On Wednesday, two bipartisan marijuana-related bills were introduced in the House of Representatives, providing an alternative to full federal marijuana legalization. These bills aim to give states more leeway with cannabis laws and address tax issues that have plagued marijuana businesses under federal law.
While both bills would stop short of legalizing marijuana nationwide, they focus on easing some of the burdens imposed by federal regulations—particularly with regard to the onerous Section 280E of the Internal Revenue Code.
The Problem: Section 280E and Its Impact on Cannabis Businesses
For years, businesses operating in the marijuana industry have faced severe tax challenges due to Section 280E, a provision in the U.S. tax code that prevents cannabis businesses from deducting ordinary business expenses, like rent and payroll. This tax provision has made it difficult for legitimate businesses to compete with their non-cannabis counterparts, often resulting in tax rates that are several times higher than those faced by traditional companies.
This provision stems from the federal classification of marijuana as a Schedule I drug, alongside other substances like heroin and LSD. Because of this classification, the federal government has maintained its stance that marijuana businesses are unable to claim the same tax deductions available to any other legal business.
Enter the PREPARE Act of 2025, introduced by House Democratic Leader Hakeem Jeffries and Ohio Republican Rep. Dave Joyce. The bill seeks to give cannabis businesses some relief from Section 280E, reducing the financial strain on companies already operating in states where marijuana use is legal.
The bill does not seek full federal legalization of marijuana, but it would establish a federal regulatory framework that would set guidelines for cannabis businesses to follow, while leaving states with the ability to manage marijuana laws as they see fit.
STATES 2.0 Act: A Step Toward Descheduling
The second bill introduced on Wednesday, the STATES 2.0 Act, is focused more directly on allowing states to regulate marijuana without federal interference. The STATES 2.0 Act would provide additional protections for states that have legalized cannabis for medical or adult use, essentially descheduling marijuana to allow for a more flexible state-regulated market.
Under the proposed bill, states with adult-use marijuana programs would be able to manage the industry without fear of federal prosecution. This bill could go a long way in solving one of the most significant hurdles that cannabis businesses face: conflicting state and federal laws. It provides a path toward more regulatory freedom, without fully decriminalizing marijuana at the federal level.
The STATES 2.0 Act would not make marijuana legal across the United States. Instead, it would grant states more freedom in crafting their cannabis laws, while maintaining some federal oversight. The bill would also extend protections to businesses that operate in the marijuana space, allowing them to access financial services and open bank accounts—two things that are still incredibly difficult due to the current federal legal status of marijuana.
Why These Bills Matter Now
Despite years of advocacy from cannabis reform groups, federal legalization of marijuana remains stalled in Congress. While progress is being made in various states across the U.S., where cannabis is legal for medical or adult use, a nationwide consensus on marijuana legalization has yet to emerge.
The introduction of the PREPARE Act and STATES 2.0 Act signals that a middle ground might be possible. By addressing some of the key issues affecting cannabis businesses without fully legalizing the drug, Congress can provide relief to a rapidly growing industry while avoiding the potential pitfalls of full federal legalization, such as conflicts with law enforcement and existing regulatory structures.
These bills also come as lawmakers grapple with other pressing issues, such as criminal justice reform and the broader debate over drug policy. With a presidential election approaching and public opinion shifting in favor of cannabis legalization, lawmakers may feel pressure to take action now, even if it’s a limited first step.
Moreover, with both Republican and Democratic sponsors for these bills, there’s hope that this might represent an area where bipartisan cooperation is possible. While marijuana legalization remains a divisive issue in Congress, focusing on specific regulatory and tax concerns offers a more narrow and possibly more palatable approach for lawmakers on both sides of the aisle.
What’s Next for Federal Marijuana Reform?
The road ahead for federal marijuana reform is still filled with challenges. Although both the PREPARE Act and STATES 2.0 Act are positive steps, their passage is not guaranteed. With a divided Congress and the current political climate, the fate of these bills remains uncertain.
That said, these bills could serve as a stepping stone for broader reform in the future. If they gain traction and receive support from both Democrats and Republicans, they could lay the groundwork for more comprehensive cannabis policy changes. If not, they might at least provide much-needed relief to marijuana businesses in states where cannabis use is already legal.
Whether or not full federal legalization becomes a reality in the near future, bills like the PREPARE Act and STATES 2.0 Act offer hope that some progress can be made to ease the burdens faced by the cannabis industry—and perhaps pave the way for more substantial reforms down the road.