The industry is set for significant change in 2025, with key developments expected in tax reform, federal rescheduling, and state regulation. While 2024 was marked by stalled reforms and legal battles, experts predict that 2025 could bring overdue relief for marijuana businesses and clarity on contentious issues like hemp-derived THC and Section 280E tax burdens.
From potential tax showdowns with the IRS to federal rescheduling, here are seven major predictions for the U.S. industry in 2025. This analysis draws on insights from MJBizDaily’s original article.
1. Federal Rescheduling to Schedule 3
One of the most anticipated developments is the potential rescheduling of to Schedule 3 under the Controlled Substances Act.
In May 2024, the Drug Enforcement Administration (DEA) received a recommendation from the U.S. Department of Health and Human Services (HHS) to reschedule from Schedule 1—where it’s classified alongside heroin—to a less restrictive category.
If is moved to Schedule 3, it would bring critical changes for marijuana businesses, including:
- Tax Relief: Businesses would no longer be subject to the harsh restrictions of Section 280E, which currently prevents them from deducting standard business expenses.
- Research Expansion: Rescheduling could pave the way for increased medical research, as the drug would no longer be considered to have “no accepted medical use.”
However, legal experts warn that the DEA’s final decision may face court challenges, potentially delaying implementation.
2. A Marijuana-Friendly President?
With Republicans taking control of the White House and Congress in 2025, industry stakeholders are closely watching President Donald Trump’s approach to policy.
While Trump endorsed Florida’s adult-use legalization measure during his campaign, experts remain cautious about expecting sweeping federal reforms. His administration’s priorities, such as tackling the opioid crisis, may push reform further down the agenda.
Still, observers believe Trump’s stance on marijuana could lead to:
- Administrative action on rescheduling.
- Potential support for SAFE Banking or similar financial reform bills, if public pressure mounts.
3. Tax Showdown with the IRS
The industry has long struggled under Section 280E, which prohibits businesses from deducting ordinary expenses, leading to inflated tax burdens.
In 2024, several major multistate operators (MSOs) took a bold step by filing for standard business deductions despite IRS warnings. This sets the stage for a potential legal showdown in 2025, which could establish precedent for how businesses are taxed moving forward.
If the courts side with operators, it could significantly improve the financial viability of many struggling businesses.
4. California’s Tax Crisis
California, the world’s largest legal market, faces a looming tax crisis. Licensedretailers owe the state an estimated $1.3 billion in unpaid taxes, and unless lawmakers intervene, the state’s 15% excise tax will increase to 19% in mid-2025.
High taxes have driven many consumers toward the illicit market, undermining legal operators. Without meaningful tax reform, experts warn that more businesses could face bankruptcy, further destabilizing the state’s industry.
5. Crackdown on Hemp-Derived THC
The legal status of hemp-derived THC products, such as delta-8 and THC-O, has been a contentious issue since the passage of the 2018 Farm Bill.
While Congress has delayed passing a new Farm Bill to address the loophole that allows intoxicating hemp products to be sold legally, several states, including California and Texas, have already moved to restrict or ban these products.
Experts predict that 2025 will bring:
- Stricter regulations on hemp-derived THC at the federal level.
- Increased enforcement actions in states where these products remain widely available.
Matthew Melander, president of Sun Theory, believes that:
“The decision to push the Farm Bill out gives us hope that policymakers will use this extra time to craft sound and safe regulations for hemp-derived intoxicants.”
6. Potential Supreme Court Case
A federal lawsuit challenging the constitutionality of marijuana prohibition could reach the U.S. Supreme Court in 2025.
The case, spearheaded by Verano Holdings and other plaintiffs, argues that the federal government’s continued prohibition of marijuana violates constitutional principles.
While lower courts have so far upheld prohibition, the plaintiffs are prepared to appeal to the Supreme Court. If the court agrees to hear the case, it could result in a landmark decision that reshapes federal policy.
7. Slower State-Level Reforms
Despite growing public support for legalization, state-level reforms are expected to slow in 2025.
Several high-profile legalization efforts failed in 2024, including a well-funded campaign in Florida. Moving forward, the focus will likely shift to legislative efforts rather than ballot initiatives.
States to watch include:
- Pennsylvania, where lawmakers have pledged to vote on adult-use legalization.
- Minnesota and Delaware, which have already passed legalization bills but have yet to launch their markets.
Big Changes, Big Challenges
While 2024 was a year of slow progress, 2025 holds the potential for significant breakthroughs in policy—particularly at the federal level. From federal rescheduling to tax reform and a potential Supreme Court case, the industry could see long-awaited relief from regulatory burdens.
However, challenges remain, especially in key markets like California, where high taxes and competition from the illicit market continue to threaten legal operators.
businesses should stay informed and prepared for these changes. Whether you’re planning to expand operations or improve compliance, Advanced Extraction Labs offers industry-leading solutions tailored to your needs.
For more in-depth coverage of industry predictions, visit MJBizDaily’s original article.
