The US Justice Department is expected to reclassify marijuana into a less restrictive federal category as soon as Wednesday, according to a person familiar with the matter. The move would mark a dramatic reversal of decades-old federal drug policy and signal formal recognition of cannabis's medical value.

Currently, marijuana sits in Schedule I alongside heroin and LSD, a classification reserved for substances deemed to have no accepted medical use and high potential for abuse. Rescheduling would place cannabis in a lower tier, potentially easing banking restrictions, IRS tax penalties known as 280E, and regulatory barriers that have hampered legal operators.

The change would also address a fundamental disconnect between federal prohibition and state-level legalization, where cannabis is now legal for recreational or medical use in dozens of states. Cannabis companies have long argued that federal classification has stifled investment and growth.