February 18, 2025

Cannabis Market Update – 2024 in Review & Outlook for 2025

2024 Review

Progress on Rescheduling

As we begin 2025, the U.S. cannabis industry stands at a crossroads after recent progression on federal reform and the start of a new political administration.  In our prior report, we highlighted key developments in the path to rescheduling cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). The reform achieved meaningful progress in 2024 but continues to experience judicial roadblocks that have delayed clear visibility on a ruling.

In April of 2024, at the direction of President Biden, the Drug Enforcement Administration (DEA) announced its intent to initiate a formal rulemaking process to reclassify cannabis as a Schedule III controlled substance, in accordance with the Department of Health and Human Services’ (HHS) earlier recommendation.  A rule was submitted by the Biden Administration and was published in the Federal Register on May 21^st, which ultimately received over 43,000 public responses to the DEA (over 91% in favor of rescheduling of cannabis and 57% supportive of de-scheduling).^{1, 2}

In August, the DEA announced a preliminary hearing scheduled for December 2 to assess its stance on the appropriate scheduling of cannabis before finalizing a reclassification rule. Ahead of scheduled hearings, DEA Administrator Anne Milgram appointed DOJ Chief Administrative Law Judge John J. Mulrooney II to oversee the hearing and released a list of 25 participants, including industry representatives, lawyers, doctors, state regulators, veterans’ organizations, and elected officials.

As many in the industry predicted, the formal rulemaking process was not completed by year’s end and remains ongoing. At the initial public hearing on December 2^nd, Mulrooney did not hear testimony regarding the proposed rule during the hearing, leaving testimonies for future proceedings that are currently delayed, but expected to take place in the next 3-6 months. Given the extensive time that formal rulemaking typically experiences, it is expected that the DEA will not publish a final rule until the latter half of 2025.

State-Level Updates

Key states that experienced significant milestones in 2024 primarily include:

• • Ohio: After voting to legalize recreational cannabis use in November 2023, the state commenced adult-use sales on August 2, 2024.  State-wide monthly dispensary revenues increased to nearly $80M as of December 2024, compared to ~$40M per month average over the first half of 2024.³
  • Florida: The state of Florida legalized medical cannabis in 2014 and has remained a medical-only market through today. In November 2024, Florida’s Amendment 3 was on the voting ballot which would have legalized recreational cannabis in the state. While a majority voted in favor of passing the bill (56%), it unfortunately fell just short of securing the 60% supermajority needed to pass under Florida law.⁴
  • Nebraska: Became the 39^th state to legalize cannabis for medical use when it passed two cannabis initiatives by large majorities in the November 2024 election. Initiative 437 (passed with 70.8% of the vote), adopts the Nebraska Medical Cannabis Patient Protection Act, which legalizes the possession and prescribing of medical cannabis.⁵ The Nebraska Medical Cannabis Regulation Act was subsequently enacted, creating a regulatory framework for a medical cannabis market.
  • North Dakota: Voters rejected Measure 5 in the November 2024 election, which sought to legalize the limited possession of cannabis products for adults 21 and older. Although the state has an existing medical cannabis program, efforts to legalize adult-use cannabis have repeatedly failed.
  • South Dakota: Voters rejected Measure 29 in the November 2024 election, which would have legalized limited possession and acquisition of certain cannabis products for adults 21 and older. South Dakota voters previously approved an adult-use cannabis measure in 2020, but was overturned by the state Supreme Court for violating the state’s single-subject rule.

2025 Outlook

President Donald Trump was sworn into office on January 20, 2025, after the 2024 elections saw Republicans assume majority control of the White House, Senate, and House of Representatives.  Trump made history in September when he became the first major-party presidential nominee to endorse a state adult-use legalization campaign.  Though Trump’s backing of Florida’s Amendment 3 didn’t lead to the passage of recreational cannabis, the then-Republican nominee also signaled support for moving marijuana from Schedule 1 to Schedule 3 of the Controlled Substances Act saying “as President, we will continue to focus on research to unlock the medical uses of marijuana to a Schedule 3 drug, and work with Congress to pass common sense laws, including safe banking for state authorized companies, and supporting states rights to pass marijuana laws, like in Florida, that work so well for their citizens.”⁶

It is expected that lawmakers from both parties will continue to reintroduce bills with the potential to significantly impact the industry, as cannabis reform has become one of the few bipartisan issues gaining momentum in recent years, with both parties increasingly focused on ending federal prohibition.

While federal rescheduling will remain the key development for 2025, some of the more likely initiatives to gain bipartisan traction in the upcoming 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.

Sources:
1 -https://www.jdsupra.com/legalnews/cannabis-rescheduling-the-dea-public-3446556/
2 -https://www.pewresearch.org/short-reads/2024/04/10/facts-about-marijuana/
3 -BDSA, New Cannabis Ventures – https://www.newcannabisventures.com/december-cannabis-sales-fell-from-a-year-ago/
4 -https://www.goodwinlaw.com/en/insights/publications/2024/11/alerts-practices-can-cannabis-on-the-ballot/
5 -https://ballotpedia.org/Nebraska_Initiative_437,_Medical_Marijuana_Legalization_Initiative_(2024)/
6 -https://www.cnn.com/2024/09/09/politics/trump-marijuana-florida/index.html