Cannabis Musings - January 3, 2025

Looking ahead to the new year.

Friends – another year of cannabis is upon us, which means it’s time once again to engage in the mostly pointless exercise of trying to predict what’s going to happen in the industry in the next twelve months. Kainer vaist nit vemes morgen es vet zein. (“No one knows what the morning will bring.”). And yet, here we are, so let’s dive right in.

• Rescheduling – I think it’s more likely than not that cannabis gets rescheduled in 2025. The administrative court process that’s getting underway will result in a mixed opinion that doesn’t strongly support or oppose rescheduling, depriving the DEA of the solid basis it would need politically to reject the FDA’s scientific findings.

• SAFE® Banking Act – Nope. Still.

• Trump and Cannabis - There’s a fair amount of opinion about whether Trump will be “good for cannabis.” As much as we try to avoid politics in these Cannabis Musings, I’m confident in saying that anyone who claims a fair level of confidence in predicting Trump’s actions iz nisht bei zafk (“is out of their senses”). Don’t be a ferdskop (“horse brain”) - tune all of that out.

• Congress and Cannabis - What I am confident about is that Congress isn’t going to anything for cannabis (see, e.g., the prior bullet point). As we like to say around here, the federal government has no interest in doing the industry any favors, and Congress will continue to be distracted by plenty of other gridlock that it’s not going to spend its political capital to deschedule, or pass any other laws easing the burden on cannabis.

• 280E and the IRS – The IRS will start to formally challenge the 280E refund positions taken by a number of operators over the past year, which it’s been hinting at doing for a while now. This should come as a surprise to exactly no one.

• Farm Bill – I’ve been predicting for two years now that Congress will pass a new Farm Bill, because there’s so much at stake for so many people across the country. My continued ignorance of the dynamics at play when it comes to the Farm Bill compels me to not make a prediction about whether 2025 is finally the year that the 2018 Farm Bill gets replaced. Instead, I’ll cheat a little and say this – if a new Farm Bill gets signed into law in 2025, it will mostly close the hemp loophole, but leave room for low-dose, hemp-derived THC products to continue to not be considered a federal controlled substance. The rulemaking will make the FDA’s existing regulatory authority over the products even more express, leaving its future a bit more in limbo because it’ll give the alcohol industry partners like retailers and distributers pause in carrying the products.

• States’ “Intoxicating Hemp” Policy – States’ movement towards limiting/banning so-called “intoxicating hemp” products will continue, and hemp industry lawsuits trying to stem that tide generally will be unsuccessful.

• State Legalization – Pennsylvania will pass adult-use.

• Canna Provisions – The Supreme Court will not grant review of the Canna Provisions case (which prediction is based solely on the generally daunting odds against.)

• Uplisting – Still won’t happen, because even a rescheduling to Schedule III won’t be enough for the Nasdaq and NYSE to get comfortable with the risk.

• Cole Memo 2.0 – We won’t see the longed-for replacement to the original Cole Memo that was rescinded in 2018 by former President Trump’s first Attorney General, Jeff Sessions. First off, if AG Merrick Garland didn’t issue one during the current Biden administration, why would a future AG under a second Trump administration? Second, so long as Canna Provisions remains open, it becomes challenging for the Department of Justice to issue any sort of cannabis enforcement policy statement that could be perceived as contradictory to its defense in that case.

• Cannabis Stock Prices – Will remain totally irrational throughout the year. They’ll pop if rescheduling actually occurs, but then revert back to the mean, because that’s what they always seem to do. This is not investment advice.

• M&A/Dealmaking – M&A will continue to be sporadic in 2025. I’ve been a contrarian on this point for a while now, and I don’t see much reason to change that position, unfortunately. I think that the Vireo deal from a few weeks ago is an outlier, because that deal was backed by friends of Cannabis Musings, Chicago Atlantic, which already had exposure to some of the assets before the deal got announced. There are precious few pockets of capital like that in this industry to fund many such deals.

• Mishmash – Tinctures will become the hot form factor as a value play. AI will become more of a presence in the industry. Everyone’s point-of-sale systems will work flawlessly on 4/20. Hailey “Hawk Tuah” Welch will launch a celebrity cannabis brand.

For all of my pessimism, I remain optimistic for our industry over the long term. Many of the problems that have plagued the business since we began these Cannabis Musings about six years ago remain the same. Nothing short of full federal legalization is going to truly solve those problems, but there are plenty of good companies and great people working to creatively slough off the mistakes of the past and transform the industry in the meanwhile.

Be seeing you, and zol zein gezunt (“you should be well”) this coming year.

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© 2025 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín.