed more than $1.6 billion in federal taxes, according to their financial disclosures.
It is unclear how the change would be put in place and how extensively businesses would benefit. The Treasury and Internal Revenue Service have yet to issue guidance, though the DEA has begun allowing businesses to register with the agency. And there are questions about how the many businesses that sell both medical and recreational cannabis will be treated.
“I’m ecstatic that this happened,” Joe Andreae, the chief executive of CULTA, a cannabis company in Maryland that sells both recreational and medical marijuana. “But it creates a challenge. Will they force us to actually delineate?”
Despite the confusion, and the exclusion of recreational marijuana, many in the industry have welcomed the administration’s acknowledgment of the medical benefits of cannabis as a meaningful first step toward broader reform and public acceptance.
Patrick Rea, the managing director of Poseidon, a cannabis-focused venture capital firm, said the tax relief will make the industry more attractive to investors. “The upshot here for investors is that you can invest and get a return,” he said.
A Windfall in Sight
Nationally, cannabis businesses are facing rising supply-chain costs, and a glut of legal crops is driving down prices. Beau Whitney, an economist specializing in cannabis, said that 24 of the 40 states that have legalized medical or recreational marijuana, or both, saw revenues decline in 2025.
A big tax break could offer significant help. Austin Ownbey, a Washington, D.C.-based partner at Akerman LLP, said the tax break will make some businesses profitable or more profitable.
Many cannabis companies have delayed filing taxes in anticipation of rescheduling. Jeffrey Schultz, a cannabis lawyer at Foley Hoag LLP in New York, said that he was advising clients who have been granted extensions from the IRS to consider holding off longer, while telling those that have filed already to think about amending their returns. “They may not owe that money,” he said.
Paying less in taxes could help cannabis companies fund research required for marijuana to gain approval from the Food and Drug Administration, which would make it legal to prescribe at the federal level.
The CEOs of Trulieve, Curaleaf and Tilray, a New York-based alcohol and pharmaceutical company with cannabis operations in Canada, said in interviews that they wanted to invest in research to gain approval for cannabis-based treatments for cancer, nerve pain and seizures.
Kim Rivers, the chief executive of Trulieve, said rescheduling cannabis was a long overdue step that recognizes how much the industry has evolved. Rivers was instrumental in persuading President Donald Trump to issue an executive order last December directing the Department of Justice to quickly reclassify marijuana.
“This is not some plants in a closet or on a dirt floor,” she said in an interview. “This is real, regulated, highly nuanced business. Millions of Americans are finding relief and want to have assurance that these products are backed by real research in the United States.”
Left Out
It came as a surprise to many in the industry that recreational marijuana was left out of the initial rescheduling. Shawn Hauser, the co-chair of the cannabis practice at Vicente LLP, based in Colorado, said the treaty powers that the Trump administration used to bypass the bureaucratic rulemaking process allowed the reclassification only of medical cannabis.
The Trump administration is seeking the same change for recreational marijuana at a hearing scheduled to begin on June 29. But it is certain to be opposed by anti-legalization groups like Smart Approaches to Marijuana, which led opposition that ultimately derailed an earlier attempt to reschedule marijuana under President Joe Biden.
Businesses that sell cannabis solely for adult recreational use are worried that the new rules for medical marijuana could put them at a competitive disadvantage.
Hurdles Remain
Moving medical marijuana to a lower-risk category does not make it legal, which would require either an act of Congress, FDA approval or removal from the federal controlled substances list. Companies will still contend with the legal risks associated with cannabis that have kept banks, institutional investors and insurance companies on the sidelines, leaving them with limited access to financial services and higher borrowing costs.
The effect can be seen at the dispensary register, where consumers are required to pay with cash or PIN debit because major payment processing companies like Visa and Mastercard do not allow cannabis transactions. Even the DEA is requiring the medical cannabis businesses now seeking federal registration to submit their application fees using PayPal or bank transfer.
Efforts in Congress to pass legislation providing protections for federally regulated financial institutions that serve state-licensed businesses have been unsuccessful so far.
It is also unclear how rescheduling will interact with state laws.
“There’s just a lot of questions, a lot of murkiness,” Whitney said, adding: “The devil’s in the details.”
This article originally appeared in The New York Times.
Copyright 2026 The New York Times Company
This story was originally published May 2, 2026 at 3:13 PM.