The U.S. marijuana industry stands on the brink of sweeping changes, with new opportunities and challenges looming large. A $32 billion sector could see long-awaited tax reforms, clearer regulatory frameworks, and even potential support from the highest political offices. Here’s a closer look at the key predictions shaping cannabis in 2025.
A Step Toward Schedule 3 Classification
The long-awaited reclassification of marijuana as a Schedule 3 drug is closer than ever. The DEA is expected to make a ruling after nearly a year of deliberation.
This decision could reshape the industry:
- If approved, it would place marijuana in the same category as anabolic steroids and ketamine, signaling a softer stance toward the drug.
- However, court challenges are inevitable, and the final outcome may remain mired in legal wrangling.
Still, the possibility of a shift to Schedule 3 is an indicator of changing attitudes at the federal level, offering hope to operators burdened by outdated policies.
A “Marijuana-Friendly” Administration?
Donald Trump’s return to the presidency comes with cautious optimism from cannabis operators. His past support for Florida’s legalization efforts sparked expectations of reform-friendly policies.
However, his appointments, including Attorney General nominee Pam Bondi, suggest a mixed bag. Bondi’s historical stance against marijuana raises concerns about federal policy under her watch. Despite this, advocates argue that Trump’s willingness to back certain measures could nudge Congress toward long-overdue banking and regulatory reforms.
The reality, though, may be slower progress. With a Republican-dominated Congress and other pressing priorities like border control and fentanyl crises, major reforms may not materialize until 2026 or later.
The IRS Battle Over Tax Burdens
The cannabis industry’s tax woes are reaching a critical point. Section 280E of the federal tax code, which prevents marijuana businesses from deducting regular expenses, continues to weigh heavily on the sector.
Last year:
- Major cannabis operators ignored Section 280E and filed deductions anyway, setting up a legal showdown with the IRS.
- The outcome of these disputes will create precedents that could redefine the tax landscape for marijuana companies.
The stakes are high, and both operators and the IRS are bracing for a confrontation that could reshape industry economics.
California’s Tax Crisis Deepens
California’s cannabis industry is grappling with mounting tax burdens, with retailers owing over $1.3 billion to the state. The situation could worsen with the state’s excise tax set to increase from 15% to 19% in July unless legislative action is taken.
Here’s why this matters:
- High taxes are driving consumers to the illicit market, undermining legalization efforts.
- The state’s budget shortfall of $20 billion makes it unlikely that lawmakers will offer much relief.
A tipping point is near. Industry leaders warn that without meaningful changes, California could lose its status as the cannabis capital of the U.S.
Crackdown on Hemp-Derived THC
While federal lawmakers delayed updating the Farm Bill in 2024, several states have moved to regulate hemp-derived THC products, which fall under a legal loophole.
Key developments include:
- California’s ban on intoxicating hemp products.
- Similar efforts in Texas, Tennessee, and other states where such products have gained popularity.
Observers believe federal regulation is the only sustainable solution. But for now, the clash between hemp and marijuana producers is poised to escalate.
Federal Prohibition Faces Legal Challenges
Marijuana’s federal prohibition could be heading to the Supreme Court. Plaintiffs argue that the 2005 ruling supporting prohibition is outdated and unconstitutional.
Here’s what’s at stake:
- A reversal of the Supreme Court’s decision could invalidate federal prohibition entirely.
- However, the legal process is slow, with a rejection by the U.S. Circuit Court of Appeals expected before any Supreme Court appeal.
A favorable ruling could transform the industry, but such a landmark decision may still be years away.
State-Level Reforms Stall
While some states, like Pennsylvania, continue to discuss legalization, progress is slow. The defeats in Florida and the Dakotas highlight the waning momentum of ballot-driven efforts.
Current trends:
- Legislative-led reforms in states like Delaware and Minnesota show more promise, but they take time to implement.
- Markets in those states remain closed, delaying economic benefits for operators and consumers.
For now, state-level changes appear to be on pause, with only incremental progress likely in 2025.