The marijuana business is growing up

A version of this article originally appeared in Quartz’s members-only Weekend Brief newsletter. Quartz members get access to exclusive newsletters and more. Sign up here.

Cannabis companies have heard plenty of promises before. Federal legalization always seemed just around the corner, only to stall in Congress or get tangled in bureaucratic delays. Investors who bought into the hype got burned. Stock prices collapsed. The industry became synonymous with broken promises.

But President Donald Trump's December executive order to reschedule marijuana from Schedule I to Schedule III represents something new. Not because it legalizes recreational use nationally. It doesn't. And not because it resolves every obstacle facing cannabis businesses. It won't. The order matters because it targets the specific financial chokepoints that have kept a $30 billion industry operating like a shadow economy.

The most immediate change involves taxes. Under current federal law, businesses that "touch the plant" cannot deduct ordinary expenses, like rent, wages, or utilities from their taxable income. This quirk of the tax code, known as Section 280E, exists because marijuana shares a classification with heroin. The result is effective tax rates between 60% and 90% for cannabis companies.

That adds up. Between 2019 and September 2025, the eight largest multistate cannabis operators paid just $600 million of roughly $2.6 billion owed in taxes, according to GreenWave Advisors, a cannabis industry research firm. The unpaid liabilities keep piling up on balance sheets, creating a slow-motion financial crisis for companies that are technically profitable.

Rescheduling to Schedule III would eliminate this punitive tax treatment overnight. One cannabis CEO told NPR that his company alone set aside $38 million in 2024 to cover potential IRS enforcement, including interest and penalties. That money could instead fund expansion, hiring, or research.

More cash, more problems

Beyond taxes, rescheduling could finally end the industry's exile from the American financial system.

Walk into most dispensaries today, and you'll find ATMs near the entrance. That's not a convenience. It's a necessity. The vast majority of cannabis retailers cannot accept credit or debit cards because payment processors refuse to work with businesses selling a Schedule I substance. Banks view them as too risky.

This forces dispensaries to operate as cash businesses, creating security nightmares. Handling that much cash makes you a target. Robberies at dispensaries typically go after the cash drawer, not the product.

The cash-only model also makes it harder to get business loans. Banks want collateral they can seize if a borrower defaults. But if a cannabis company's cash is technically the proceeds of a federal crime, disposing of those assets gets complicated. Lenders stay away.

Rescheduling won't automatically open the floodgates. Banks will still need to update their compliance procedures, and cannabis would remain illegal to transport across state lines. But the legal conflict between state and federal law that has paralyzed financial institutions would largely disappear. Payment processors and traditional lenders could finally enter the market without fearing prosecution.

Fool me twice

Given all this potential upside, you might expect cannabis stocks to have soared on the news. They did the opposite. The AdvisorShares Pure US Cannabis ETF dropped 27% on the day Trump signed the order and has continued falling since.

Part of this reflects classic market dynamics. Prices had doubled in the days before the announcement that rescheduling was coming. The actual news triggered profit-taking.

But the reaction also reveals deeper skepticism. Cannabis investors have been burned too many times. They've watched promising legislation die in Congress. They've seen rescheduling proposals get stuck in administrative hearings. The Biden administration started this same process, and it went nowhere.

The Trump order still requires implementation through the Justice Department. It could face legal challenges from anti-marijuana groups. And it doesn't address other industry priorities, like access to stock exchanges or interstate commerce.

Still, the fundamentals suggest this moment is different. Colorado just crossed $1 billion in marijuana sales for 2025, generating nearly $200 million in state tax revenue. The industry employs more than 400,000 people across almost 15,000 licensed dispensaries. These are real businesses with real customers, trapped in a regulatory framework designed for drug cartels.

And Trump has shown he's willing to push through on industries that couldn't make headway before. In July, he signed the GENIUS Act, creating the first federal framework for cryptocurrency, another sector that spent years locked out of traditional banking. Marijuana rescheduling isn't even his only drug policy shift — his FDA commissioner has called psychedelics research a "top priority," with the VA now running clinical trials on psilocybin for veterans. 

The executive order won't transform cannabis into a normal industry overnight. But for an administration that keeps delivering for industries written off as lost causes, betting against it hasn't been a winning strategy.