On December 18, 2025, President Donald Trump signed an executive order directing the U.S Attorney General to expedite the completion of rescheduling cannabis from Schedule I to Schedule III under the Controlled Substances Act. The move generated immediate headlines suggesting a sweeping shift in federal cannabis policy. But for business owners, patients, and incarcerated individuals in U.S. territories like Puerto Rico and the U.S. Virgin Islands, the reality is far more nuanced, and far less immediate, than media coverage suggests.
“The recent move by President Trump did not actually reschedule cannabis to Schedule III, he merely encouraged his Attorney General to move quickly to do so,” clarifies Jason Ortiz, Director of Strategic Initiatives at Last Prisoner Project, a non-profit organization dedicated to cannabis criminal justice reform. This distinction matters more than you’d think.
The executive order doesn’t change cannabis’s current classification. It doesn’t legalize cannabis, decriminalize possession, or alter enforcement policies. What it does is direct federal agencies to complete a rescheduling process that began under the Biden administration in 2022, a process that has already stretched over three years and remains subject to administrative law hearings and regulatory review. Until the Drug Enforcement Administration (DEA) publishes a final rule, cannabis remains federally classified alongside heroin and LSD as a Schedule I substance.
The Business Reality: Procedural Steps, Not Immediate Change
For cannabis business owners in U.S. territories, the executive order represents procedural momentum rather than substantive relief. Gigi Diaz, owner of Creative Concepts International LLC, a travel and hospitality company operating in the U.S. Virgin Islands, doesn’t mince words about the current impact: “At this point, very little has changed. The President’s action is not law and does not immediately reschedule cannabis, it simply directs federal agencies to review the classification.”
Diaz emphasizes that until the DEA completes its rulemaking process, nothing changes in practice for operators or patients. “Cannabis remains federally illegal and nothing changes in practice for operators or patients in the USVI. If rescheduling were ultimately finalized, it could have downstream implications such as relief from IRS 280E and improved access to financial services, but those outcomes are speculative until the process is complete. Right now, the impact is procedural, not substantive.”
The reference to IRS Section 280E is significant. Currently, businesses dealing with Schedule I or II substances cannot deduct ordinary business expenses from their federal taxes, a burden that has crippled profitability for licensed cannabis operators nationwide. Rescheduling to Schedule III would eliminate this restriction, potentially transforming the financial viability of compliant businesses. However, this benefit remains hypothetical until federal action is finalized.
In Puerto Rico, the regulatory landscape adds another layer of complexity. Rene Fernandez, co-founder of Puerto Rico Alchemy, an artisanal cannabis extraction company, explains that the island’s cannabis framework operates independently of federal classification. “In Puerto Rico, cannabis is technically classified under a Schedule II framework, but in practice, the industry has been regulated and operated as if it were Schedule I,” says Fernandez.
Puerto Rico’s medical cannabis regulations were modeled after early frameworks from Colorado, Oregon, and Washington, states that built their compliance systems while cannabis remained federally classified as Schedule I. As a result, operational requirements, security protocols, and reporting standards on the island reflect a Schedule I mindset despite local medical authorization.
“The federal move to Schedule III is still highly significant. It formally recognizes cannabis as having accepted medical use and challenges the regulatory current framework,” Fernandez notes. “While it does not mandate immediate local change, it creates strong legal and policy justification for Puerto Rico to reassess and modernize its regulations.”
From a business standpoint, Fernandez sees potential upside, but only if local authorities respond. “If Puerto Rico updates its regulatory framework to reflect Schedule III status, licensed operators could benefit from reduced regulatory friction, improved operational cost, and increased business legitimacy.”
The question of when, or whether, territorial governments will update their frameworks remains open. Federal rescheduling doesn’t automatically change local law, and territories maintain their own legislative and regulatory processes.
The Criminal Justice Gap: Why Rescheduling Won’t Free Anyone
While business owners navigate regulatory uncertainty, individuals incarcerated for cannabis offenses face a harsher reality: federal rescheduling will not help them.
“Unfortunately, even if cannabis is rescheduled, it will not free anyone from prison, it will not decriminalize cannabis, or advance any criminal justice aspect of cannabis policy,” says Ortiz. “All rescheduling will do is to alter the taxation of corporate cannabis companies, and potentially create some easier pathways for research into cannabis’s potential as an FDA approved medicine.”
This disconnect between corporate benefit and criminal justice reform is stark. Moving cannabis to Schedule III recognizes its accepted medical use and lower abuse potential, yet individuals serving sentences for the same substance see no change in their circumstances. Cannabis possession, distribution, and cultivation remain federal crimes under Schedule III, just as they do under Schedule I.
Ortiz emphasizes that the mechanisms for relief exist independently of rescheduling. “The President does have the ability to pardon and commute the sentences of anyone incarcerated in federal prison, and that is exactly the action we are asking him to take in conjunction with his Executive Order on Rescheduling. He has that power independent of the conversation around rescheduling, so what we really want is for him to use that power immediately regardless of how rescheduling goes.”
Presidential pardons and commutations are executive powers that don’t require congressional action or regulatory review. They can be implemented immediately, unlike the multi-year rescheduling process. For advocates like Last Prisoner Project, this makes executive clemency the most direct and effective tool for cannabis justice reform.
Beyond federal prisoners, reform must also occur at state and territorial levels. In Puerto Rico and the USVI, Governors have similar executive authority to grant clemency to those incarcerated under local cannabis laws. Additionally, territorial legislatures can reduce penalties, shorten probation periods, expunge records, and eliminate collateral consequences, the secondary punishments that extend beyond incarceration.
“Things like taking away someone’s driver’s license, parents who lose their children for a cannabis arrest, or rights like voting, housing or employment,” Ortiz explains. “There are a ton of different ways that we punish people for having a criminal record related to cannabis, and state and local officials can work to undo those punishments so those who have a record are not punished for the rest of their lives for an activity that today is legal and generating tax revenue.”
Cannabis businesses, particularly dispensaries that interact directly with consumers, have a role to play in this advocacy. “By encouraging their customers to take action and also pressure elected officials to do the right thing, we can broaden our reach to the average cannabis consumers and greatly grow our ability to mobilize the people power necessary to create real lasting change,” says Ortiz.
Last Prisoner Project also offers cannabis businesses a direct way to support incarcerated individuals: financial donations that fund commissary accounts for those currently imprisoned and re-entry grants for those returning to society. “In this way they can directly support prisoners, and make their return to society a little easier once they get out,” Ortiz adds.
The Path Forward: Dual Markets and Comprehensive Reform
Looking beyond the immediate implications of the executive order, business owners in both territories envision more comprehensive approaches to cannabis policy. Fernandez advocates for Puerto Rico to adopt a dual-market system:
“The most balanced and progressive-looking approach for Puerto Rico is a dual-market approach: a regulated non-medical adult-use cannabis program alongside a preserved, high-standard medical cannabis system.”
Adult-use legalization would expand access, reduce reliance on unregulated markets, and create tax revenue at a time when Puerto Rico urgently needs economic diversification. “Puerto Rico can leverage the experience of more than two dozen U.S. states that have already navigated this transition,” Fernandez notes.
At the same time, medical cannabis would remain distinct, offering higher-grade products, clinical oversight, and financial advantages such as reduced or zero taxation. “Ideally, medical cannabis would also integrate more closely with the broader healthcare system, including insurance participation where feasible,” he says.
Fernandez sees cannabis as “a modern agricultural, manufacturing, and retail ecosystem capable of generating jobs, tax revenue, and long-term growth. When properly regulated and paired with responsible-use education, it can benefit patients, consumers, and the broader Puerto Rican economy simultaneously.”
Diaz takes a more systemic view of what meaningful reform requires. “The most meaningful move would be clear, comprehensive federal reform rather than partial measures. For patients and consumers, that means expanded research, consistent product standards, and access without stigma or legal ambiguity. For businesses, it means regulatory clarity, fair taxation, and the ability for small and locally rooted operators to survive alongside larger players.”
She’s clear about where the current executive order fits in that bigger picture: “Rescheduling may be a step in a longer process, but descheduling and thoughtful regulation are what actually address the structural issues facing both patients and the industry.”
The Work Ahead: From Executive Orders to Executive Action
The signed executive order on cannabis rescheduling marks a significant moment in federal drug policy, but it’s a beginning, not a conclusion. For U.S. territories, the order doesn’t immediately change laws, free prisoners, or transform business conditions. What it does is signal federal recognition of cannabis’s medical utility and potentially pave the way for research and taxation reform, eventually.
The real work remains ahead: territorial governments must update their own frameworks, executives must use clemency powers to correct past injustices, and comprehensive federal reform must address the structural contradictions of a plant that generates billions in revenue while keeping people imprisoned for possessing it. Until then, business owners will continue navigating regulatory uncertainty, patients will seek relief in fragmented markets, and cannabis prisoners will remain behind bars for a substance the federal government increasingly acknowledges has legitimate medical use.
As Ortiz puts it plainly: rescheduling might help corporations deduct expenses, but only executive action, and political will, can free people from prison.
Veronica Castillo, known as Vee the Traveling Cannabis Writer, has spent over six years journeying across the United States documenting cannabis communities, cultures, and the economic impact of cannabis tourism. She is the author of “Cannabis Legacy Chronicles Series: The Traveling Cannabis Writer’s Guide to America’s Hidden Gems,” chronicling six years of documenting resilience, challenges, and inspiration across legal cannabis markets. She has a background bridging professional business insights and creative storytelling, offering a unique perspective on how cannabis tourism drives local economic development.
