Is Cannabis Reform Doomed Under the New Administration?

As 2024 draws to a close, the U.S. cannabis industry finds itself at a crossroads, caught between the hope of long-promised federal reform and the uncertainty of a new administration. Advocates and businesses alike are grappling with unanswered questions about the future of cannabis policy, particularly the fate of federal rescheduling.

The year began with optimism. The Department of Health and Human Services (HHS) had recommended reclassifying cannabis from a Schedule I to a Schedule III substance, a move that would have marked a significant shift in federal policy. Such a reclassification could pave the way for cannabis-derived medications to gain FDA approval, reduce tax burdens for cannabis businesses, and signal a step toward broader acceptance of the industry.

The Drug Enforcement Administration (DEA) responded by opening a public comment period, which drew over 40,000 responses, 69% of which favored decriminalization or legalization. Despite this strong show of public support, the process has stalled, and meaningful action seems increasingly unlikely under the current administration.

Joe Biden campaigned in 2020 with promises of cannabis reform, yet significant progress has been elusive. Rescheduling, while less sweeping than full legalization, was seen as the most achievable federal action during his presidency. However, bureaucratic delays and shifting political priorities have kept these efforts mired in limbo.

The big issue is rescheduling, said Alex Halperin, editor of the cannabis-focused newsletter WeedWeek. There was a lot of excitement about that, but it’s been sort of mired down. Now, of course, we have the new administration, and who knows what they’re going to do?

With the Trump administration poised to take the reins once more, cannabis advocates are bracing for the unknown. During his first term, Trump largely left cannabis policy to individual states but appointed officials, such as former Attorney General Jeff Sessions, who were openly hostile to legalization efforts.

The question now is whether the new administration will take a similarly hands-off approach or actively impede progress. The cannabis industry, which has seen state-level legalization expand to nearly 40 states for medical use and 23 for recreational use, risks losing momentum if federal support stalls—or regresses.

Business UncertaintyThe lack of clear federal policy creates a challenging environment for cannabis businesses. Without rescheduling or legalization, companies remain subject to heavy tax burdens under Section 280E of the IRS code, which prohibits standard deductions for businesses dealing with Schedule I or II substances.

Many operators are also excluded from banking services, forcing them to operate in cash, which increases security risks and limits growth potential. A reversal or slowdown of federal reform efforts could deepen these operational challenges.

Public Sentiment vs. PolicyPublic support for cannabis reform has reached record highs, with a 2023 Pew Research Center survey showing 68% of Americans favoring legalization. The gap between public opinion and federal policy highlights a disconnect that could fuel further frustration and activism.

State-Level MomentumWhile federal reform stalls, state-level legalization continues to advance. States like Minnesota and Maryland legalized recreational cannabis in 2024, adding to the patchwork of regulations across the country.

However, the lack of federal coordination leaves businesses navigating inconsistent rules and missing out on interstate commerce opportunities Advocacy and AdaptationAdvocacy groups are doubling down on efforts to push for reform, while businesses prepare contingency plans to weather prolonged uncertainty. This includes diversifying product offerings, expanding into emerging markets, and focusing on local community engagement to build brand loyalty.

As the cannabis industry looks ahead to 2025, it faces an inflection point. Will the incoming administration choose to build on the incremental progress made under Biden, or will it reverse course, threatening the industry's gains?

For now, the industry remains in limbo, navigating a complex landscape shaped by evolving state laws, uncertain federal policies, and the enduring gap between public opinion and political action. Whatever happens next, the stakes for the U.S. cannabis industry have never been higher.

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