With a new presidential administration in place, industries across the country are adjusting their strategies to navigate anticipated policy shifts. The cannabis sector, in particular, faces a period of heightened uncertainty and potential transformation. Federal policies surrounding banking access, regulatory oversight and legalization have long influenced the trajectory of the cannabis industry and the return of Donald Trump to the White House brings renewed speculation about what comes next.
Now that President Trump is in office, cannabis businesses, investors and advocates are carefully evaluating how his administration will approach key issues, including federal rescheduling, banking reforms and regulatory oversight. With pending policy decisions at multiple federal agencies like the Drug Enforcement Agency, Department of Veterans Affairs and Justice Department and in Congress, stakeholders must prepare for both opportunities and challenges over the next four years.
During President Trump’s first 100 days in office, little progress on any of these fronts is expected as the administration focuses on other priorities such as foreign policy, government efficiency, economic policy and regulatory reform. Given the cannabis industry’s complex regulatory environment, fluctuations in capital markets and shifting political dynamics, businesses must assess how the new administration’s actions will shape the industry landscape—and on what timeline. Let’s take a closer look.
Federal Rescheduling and the DOJ’s Focus on Enforcement
The Biden administration initiated efforts to reclassify cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA), a shift that would significantly impact industry taxation and set the stage for potential expansion of capital market access. This move, if finalized, would provide relief from IRS Code 280E restrictions, allowing cannabis operators to take advantage of standard business deductions and credits.
Under President Trump, the future of rescheduling remains uncertain, and is highly unlikely to take place in the first 100 days of his term. With Pam Bondi confirmed as Attorney General and Terrance Cole appointed as DEA Administrator, the rescheduling decision rests in the hands of officials who take a more stringent stance on drug policy. While these appointees have previously expressed skepticism toward cannabis reform, we anticipate that their decisions will be guided by scientific research.
In fact, under the Controlled Substances Act, the DEA is required to afford substantial deference to the scientific and medical findings of the Department of Health and Human Services (HHS). With the recent confirmation of Robert F. Kennedy as Secretary of HHS, we have a cannabis reform advocate who can reassert the medical findings of the organization he now leads.
The process will require time as hearings take place and litigation ensues. A key risk is that industry leaders and investors may anticipate immediate benefits from rescheduling, only to encounter unexpected delays and regulatory hurdles. I fundamentally believe rescheduling will happen, but it may take longer than any of us would like.
The Justice Department is also defending a lawsuit filed against the U.S. Attorney General, challenging the constitutionality of the Controlled Substances Act (CSA) as it applies to state-legal, intrastate cannabis activities. Plaintiffs in the CannaProvisions case argue that federal prohibition imposes undue burdens on state-regulated cannabis operations, particularly as more states continue to legalize cannabis.
While the Biden DOJ has vigorously defended the case, it remains to be seen how the Trump administration’s DOJ will approach the ongoing litigation.
Banking Reform and Broader Industry
Despite ongoing efforts to secure banking protections for cannabis businesses, access to traditional financial services remains a major challenge. The SAFER Banking Act, which received bipartisan Senate Banking Committee support in 2023, aims to ensure financial institutions can work with state-licensed cannabis operators without fear of federal penalties.
Previous iterations of this bill passed the House multiple times with bipartisan support, yet shifting political dynamics—especially with Speaker Mike Johnson leading the House—have introduced new uncertainties. A provision within the bill, known as Section 10, aims to prevent regulatory agencies from using banking laws to target specific industries—a practice often referred to as "debanking."
Recent hearings on Capitol Hill focused on debanking for the crypto industry, wherein some participants highlighted similar issues for the cannabis industry. Conservative lawmakers’ interest in providing a level playing field for banking services could offer the forum to advance cannabis banking reform, though the potential for broader legislative gridlock remains a major hurdle.
There is also the possibility that legislation targeting debanking for "federally legal" businesses as Senate Banking Committee Chair Tim Scott implied earlier this year. That would be a disappointment for the industry but remains a real possibility.
We will also be watching the Veterans Administration for support of legislation that would allow VA doctors to discuss and recommend cannabis with patients living in legal states. Such a provision has been included in previous spending bills that have cleared key House and Senate Committees, but it has yet to pass.
Doug Collins, the new Secretary of Veterans Affairs, has been a supporter of alternative therapies for veterans and was a sponsor of the STATES Act, which would have allowed states to regulate cannabis activities without federal interference. We are optimistic that he will advocate for medical cannabis for veterans, which would serve as meaningful validation of its medical efficacy.
Any cannabis reform could come with additional regulatory burdens, particularly from the Food and Drug Administration (FDA), which can impose extra compliance and reporting requirements. However, given the agency’s prior struggles in regulating CBD and hemp, it is not likely to take on a meaningful supervisory role without direction from Congress.
Additionally, the FDA would likely require increased funding to assume such a role, which seems unlikely given this administration’s emphasis on reducing government bureaucracy.
Capital Markets and Investment Hesitation
The cannabis sector has seen periods of extreme volatility in equity valuations and cost of capital and that trend is likely to continue as investors react to regulatory developments. While some stabilization may occur as the process unfolds, major new capital inflows are unlikely until there is greater certainty around the direction of federal policy.
Even if the DEA follows the HHS recommendation and moves cannabis to Schedule III, institutional investors will likely wait for a finalized ruling before significantly increasing investment, particularly given the high likelihood of litigation. Once there is more regulatory clarity, funding will likely be directed toward companies with strong operational track records and competitive advantages.
Until then, the industry will continue to struggle with limited access to traditional capital sources, slowing expansion efforts for many businesses.
Cautious Approach to Mergers and Acquisitions
Mergers and acquisitions (M&A) activity within the cannabis industry has been subdued and that trend may reverse as strong operators look to acquire distressed assets opportunistically. Given the hesitation to assume legacy liabilities, we are likely to see more segment or state acquisitions versus whole-company transactions.
Operators that prioritized improving margins and cash flow over the past 18 months will be best positioned to consolidate the industry.
Legal Challenges and Possible Supreme Court Involvement
While legislative and administrative actions will shape the future of cannabis policy, legal battles may ultimately drive some of the most significant changes. In addition to the CannaProvisions case previously mentioned, there are other legal challenges that may bring new scrutiny to federal cannabis prohibition and potentially reach the Supreme Court.
In particular, cannabis policy intersects with Second Amendment rights, adding another layer of legal complexity. Conflicting Federal Circuit Court rulings regarding whether state-legal cannabis users can legally possess firearms have set the stage for a potential Supreme Court review. These legal uncertainties add yet another challenge for an industry seeking regulatory clarity.
While a Trump presidency presents both opportunities and risks, the path forward for cannabis policy remains difficult to predict. What is clear, however, is that the cannabis industry has repeatedly proven its resilience in the face of shifting political landscapes and regulatory challenges.
Whether managing delays in rescheduling, advocating for financial reforms or preparing for potential changes in federal enforcement, operators and investors should brace for continued uncertainty for the foreseeable future.
Anthony Coniglio is the president, chief executive officer and board member of NewLake Capital Partners, Inc., an internally managed real estate investment trust that provides real estate capital to state-licensed cannabis operators through sale-leaseback transactions and third-party purchases and funding for build-to-suit projects.
