As we enter 2025, the U.S. cannabis industry stands at a crossroads. The industry has come a long way since the start of the first Trump administration, which began with the appointment of cannabis opponent Jeff Sessions as attorney general.
Despite the near-universal acceptance of medical marijuana and the growing acceptance of recreational cannabis use at the state level, federal legalization has yet to materialize. As such, it makes sense to take a closer look at what the cannabis industry can expect in the coming years.
Federal reclassification of cannabis
One of the most anticipated developments in 2025 is the possible reclassification of cannabis from Schedule I of the Controlled Substances Act (CSA) to the less restrictive Schedule III. In April 2024, at the direction of President Biden, the Drug Enforcement Administration (DEA) announced that it would initiate a formal rulemaking process to reclassify cannabis as a Schedule III substance, in line with the previous recommendation of the Department of Health and Human Services (HHS).
If successful, reclassification would provide a huge boost to the industry, reducing federal restrictions and exempting state-legal cannabis businesses from Internal Revenue Code Section 280E, which prohibits businesses from deducting expenses related to the trafficking of Schedule I or Schedule II substances.
As expected, the formal rulemaking process was not completed by year’s end and is still ongoing. The DEA held an initial public hearing on December 2, 2024, but the administrative law judge did not hear testimony on the proposed rule during the hearing. That testimony is scheduled for later hearings, which will take place from January 21 to March 6, 2025.
While formal rulemaking can be a lengthy process, given the scheduled end of depositions on March 6, 2025, it is possible that the DEA could publish a final rule in the second half of 2025.
Trump's Position on Cannabis Legalization
While Trump has indicated that he supports states’ rights to determine legalization, and there is hope that he will continue this policy, his administration has not taken an official position on the issue. Furthermore, cannabis reform is not specifically mentioned in Project 2025, suggesting that it is not a high priority.
Additionally, several people in the Trump administration have spoken out against legalization. For example, Attorney General Pam Bondi opposed cannabis legalization when she was Florida’s attorney general. Trump’s FDA chief-designate, Marty Makary, has called cannabis a “gateway drug” and suggested it can cause cognitive problems. Both appointments are likely to play a pivotal role in federal cannabis policy under Trump.
Congressional Legislative Agenda and Federal Reforms
With Republicans controlling all three branches of government, the cannabis industry could see a shift in federal reform efforts in the coming year. While advocates hope reform is still possible under a Republican-led federal government, it will likely be gradual and focused on public safety and states’ rights.
Despite this uncertainty, lawmakers on both sides of the political spectrum are expected to continue to introduce bills that could have significant implications for the industry. Cannabis reform is one of the few issues gaining momentum in recent years, with both parties showing increasing interest in ending federal prohibition.
Some bills expected to receive support in the upcoming legislative session include:
- The Secure And Fair Enforcement Regulation Banking Act (SAFER Banking Act), which would give cannabis companies access to financial services.
- The States Reform Act, which would remove cannabis from the CSA, impose an excise tax, release non-violent cannabis offenders, and maintain existing state legalization policies.
- The Strengthening the Tenth Amendment Through Entrusting States 2.0 Act (STATES 2.0 Act), which would amend the CSA so that it does not apply to cannabis legally produced and sold under state laws.
The passage of either of these laws would be a huge step forward for the industry. Legislation that preserves existing state regulatory regimes could be particularly beneficial, given the growing number of states that have legalized cannabis. Currently, 24 states, two territories, and the District of Columbia have legalized recreational cannabis, while medical cannabis is legal in 40 states. More states are expected to legalize cannabis by 2025.
Major lawsuits in 2025
There are several lawsuits to watch in 2025. Specifically, there are appeals pending in the Second, Fourth and Ninth Circuits challenging state and local cannabis licensing programs under the Dormant Commerce Clause (DCC) doctrine, which restricts states from adopting policies that impede interstate commerce.
The plaintiffs in these cases allege that cannabis licenses in New York, Maryland and Washington unconstitutionally favor local businesses over businesses from other states, in violation of the DCC. However, federal courts in those states have rejected the plaintiffs’ arguments, arguing that cannabis’ illegality under federal law means the DCC does not apply.
Another case to watch is Canna Provisions Inc. v. Garland, a lawsuit brought by Massachusetts cannabis companies challenging the federal ban on state-regulated cannabis. The case seeks to reconsider the Supreme Court’s 2005 decision in Gonzalez v. Raich, which dismissed an earlier case challenging the CSA.
A federal judge in Massachusetts dismissed the case last summer, and the plaintiffs appealed to the First Circuit. The three judges who heard oral arguments in December 2024 appeared inclined to uphold the federal cannabis law. The First Circuit’s ruling is expected in 2025, and the case could eventually end up before the Supreme Court.
Source: Reuters.com
