United States of America
The evolution of the US cannabis industry and ecosystem continued in 2024 with mixed news in terms of progress, particularly at state level, and recurring challenges federally, primarily due to cannabis still being a Schedule I drug under the Controlled Substances Act. Overall, the outlook is positive, with promising developments likely to take place in 2025 at the federal level. These, mostly regulatory and political shifts, are very likely to have an impact on the financial health of cannabis companies and improve the ecosystem.
Regulation
As of November 2024, 39 US states had legalised medical cannabis, representing about 59% of the US population and 70% of GDP, with adult-use cannabis legal in 24 states, representing 55% of the population and 62% of GDP. The last Gallup poll, which covered views on legalisation (from 2023), showed that over 70% of US adults are in favour of cannabis legalisation. Despite these figures, and the many states where cannabis is legal today, federal prohibition still limits the industry’s potential.
A series of cannabis related votes took place in November 2024:
- In Florida: Amendment 3 would have made adult-use cannabis legal in the state, however it failed to reach the 60% threshold of votes required to pass, falling marginally short at 55.9%.
- In South Dakota: Measure 29 would have made adult-use cannabis legal, but failed to pass.
- In North Dakota: Measure 5 would have made adult-use cannabis legal, but failed to pass.
- In Nebraska: Initiative 437 passed, making medical cannabis legal in the state.
Few US states remain fully closed to cannabis, namely, North and South Carolina, Kansas, Wyoming and Idaho. Meanwhile, some states have a legal status but with a conservative approach, with just medicinal CBD being legal with a 1% tetrahydrocannabinol (THC) limit for access with a doctor’s prescription and below 0.3% THC without a doctor’s prescription, as is the case in Texas. Similar laws exist in other states, particularly in the midwest and Georgia.
A key update, that is still expected in 2025, has to do with cannabis classification at the federal level, with the Department of Justice, which oversees the Drug Enforcement Administration (DEA), proposing in early 2024 to move cannabis to a Schedule III drug, a more lenient classification than its current status as Schedule I. The hearing for this potential change was expected to take place mid-year, but was delayed to 2 December 2024 due to the elections. Nevertheless, the chances of cannabis being rescheduled in 2025 are significant, particularly considering the political alignment on the subject of cannabis.
Moreover, in political terms, and in the context of a highly polarised election in November, both candidates signalled support to cannabis rescheduling, with Kamala Harris being very explicit on it and Trump’s campaign also being favourable to this change, but with less openness, likely caused by concerns that it could affect votes from his conservative base.
Taking a look at hemp, a major discussion taking place in the US today has to do with the 2018 Farm Bill, which legalised, nationwide, some hemp-derived CBD products containing less than 0.3% CBD. This created a legal loophole whereby many companies are now thriving by selling tetrahydrocannabinolic acid (THCA) and semi-synthetic THC hemp derivatives, at scale. The bill, which is valid for the standard five years, used a one year extension which is now coming to an end. Congress is expected to take action shortly to pass a new bill that is likely to explicitly forbid semi-synthetic and pyschoactive hemp derived cannabinoids, following a Republican amended proposal in this regard.
‘The US cannabis industry is at a major crossroads. With cannabis set to be rescheduled, and the descheduled intoxicating hemp sector gaining momentum (mainstream, low-dose, over-the-counter THC beverages, gummies, vapes), things are certainly evolving in a way that none of us ever saw coming. Schedule III movement will change the global supply chain landscape, as US operators will be able to participate in cannabis global commerce. The state-based dispensary system needs the tax (280e) relief, and will only be able to move past its current economic struggles when it has greater cash on hand.’
Robert Hoban, US based Global Cannabis Industry Strategic Advisor.
Market
A major avenue of progress for the cannabis industry in the US has to do with the Secure And Fair Enforcement Regulation Banking
Act, also known as the SAFER Banking Act. This new legislation, which was approved with a good margin by the Senate Banking Committee in September 2023, with votes from both Democratic and Republican senators, now awaits a full floor vote from the
Senate in order to be approved.
If it passes, this new regulatory framework for cannabis financing is expected to boost the cannabis industry, as it would allow banks, insurance companies and other financial service providers to fully enter the cannabis industry in states with legal status, without fear of federal prosecution. This would assist cannabis businesses and entrepreneurs, who, in some cases, still struggle to access vital business services, such as having a bank account or accepting card payments.
Another major potential financial development in the cannabis ecosystem of the US relates to federal taxes, and is connected
to the previously discussed rescheduling proposal to Schedule III. If rescheduled, cannabis companies would be allowed to deduct business expenses for their tax declarations, thereby being removed from the Internal Revenue Code 280E. This would mean
that cannabis companies could witness a drop in their federal taxes.
Cannabis stocks saw significant fluctuation during 2024. Stocks such as Canopy Growth Corp. (NASDAQ:CGC) started 2024 trading at US$4.79, and entered an upward trend in Q2, reaching US$14.88 in May – this was driven by the declarations of Vice President Harris for federal cannabis legalisation. Since then, their stocks fell again, being close to US$2.74 in December 2024.
Other well known cannabis stocks in the US such as Aurora Cannabis Inc. (NASDAQ:ACB), Cronos Group Inc. (NASDAQ: CRON) and Tilray Brands Inc. (NASDAQ: TLRY) experienced similar evolution during the year, with stock prices soaring in Q2 and then going back to lower values in Q3 as the year unfolded.
One of the reasons for stocks falling again after politically-driven highs was the postponement of the rescheduling to December 2024, with cannabis stocks falling an average of 10% upon postponement.
Another shock to stock prices occurred following the ballot initiatives which took place with the presidential election in November, in particular Florida’s adult-use legalisation not passing. This sent stocks tumbling, with listed cannabis companies and cannabis exchange traded funds (ETFs) generally losing between 10% – 20% of their value in the immediate aftermath of the vote.
Meanwhile, there is potential for interesting stock price increases in early 2025, depending on the passing of the SAFER Banking Act, and the rescheduling hearing taking place.
In 2024 there were a number of mergers and acquisitions (M&A) that signalled the industry trend to consolidate.
Canopy USA bought Wana and all its subsidiaries. Based in Colorado, and with a presence in several states, the company is well known for its cannabis edibles. Canopy also acquired 75% of Lemurian Inc., a company famous for its extracts for vaping.
Also in the consolidation trend, Nabis, a cannabis wholesale platform, acquired Nevada based cannabis distribution company, Blackbird. This will help the company serve the state and cities, such as Las Vegas. The state has witnessed a cannabis sales reduction in the last few years, yet a report by the Nevada Cannabis Compliance Board suggests there may be a halt to that drop in sight, and increased sales are projected until 2030.
The trend of cannabis companies entering the drinks market has continued, in both alcoholic and non-alcoholic drinks, most notably beer, with several new and existing brands launching cannabis-infused beers in 2024.
Tilray Brands Inc. announced in Q3, 2024, that it would be acquiring four Molson Coors Beverage Co. breweries. This comes after the company acquired eight beverage companies in 2023, and two large breweries in the previous years.
‘The future soul of the US cannabis industry hinges on how well social equity
Hilary Yu, Founder of Our Dream, a socially inclusive cannabis media site
is protected as states legalise and as we approach potential federal recreational
legalisation. Marginalised communities should lead this expansion, with access
to low-interest, impact-focused capital. Yet, large MSOs are likely to continue lobbying for monopolistic control, as seen in states like Florida. If consumers
consistently demand a social equity-focused industry, cannabis can grow into a broader, more equitable market. For social equity to thrive, it’s essential that entrepreneurs from impacted communities have access to favourable loans and impact capital to foster real opportunity.’
that centres around minority groups.
In terms of sales, California continues to lead by far, with monthly sales close to US$395 million. Next in the ranking is Michigan, with approximately US$277 million monthly sales, but with projected sales growth of 8.6% in 2024. Meanwhile, California’s sales are expected to drop over 3% in 2024, and other progressive states are witnessing a similar phenomenon, with projected drops of 7.5% in Arizona, 8% in Colorado and 3.3% in Washington. Other states that have recently approved cannabis legislation are also witnessing growth, such as Florida’s medical cannabis sales seeing a 6.1% projected growth, medical cannabis sales in Pennsylvania seeing a 9.4% projected growth, and New Jersey seeing a projected adult-use sales growth close to 20%.
Also in sales, some sources have reported that Michigan surpassed California in 2024 in total sales by volume (quantity). The main reason is related to significantly lower prices for cannabis products in the midwest state when compared to California. Another reason is the abundance of illegal market products in the west coast state when compared to Michigan. Estimates indicate that cannabis-related products (including accessories for adult-use consumption) sold in May 2024 were at 24.2 million units for Michigan and 17.3 million units in California. More interestingly, is the fact that in per capita terms, cannabis expenditure is at US$330 million in Michigan and less than half in California, at US$120 million.
‘The US cannabis market is designed to be fractured – each state has its right to govern cannabis as it deems fit. This is what will make federal regulation challenging. When recreational cannabis is legalised federally, it is unlikely that the regulation will supersede state mandates. In fact, what will likely occur is a new federal tax, interstate trade and mass decriminalisation. All good things but the country will be far from the international cannabis leader they have the potential to be with federal standards on quality and compliance.’
Rachel G. – Canadian Craft Cannabis Company Co-Founder,
Change Creator & Global Cannabis Expert
Recent developments in the US cannabis ecosystem
- California is struggling with illicit cannabis suppliers. This progressive state witnessed a growing supply of illicit cannabis in 2024, cultivated in the state, from where 40% of total cannabis production (legal and illicit) comes in the US. This continues to pose a challenge for legal cannabis businesses competing for market share in the state.
- Also in California, the progressive state became the first in the US to allow for cannabis sales and consumption in its state fair, a major annual event.
- Pre-rolls, a ready-to-use dried flower cannabis product, continues to grow in its popularity, following the Canadian trend. Some projections suggest pre-roll sales will soon surpass other dried flower products and could surpass US$4 billion sales in 2025. Pre-roll sales increased almost 12% between June 2023 and June 2024.
- The US, and in particular the state of New Mexico, continues to struggle with the increase of illegal cannabis farms which are foreign funded and owned, and staffed by Chinese migrants, most of them entering the country illegally through the southern border.
- A major challenge in 2024 has been fighting the increasing synthesised cannabis options available at stores, primarily delta-8 THC, an artificial derivative of hemp. This has led to states, such as South Dakota and Wyoming, explicitly prohibiting this particular cannabinoid, and Indiana and Missouri warning stores about the urgent need to remove it from their shelves.
- A Civic Science poll, in early 2024, showed that 21% of Gen Z (those born between the mid 1990s and 2012) intended to replace alcohol with cannabis in the 2024 Dry January campaign. The campaign promotes alcohol abstention during the first month of the year. Gen Z represents about 20% of the US population today, and it will represent over 30% of the workforce by 2030. This trend is expected to go beyond Dry January, and similar such campaigns, as the trend increases towards a reduced use of alcohol by the Gen Z population.
- The year of 2024 started with negative news from Colorado, a highly regarded state in the cannabis industry, with sales plummeting and average prices dropping. Around 2021, during the pandemic and the cannabis industry peak, sales were US$1,700 a pound, but they dropped to US$700 a pound in early 2024. This led to some dispensaries closing and cannabis workers losing their jobs, creating fear in the industry.
- Another state facing challenges in 2024 is Oregon. Also a progressive state, its permissive cultivation laws created an excess of supply, and estimates indicate total state cultivation today could exceed the state’s total cannabis demand. Local producers are waiting for a federal legal change to allow the state to sell nationwide while also struggling to work out how to reduce production.
- In the state of New York, adult-use dispensaries reported to the Cannabis Association of New York (CANY) that they were struggling with supply, as the state experienced the challenges associated with the early stages of the industry. Reduction in product diversity was reported by 78% of the dispensaries surveyed while 53% of the cultivators haven’t been able to meet demand levels.
