What does it mean for Arizona’s cannabis industry that President Trump recently signed an executive order rescheduling marijuana and downgrading cannabis from the most restrictive and dangerous category of drugs?

“It’s not legalization, but it does move the industry out of the penalty box,” says Justin Brandt, partner and co-founder of industry law firm Bianchi & Brandt, of Arizona’s billion-dollar cannabis market.

“It doesn’t reduce regulatory requirements, mandate rescheduling, or federally legalize cannabis,” Brandt says. “Any rescheduling still has to go through the [Drug Enforcement Agency’s] formal rulemaking process.”

On December 18, Trump directed the Department of Justice to reschedule marijuana from a Schedule I drug to a Schedule III drug under the Controlled Substances Act. The move promises to ease some restrictions on the industry and allow for cannabis research.

But importantly, it does not legalize cannabis nationwide.

Schedule I drugs, such as heroin, have no medical value, a high potential for abuse and the potential to create severe psychological or physical dependence. Schedule III drugs, such as ketamine or testosterone, acknowledge medical use and lower risk.

Laura Bianchi, partner and founder of Bianchi & Brandt, cautions that cannabis markets will not see changes overnight.

The industry anticipates that once rescheduling is complete, it will change how regulators, lenders and investors view the industry. For Arizona operators, that shift could unlock financing and deal activity that has been largely frozen.

The most immediate impact of rescheduling would be the effective end of 280E, part of the tax code that effectively bans cannabis businesses from taking common tax deductions enjoyed by other regulated industries. According to Sara Gullickson, CEO of The Cannabis Business Advisors, that will significantly improve cash flow and financial stability for compliant operators.

“That said, state licensing frameworks remain fully intact, and operators should expect heightened expectations around compliance, governance, and operational discipline,” Gullickson says. “This move rewards well-run businesses with strong regulatory foundations and positions cannabis closer to a normalized, highly regulated industry—while exposing those that are unprepared for increased scrutiny.”

Mitchel Chargo, partner at Hinshaw & Culbertson LLP, says the tax code changes alone could improve operators’ cash flow, stabilize pricing and strengthen long-term viability for the industry.

He notes, too, that the gap between federal law and state-regulated cannabis markets such as Arizona’s has created unnecessary confusion for patients, business and regulators.

“We’re not at the finish line and there are still many steps to go before this becomes official,” Chargo says. “But this is a pivotal moment. Thoughtful policy changes like this help bring marijuana out of the shadows and into a space where education, research, responsible regulation, and opportunity can continue to grow.”

Jason Vedadi, CEO of Story Cannabis, calls the decision long-overdue, saying it “finally acknowledges the overwhelming scientific evidence of cannabis’s medical value, expands critical research opportunities, and ensures our nation’s veterans can more easily access the cannabis-based treatments many of them rely on for PTSD, chronic pain, and other service-related conditions.

“By removing the Schedule I stigma, this action also grants dignity and legitimacy to more than 500,000 hardworking Americans employed in the legal cannabis industry, recognizing them as the normal, tax-paying citizens and job creators they have always been,” Vedadi says.

Ann Torrez, executive director of the Arizona Dispensaries Association, called the decision “a profound cultural shift.”

“For decades, marijuana has been stigmatized and now the federal government acknowledges what patients and providers have long understood – marijuana is medicine.”

Rescheduling cannabis “acknowledges what many patients and operators have known for years: that marijuana has legitimate medical value and deserves to be treated that way, including through more credible research and understanding,” says Marie Saloum, Owner & CEO of GreenPharms Dispensary and Medical Marijuana Doctors.

“We’re not at the finish line yet,” she says. “But moments like this help move cannabis out of the shadows and into everyday life, where education, research and responsible access can continue to grow.”