Cannabis Industry Faces Familiar Challenges Following Trump’s Reelection
Donald Trump’s reelection has left the cannabis industry grappling with familiar uncertainties about its federal future.
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Over the past decade, cannabis companies, advocacy groups, and investors have pinned hopes on sweeping federal reforms that repeatedly failed to materialize.
While state-level legalization continues to expand, national policies remain fragmented, prompting industry leaders to shift focus toward strategies within their immediate control.
Federal cannabis reform has often served as political leverage, with both major parties using it to energize voters. Yet, meaningful progress has proved elusive. President Joe Biden’s earlier pledges to decriminalize cannabis and reschedule it under federal law resulted in only symbolic measures, such as pardoning simple possession offenses. Despite broad public support for legalization and state-level advances, federal reform efforts remain mired in political complexity and division.
Trump’s reelection signals a likely continuation of this federal inertia. While historically ambivalent about cannabis reform, Trump has favored a state-driven approach, enabling individual states to chart their own paths without federal interference. As a result, expectations for sweeping federal changes remain low.
Overestimating Federal Reform as a Solution
A common misconception in the cannabis industry is that federal legalization will resolve its most pressing challenges, such as limited banking access, heavy tax burdens, and regulatory hurdles. However, even if federal legalization were achieved, these issues would not vanish overnight.
Banking Access
Federal legalization might improve financial services access in theory, but in practice, cannabis businesses remain cash-intensive and highly regulated. Canada’s experience highlights this reality—despite federal legalization, only a handful of banks offer services to the cannabis industry due to compliance risks and operational complexities. Similarly, U.S. banks may remain hesitant, regardless of legalization.
Tax Burdens
Cannabis businesses also face steep tax burdens under Section 280E of the federal tax code, which prohibits standard deductions for companies trafficking controlled substances. Rescheduling cannabis to Schedule III could ease this burden, but it wouldn’t eliminate the costly compliance requirements imposed by state laws. Businesses must prepare for ongoing financial and regulatory pressures even in the event of partial reform.
State-Level Momentum Offers Opportunities
Despite federal stagnation, state-level legalization continues to gain traction. Nearly 40 states now permit cannabis sales for medical or recreational use, each with its own regulatory framework. This patchwork approach presents challenges but also creates opportunities for businesses that adapt effectively to local markets.
Companies that align their operations with state regulations and build relationships with policymakers can establish more stable foundations. Multistate operators, in particular, benefit from diversifying their operations across jurisdictions, making them more resilient to regulatory shifts.
Additionally, focusing on local markets allows businesses to meet customer needs, build brand recognition, and generate revenue without relying on federal intervention. This state-centric strategy positions companies for growth even in the absence of national reform.
Practical Strategies for Progress
Industry leaders can achieve meaningful progress by prioritizing incremental victories and sustainable strategies:
Banking Reform Advocacy: While bills like the SAFE Banking Act and SAFER Banking Act have stalled, businesses can continue advocating for bipartisan banking protections.
Innovative Payment Solutions: Embracing cashless payments and automated clearing house transfers can streamline operations under current restrictions.
Capital Access: Building partnerships with specialized financial services and private lenders can help businesses secure funding despite banking challenges.
Operational Efficiency: Investing in compliance tools and technologies reduces regulatory risks and improves long-term viability.
The Path Forward
The cannabis industry’s future remains uncertain at the federal level, and relying on sweeping legalization efforts is a risky approach. Instead, companies must focus on navigating existing frameworks, strengthening state-level operations, and adopting pragmatic solutions to overcome barriers.
While federal reform may eventually materialize, its timeline and scope remain unpredictable. Businesses that prioritize resilience, incremental growth, and compliance will be better positioned to succeed in an evolving market.
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