May 21, 2025
Cannabis Market – Q1 2025 Update
PROGRESS ON FEDERAL RESCHEDULING
Through the first quarter of 2025, the U.S. cannabis industry remains at crossroads, following strides in federal reform and the onset of a new political administration. In our previous reports, we outlined significant developments on the path to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). While the reform made notable progress in 2024, it still faces judicial hurdles that have postponed a definitive ruling.
In April 2024, at Former President Biden’s direction, the Drug Enforcement Administration (DEA) announced plans to initiate a formal rulemaking process to reclassify cannabis as a Schedule III controlled substance, in line with a previous recommendation from the Department of Health and Human Services (HHS). A proposed rule was submitted by the Biden Administration and published in the Federal Register on May 21st, generating over 43,000 public comments—more than 91% of which supported rescheduling, and 57% of which favored de-scheduling altogether.1,2
In August 2024, the DEA set a preliminary hearing for December 2 to further examine its position on cannabis’ appropriate classification before finalizing the reclassification. Ahead of the hearing, DEA Administrator Anne Milgram appointed DOJ Chief Administrative Law Judge John J. Mulrooney II to oversee the proceedings and released a list of 25 participants, including industry leaders, attorneys, medical professionals, state regulators, veterans’ groups, and lawmakers.
As many industry observers had predicted, the formal rulemaking process was not concluded by the end of 2024 and remains in progress. The hearing was scheduled to begin on January 21, but, on January 13, Mulrooney postponed it while an appeal by an involved party is resolved. As of Q1 2025, the federal marijuana rescheduling process continues its holding pattern in awaiting a hearing.
2025 OUTLOOK
Four months into the Trump’s second term, cannabis reform does not appear to be a priority of the new administration and its outlook remains largely unchanged from the start of 2025.
Notably, Trump recently nominated Terrance Cole to be the new DEA Administrator. While not yet officially appointed, Cole has largely declined to commit to rescheduling cannabis or even comment on how he would approach federal enforcement in states that have legalized cannabis. Sources indicate that Cole’s stance on cannabis appears more restrictive, based on historical comments made by Cole indicating the dangers of cannabis and also through his 22 years of service with the DEA. Cole did recently comment that cannabis reform would be a priority and that it was time to “move forward,” however we see his lack of clear commitment and public response to questions on reform contributing to further uncertainty on the process as it stands today.3
In addition to federal rescheduling, other likely initiatives to gain bipartisan traction in the 2025 legislative sessions include:
- Secure And Fair Enforcement Regulation Banking Act (SAFER Banking Act), which would provide cannabis businesses with much-needed access to financial services (and which was most recently passed by the Senate Banking Committee in September 2023);
- States Reform Act, which would deschedule cannabis, impose an excise tax, release nonviolent cannabis offenders and preserve existing state legalization policies;
- 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 produced and sold in compliance with state law. These bills have been introduced in prior legislative sessions and have garnered bipartisan support in the past.