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As we close out the year, and the newly elected president prepares to take office, the cannabis industry is abuzz with speculation about potential policy changes. While it is difficult to predict exactly what will happen based on comments from the President-elect, the historical precedents set during his last term, combined with his recent rhetoric, suggest the new administration may be more supportive of cannabis reform than it was in the past. The question is how much of his comments will move to tap into key voting demographics and what the actual policy shift will be when the administration comes into office. Ultimately, in the last several years, marijuana legalization and reform have continued to become more broadly popular across partisan lines. With the President-elect's shift toward populism, this may also be a good thing for cannabis reform.

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During his first term, President-elect Donald Trump showed limited activity on cannabis reform, mostly following the status quo from the prior administration. However, his recent statements indicate a shift in his stance. Trump has gone as far as expressing support for legalizing recreational marijuana, which, despite his support, did not pass in Florida. This marks a significant change from his previous position and suggests a more relaxed approach to cannabis regulation.

The Trump Marijuana Transition Memo outlines several policy recommendations that could shape the future of cannabis reform. These include issuing pardons for federal marijuana offenses, stopping the denial of federal housing to marijuana consumers, and not interfering with D.C. Council decisions on marijuana laws. If implemented, these recommendations could have a profound impact on the cannabis industry and its consumers.

With all of that in mind, the marijuana industry is cautiously optimistic about Trump's second term. While many in the industry do not favor Trump, they see potential opportunities with his administration. Trump's support for marijuana rescheduling and cannabis banking reform could be a massive benefit to the industry, despite his controversial pick for Attorney General. Efforts to reschedule marijuana could significantly reshape the industry, making it easier for businesses to operate and for consumers to access cannabis products.

Bob Fireman, CEO of MariMed, recently shared his insights on the potential impacts of Trump's presidency on the cannabis industry. Fireman believes that Trump's business-friendly approach could benefit the industry by reducing regulatory burdens and fostering a more favorable environment for growth. He also highlighted the importance of bipartisan support for cannabis reform, noting that both Republicans and Democrats have shown increasing support for legalization.

Despite the potential for positive change, there are still many uncertainties. Trump's nomination of Pam Bondi as Attorney General has raised concerns due to her history of opposing marijuana reform. Bondi's stance on marijuana rescheduling and cannabis banking reform remains uncertain, and her confirmation could impact the ongoing marijuana rescheduling process and other cannabis-related issues. Therefore, industry insiders should remain vigilant during this transition to a new administration.

<strong>Rescheduling and the DEA</strong>

The potential for the DEA to reschedule cannabis from Schedule I to Schedule III under the Controlled Substances Act marks a significant shift in federal cannabis policy. This move, following recommendations from the Department of Health and Human Services, acknowledges the medical benefits of cannabis and its lower potential for abuse compared to other Schedule I substances. If finalized, this rescheduling would alleviate some of the regulatory burdens on the cannabis industry, such as the restrictions imposed by Section 280E of the Internal Revenue Code, which currently prevents cannabis businesses from deducting ordinary business expenses. Additionally, it could pave the way for more comprehensive research into the medical uses of cannabis, potentially leading to new treatments and therapies. The DEA's formal hearing proceedings on this matter are set to begin on January 21st, 2025, and the outcome could have far-reaching implications for the industry and its stakeholders.

Again, here the impact of the Trump administration on the potential for rescheduling cannabis is noteworthy. While the administration is showing a more supportive stance towards cannabis reform compared to his previous term, the new head of the DEA may have a significant impact on the outcome of this process. While we await additional news on that subject it is difficult to determine the potential outcome of the current rescheduling process. Certainly, these key regulatory roles, such as the DEA and Attorney General, could also impact the timeline and implementation of these changes.

While this also remains somewhat uncertain, it seems that the new House and Senate are likely to extend the current Farm Bill, which governs agricultural and food policy in the United States. This extension could have significant implications for the hemp and marijuana industries, particularly regarding intoxicating hemp products. The Farm Bill defines hemp as cannabis with less than 0.3% THC, but the rise of intoxicating hemp products, such as Delta-8 and Delta-9 THC, has created regulatory and business challenges for the legacy marijuana businesses. This has lead to market compression for licensed marijuana operators and tension among the different types of cannabis businesses. Unlicensed operators in the intoxicating hemp industry are continuing to grow, while questions have been raised about safety, as well as compliance with federal law for these products. Ultimately, it is unclear that there will be significant change with respect to increased regulations on intoxicating hemp products, and the market may continue to grow without regulatory clarity. Extending the Farm Bill in its current form will only continue to exacerbate issues among marijuana and hemp operators.

<strong>Potential Market Trends for 2025 </strong>

Looking ahead to 2025, several market trends could shape the cannabis industry. Firstly, the push for federal legalization and reclassification of marijuana is likely to continue, potentially opening new markets and reducing operational barriers. Secondly, advancements in cannabis research and technology could lead to new product innovations and improved cultivation methods. Thirdly, the increasing acceptance of cannabis for medical and recreational use may drive higher consumer demand and market expansion. There will still be legacy market challenges, but expanding market and larger market adoption is likely to provide opportunity for well positioned players.

According to a recent article on Forbes, Trump's administration may also focus on rescheduling cannabis to a Schedule 3 drug, which would acknowledge its medical benefits and reduce some of the regulatory burdens currently faced by the industry. This move could significantly impact the market by allowing for more research and development, as well as providing tax relief for cannabis businesses.

It is difficult to predict exactly what will happen under the new administration. Cannabis business owners should stay informed and engaged with the evolving political landscape. By doing so, they can better navigate the challenges and seize the opportunities that lie ahead. Key areas to watch include federal policy shifts, state-level legislative actions, and the ongoing push for safe banking and reclassification of marijuana. Staying proactive and adaptable will be crucial for success in the ever-changing cannabis industry.  As always, it is important to stay informed and engaged with the latest developments in cannabis policy. The coming months will be crucial in determining the future of cannabis reform in the United States.

If you have any questions or would like to discuss this topic further, please feel free to reach out to your Michael Best and Friedrich, LLP contact.

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Potential Support for Cannabis Reform Under the New Presidential Administration

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