Michigan’s path to Schedule III The $1.8 billion tax break and the ghost of prohibition

For years, Michigan’s cannabis operators have been fighting a war on two fronts. Locally, they face a race to the bottom, with the average price of an ounce having dropped to double digits. Federally, they’ve been treated like cartel bosses by the IRS, forced to pay taxes on gross profits because of a Reagan-era relic called Section 280E of the Internal Revenue Code.

With the federal government finally moving to make cannabis a Schedule III drug, the industry has reached a tipping point. For Lansing-area staples and statewide powerhouses, this isn’t just a “legal update”—it’s a balance sheet revolution. Yet, for those still sitting in federal prison cells, the news carries a much sharper sting.

 

The death of 280E:

A game of survival

Cannabis’ move to Schedule III is a financial pressure valve. Under the current rules, businesses cannot deduct “ordinary and necessary” expenses like rent, payroll, utility bills or marketing from federal taxes. This leaves Michigan marijuana businesses with effective tax rates often hitting 70% to 80%.

By recheduling cannabis, the feds are finally acknowledging cannabis has medical value. More importantly, it nullifies 280E. In a state like Michigan, this change alone would keep hundreds of millions of dollars in the hands of local businesses, rather than the federal treasury.

 

What it could mean for local operators

1. Pure Options (the scale powerhouse)

As a vertically integrated giant, Pure Options and its cultivation arm, Pro Gro, manage one of the state’s largest marijuana workforces. Under the old tax rules, every dollar spent on employee health care or facility maintenance was essentially a “luxury” the IRS wouldn’t recognize. Cannabis’ move to Schedule III allows Pure Options to operate like a standard agricultural and retail business, freeing up capital to stabilize prices or reinvest in Lansing’s local workforce.

 

2. Element & Lion Labs (the tech innovators)

For the team at Lion Labs — the specialists behind Element — the rescheduling of cannabis legitimizes the science of the plant. Its model relies on high-tech hydrocarbon extraction and R&D. Schedule III status could lower the perceived risk for lenders, potentially opening the door for traditional equipment financing and banking services that may have been previously blocked by risk-averse compliance decisions.

 

3. Redemption (the moral compass)

For Ryan Basore, the CEO of Redemption Cannabis, cannabis rescheduling is both personal and professional. Basore, who served federal time for cannabis before the state went legal, has built a brand centered on helping others affected by prohibition.

In a recent conversation, Basore noted that while the change is a “great step in cannabis regulation,” its most immediate impact is operational. He welcomed the news, noting it would allow business owners to receive much-needed tax relief and, crucially, obtain access to traditional funding — a hurdle that has stifled small and legacy operators for years. For Basore, this is about more than just profit; it’s about the survival of the “soul” of the industry in the face of corporate consolidation.

 

The justice gap

While CEOs and investors are celebrating the tax savings, a dark cloud remains: Rescheduling is not legalization.

The most glaring example for Lansing residents is Danny Trevino. Once a prominent local entrepreneur and the owner of the Hydro World dispensary chain, Trevino was a fixture in the fight for Michigan’s medical laws. In 2020, he was sentenced to nearly 16 years in federal prison for conspiracy to distribute.

The judge in Trevino’s case famously noted that while Michigan law had changed, federal law had not. Trevino remains incarcerated for activities that are now part of the bedrock of our state’s economy.

Rescheduling cannabis does not trigger retroactive sentencing relief or automatic release. It does not expunge records or open the doors for federal cannabis prisoners.

We are entering a surreal era where a cannabis brand can deduct its payroll taxes, while a pioneer like Trevino remains in a cell for the same plant.

 

Call to action: Bridging the gap

As Michigan’s cannabis industry enters this new era of financial freedom, the community cannot afford to leave its pioneers behind. If you want to see the “freedom” in Michigan’s cannabis market apply to more than just a tax return, here is how you can help:

 * Support the Last Prisoner Project: The LPP is advocating for clemency for federal prisoners like Trevino. Visit lastprisonerproject.org to join its letter-writing campaigns.

 * Back Redemption Cannabis: A portion of every Redemption purchase goes toward the Redemption Foundation, supporting those still incarcerated or on probation.

 * Contact your reps: Urge Michigan’s congressional delegation to support broader clemency for nonviolent cannabis offenders. The tax break for businesses is a start, but human liberty must be the finish line.

Rescheduling cannabis could well save Michigan’s industry from financial collapse.

But as long as Trevino is serving a 188-month sentence, even if the state collects hundreds of millions in revenue, the victory remains incomplete.