U.S. Cannabis Reclassification Puts Pharma-Grade Firms in Pole Position

VANCOUVER, BC – December 18, 2025 – In a landmark decision that promises to reshape the American cannabis landscape, the United States administration issued an executive order today directing federal agencies to reclassify cannabis as a Schedule III controlled substance. The move, which follows years of advocacy and a formal recommendation from health officials, signals a monumental shift away from prohibition and toward a federally regulated, pharmaceutical-based framework for medical cannabis.

This historic reclassification moves cannabis from the highly restrictive Schedule I category—reserved for drugs with "no currently accepted medical use and a high potential for abuse," such as heroin and LSD—to Schedule III. This new classification places it alongside substances like acetaminophen with codeine and testosterone, acknowledging its accepted medical use while maintaining regulatory controls. For companies that have long wagered on a future where cannabis is treated as medicine, this moment represents a powerful validation. Among them is Vancouver-based HYTN Innovations Inc., a pharmaceutical-grade cannabis manufacturer that has been quietly building an infrastructure perfectly suited for this new era.

A New Regulatory Dawn

The executive order accelerates a process that began in August 2023, when the Department of Health and Human Services (HHS) formally recommended that the Drug Enforcement Administration (DEA) reschedule cannabis. The DEA accepted this recommendation in May 2024, setting the stage for today's directive. The order instructs the Attorney General to expedite the rulemaking process, which will include a public comment period before the change is finalized.

Under a Schedule III designation, cannabis products intended for medical use will fall under the stringent oversight of the U.S. Food and Drug Administration (FDA) and the DEA. This means that any company wishing to produce and sell medical cannabis at a federal level will need to adhere to the same Good Manufacturing Practices (GMP) and rigorous clinical trial standards required of any other prescription drug. This stands in stark contrast to the existing patchwork of state-level recreational and medical cannabis systems, which have operated for years in a legal gray area due to ongoing federal prohibition.

The most immediate and celebrated impact for the thousands of existing state-legal cannabis businesses is the elimination of IRS tax code Section 280E. This punitive rule has prevented plant-touching businesses from deducting standard operating expenses, leading to crippling effective tax rates often exceeding 70%. The move to Schedule III instantly nullifies 280E for cannabis operators, promising to dramatically improve cash flow, profitability, and the ability to attract desperately needed capital from institutional investors and traditional banking services.

From Dispensary to Pharmacy

While tax relief provides a short-term lifeline, the long-term implications point toward a fundamental transformation of the industry. The future of federally recognized cannabis in the U.S. is not in the dispensary, but in the pharmacy. Rescheduling paves the way for pharmaceutical companies to develop, test, and market FDA-approved, cannabis-derived medicines that can be prescribed by doctors and covered by insurance.

This shift will significantly lower barriers to medical research, which has been severely hampered by cannabis's Schedule I status. Federal funding for clinical trials may become available, de-risking the substantial investment required to bring a new drug to market. However, it also introduces a new set of challenges. The state-licensed products that patients currently access will not automatically become federally legal prescription drugs. Instead, a new class of pharmaceutical-grade cannabis products will emerge, backed by the scientific rigor and consistency demanded by the FDA.

This is precisely the future that some forward-thinking companies have been preparing for. Rather than focusing on the state-by-state recreational gold rush, they have invested in pharmaceutical-grade compliance and manufacturing, a strategy that until now seemed years ahead of its time.

HYTN's Strategic Foresight

One such company is HYTN Innovations Inc. The Canadian firm welcomed the U.S. executive order, viewing it as a powerful endorsement of its long-term strategy. "The executive order reflects a more structured and controlled regulatory approach toward cannabis that is aligned with established pharmaceutical frameworks," said Elliot McKerr, Chief Executive Officer of HYTN, in a statement. "As regulatory expectations evolve, HYTN has focused on building systems, infrastructure, and quality standards consistent with GMP-based drug manufacturing."

This is not just corporate rhetoric. HYTN holds a Health Canada Drug Establishment Licence (DEL) and a highly sought-after Cannabis Drug Licence (CDL), which specifically authorizes the company to manufacture cannabis-derived pharmaceutical products for clinical research and commercial sale. Crucially, the company has also secured a Certificate of GMP Conformity applicable to the United States, meaning its facilities and quality systems are already built to the standard the FDA will likely demand.

This positions HYTN as one of a very small number of companies globally that can currently manufacture cannabis products to a pharmaceutical standard recognized by U.S. regulators. While many U.S. cannabis operators will now face the daunting and expensive task of upgrading their operations to meet GMP standards, HYTN has already done the work. This unique positioning makes it an attractive potential partner for large U.S. pharmaceutical and biotechnology firms that may now look to enter the cannabis space but lack the specialized manufacturing infrastructure. The company could operate as a Contract Development and Manufacturing Organization (CDMO), leveraging its expertise to help others navigate the complex path to FDA approval.

The company's experience in navigating complex international regulations, demonstrated by its existing export operations to medical markets in Germany, the United Kingdom, and Australia, further solidifies its credentials. This track record proves its ability to meet diverse and stringent regulatory demands, a key capability in the emerging U.S. pharmaceutical cannabis market. While the road to bringing an FDA-approved drug to market is still long and arduous, HYTN appears to be starting the race several laps ahead of the competition.

The reclassification does not, however, solve every issue. It does not federally legalize recreational cannabis, nor does it permit interstate commerce for existing state-licensed businesses. The legal and operational framework for how the new federal pharmaceutical system will coexist with established state medical and adult-use markets remains to be defined. This ambiguity presents both challenges and opportunities as the industry enters this new, more mature phase of its evolution.