WHILE EARLY expectations centered on federal rescheduling and smoother payment access, the cannabis industry’s trajectory in 2025 was instead shaped by stalled federal reforms, expanding state markets and intensifying oversight of hemp-derived intoxicants.
This wrap-up highlights the most significant policy, regulatory and market developments of 2025, including late-year changes not captured in earlier summaries.
Federal rescheduling stalls again
The long-running push to reschedule cannabis remained frozen through 2025. A scheduled Drug Enforcement Administration administrative hearing was indefinitely postponed in January, and new DEA Administrator Terrance Cole, who was sworn in in July, quietly excluded rescheduling from the agency’s strategic priorities.
As a result, cannabis businesses will end the year still burdened by IRS section 280E and without clarity on federal tax, research or financing rules. IRS Code bars businesses that sell federally controlled substances, like cannabis, from deducting ordinary operating expenses, allowing them to write off only the cost of goods sold.
Payments landscape more stable
The SAFER Banking Act once again stalled in Congress, but dispensaries benefited from a more reliable payments ecosystem. Industry-specialized providers expanded cashless options, reducing shutdowns and improving checkout processes.
Even without federal action, 2025 marked a practical improvement for operators long dependent on cash-heavy transactions.
Federal spending bill closes the hemp loophole
A provision in the November federal spending bill rewrote the national hemp landscape by recriminalizing most intoxicating hemp-derived THC products.
Beginning in November 2026, hemp items will only be legal if they contain no more than 0.3% of Delta-9 THC per container, include no synthetically produced cannabinoids, avoid THC like compounds and are not intermediate cannabinoid products sold directly to consumers.
Industry groups estimate that more than 90% of existing hemp and CBD products exceed the new thresholds.
Hemp farmers, manufacturers of infused drinks and edibles and nonintoxicating CBD now face a one-year countdown that may force reinvention or closure.
State actions
California — In October, the Golden State rolled back its cannabis excise tax from 19% to 15% after Governor Newsom signed AB 564 into law. The move reversed an automatic increase that took effect in July and will remain in place until at least 2028.
Minnesota — The North Star State continued building its adult-use market by selecting 150 retailers across two lotteries, including an initial round reserved for social equity applicants. Lawmakers also introduced bills to regulate psilocybin therapy and authorize home cultivation. Meanwhile, the new state budget increased the cannabis gross receipts tax from 10% to 15%.
New York — The Empire State remained one of the nation’s fastest-growing markets, with sales up more than 90% year over year.
But the Office of Cannabis Management announced that an error in the state’s cannabis business proximity rule affected 152 approved locations and could force many of them to move or close.
While 47 pending applicants must relocate, lawmakers are considering a fix to allow already operating dispensaries to remain.
Illinois — The Prairie State fully transitioned from BioTrack to Metrc in July and paused new retail licenses to help social equity operators secure capital. The state launched a $12 million forgivable loan program, introduced psilocybin-therapy legislation and froze new transporter licenses to protect smaller operators.
Takeaway
The regulatory environment for cannabis in 2025 was defined more by recalibration than by breakthrough, although the federal intoxicating hemp ban proved to be the most earth-shaking moment.
While federal rescheduling stalled yet again, banking stability improved and states expanded their markets.