Federal Cannabis Rescheduling and Its Implications for the U.S. Cannabis Industry: Strategic Investment Opportunities in Equities and Infrastructure as Trump's Potential Schedule III Reclassification Nears

The potential reclassification of cannabis from Schedule I to Schedule III under the Controlled Substances Act represents a seismic shift in U.S. drug policy and a pivotal moment for the cannabis industry. As President Donald Trump's administration moves closer to finalizing this decision, investors are increasingly scrutinizing the implications for cannabis equities and infrastructure. This analysis explores the strategic opportunities and risks associated with this regulatory transformation, drawing on recent developments and financial data from key players in the sector.

The Policy Shift: From Schedule I to Schedule III

According to a Bloomberg report, President Trump is expected to direct his administration to reclassify cannabis as a Schedule III substance, aligning it with drugs like ketamine and anabolic steroids. This move would reduce federal regulatory barriers, allowing state-licensed cannabis businesses to access standard tax deductions under IRS code 280E, currently prohibited for Schedule I substances. The reclassification would also acknowledge cannabis's medical utility, potentially spurring research and development in therapeutic applications.

While no final decisions have been made, Trump has engaged in discussions with industry leaders, signaling a high likelihood of action via executive order. However, political opposition remains, with figures like House Speaker Mike Johnson expressing concerns about the proposal.

Strategic Investment Opportunities in Cannabis Equities

The rescheduling of cannabis could unlock significant value for equity investors. By removing IRS Section 280E restrictions, cannabis companies would gain access to tax deductions for general and administrative expenses, research and development (R&D) credits, and energy-related incentives. This change could dramatically improve profitability, as highlighted by CohnReznick, which notes that cannabis businesses would no longer be limited to deducting only cost of goods sold.

Tier 1 cannabis operators, such as Trulieve Cannabis Corp. and Curaleaf Holdings, have historically faced volatility, with both experiencing notable declines in September 2025. However, Tier 2 companies-ancillary businesses and suppliers-have shown stronger returns, suggesting a shift in investor preference toward infrastructure and support sectors. For example, Cronos Group reported record net revenue of $36.3 million in Q3 2025, bolstered by its debt-free balance sheet and strong performance in Israel. Similarly, Verano Holdings Corp. generated $203 million in Q3 revenue, though it faced a $44 million net loss due to impairment charges.

Infrastructure Sectors: The Backbone of Industry Growth

Infrastructure firms stand to benefit immensely from the rescheduling of cannabis. Controlled environment agriculture (CEA) and cultivation technologies, such as LED lighting and automation systems, are critical to scaling operations efficiently. As noted by Dentons, delaying infrastructure investments can lead to missed yield and revenue opportunities, with LED lighting alone offering returns of up to 15x the initial investment within a year.

Jushi Holdings Inc., a key player in the infrastructure space, reported Q3 2025 revenue of $65.7 million and a gross profit margin of 46.7%, driven by operational efficiencies and new dispensary openings in Ohio and Pennsylvania. Conversely, IM Cannabis Corp. saw a 13% decline in gross profit to $2.7 million, attributed to regulatory uncertainties in Germany and asset impairments. These divergent outcomes underscore the importance of strategic capital allocation and regulatory agility in infrastructure investments.

Risks and Challenges for Investors

Despite the optimism surrounding rescheduling, several risks persist. Political opposition, such as Senator James Lankford's proposed legislation to block tax deductions for cannabis businesses, could undermine the financial benefits of reclassification. Additionally, the retroactive application of tax changes remains uncertain, with the IRS's stance on this issue critical to long-term profitability.

Regulatory volatility at the state level also poses challenges. For instance, recent enforcement actions targeting intoxicating hemp-derived cannabinoids have created market uncertainty. Furthermore, the cannabis industry's stock market remains highly volatile, influenced by fragmented regulation and investor sentiment cycles.

Conclusion: Navigating the Path Forward

The potential rescheduling of cannabis under the Trump administration presents a transformative opportunity for investors. While the removal of Schedule I restrictions would not legalize cannabis, it would reduce barriers to research, banking access, and profitability. Equity investors should focus on Tier 2 companies and infrastructure firms with strong balance sheets and regulatory adaptability. However, caution is warranted given political and regulatory uncertainties. As the industry navigates this pivotal moment, disciplined capital deployment and strategic partnerships will be key to unlocking long-term value.