Cannabis Legalization Hearing with Gavel and Scales of Justice in Courtroom Setting

2024 was a primarily lean and flat year for the U.S. cannabis industry. The state-legal cannabis industry has been volatile from its inception, and 2024 represented a year of winnowing with many cannabis businesses failing. 2025 has some light on the horizon, though, with the prospect of the Drug Enforcement Administration’s (“DEA”) rescheduling of cannabis from Schedule I to Schedule III. Until that occurs though, you can expect that cannabis in 2025 will be just as rocky as in 2024. Rocky doesn’t mean unsuccessful though. There are still opportunities across the board for investors and business operators, from state-by-state expansion to purchasing cannabis assets for pennies on the dollar in some cases.

Based on a recent article in the Green Market Report (and corresponding public filings), “$1.83 billion of . . . debt is set to come due by 2026” for a number of publicly traded multi-state cannabis operators (“MSO”s). While this public cannabis company debt is not a pretty sight, it might be the tip of…

Flag of Minnesota in Marijuana leaf shape. The concept of legalization Cannabis in Minnesota.

The Minnesota Office of Cannabis Management (“OCM”) has begun issuing final denials to the overwhelming majority of previously qualified social equity applicants (“SEA”s) ahead of its first statewide cannabis lottery on December 2 for 280 available “preapproval” cannabis licenses.

America’s Dairyland does not currently have any form of either medical or adult-use cannabis. The state has tried and failed at least a couple of times on convening medical cannabis legislation (see here on the latest attempt earlier this year). At the same time, Wisconsin is surrounded by three states that have both medical and adult-use cannabis programs (Minnesota, Illinois, and Michigan), with Canada to the north, which legalized cannabis in 2018.

High detailed image of fresh cannabis cultivation

In April, I wrote about the Docklight case in Washington State. That case involved a qui tam action pursuant to the False Claims Act in which Docklight, a cannabis ancillary company, settled with the Department of Justice for having wrongfully received and been forgiven a Payment Protection Program (PPP) loan. While there was little reporting on or analysis of the case by the cannabis industry, it was clear that the federal government was looking at cannabis and cannabis ancillary businesses and, essentially, PPP fraud.

Now, there is growing concern among cannabis PPP loan recipients of potential audits related to the Small Business Administration (SBA) Office of Inspector General’s estimate that up to one-third of PPP loans were fraudulently secured (and forgiven). Notably, as part of the PPP, the SBA issued specific guidance in 2019 that both cannabis and cannabis-related companies were not eligible for PPP loans (though it’s likely that hundreds if not thousands of these companies applied for and received these funds anyway). And while “plant touching” businesses likely have no leg to stand on if they’re audited by the SBA, cannabis ancillary businesses potentially have a shot at surviving these audits.

As the 2024 Minnesota Legislative Session came to a chaotic close on May 20, numerous changes to Minnesota Statutes Chapter 342 were sent to the Governor’s desk to build on the already existing cannabis regulatory structure. On May 24, Governor Tim Walz signed the amendments to Chapter 342, which address social equity provisions, preapproval process for social equity applicants, the larger application and licensing process, and consumer safety.

While the cannabis industry is closely following the recently published notice of proposed rulemaking from the Department of Justice (“DOJ”) and the Drug Enforcement Administration (“DEA”), which will move cannabis from a Schedule 1 controlled substance to a Schedule 3 controlled substance under the Controlled Substance Act (“CSA”), a very important federal cannabis litigation matter is making its way through federal court. That case is Canna Provisions, Inc., Gyasi Sellers, Wisacre Farm, Inc., and Verano Holdings Corp.v. Merrick Garland, case no. 23-cv-30113. Filed in October of last year, the Canna Provisions case is more important than ever in the context of rescheduling (in my opinion) and this post serves as an update on what’s happening in court.

On May 16, the Drug Enforcement Administration (“DEA“) published its 92-page notice of proposed rulemaking (“NPRM“) to move marijuana from schedule 1 on the Controlled Substances Act (“CSA”) to schedule 3 (ironically, the proposed rule itself only takes up a couple of paragraphs on the last two pages of the NPRM). On the same day, the DEA released an opinion from the Office of Legal Counsel (within the Department of Justice (“DOJ”), which prepares legal opinions of the U.S. Attorney General “and provides its own written opinions and other advice in response to requests from the Counsel to the President, the various agencies of the Executive Branch, and other components of the Department of Justice”) in response to questions from the U.S. Attorney General’s office about schedule 3 marijuana (the “Opinion”). While the NPRM represents the proposed DEA rule that moves marijuana from schedule 1 to schedule 3, the Opinion is essentially the OLC’s roadmap for fending off legal and administrative challenges to this historic move.

The biggest legal shift in the cannabis industry in decades just occurred on the heels of the Drug Enforcement Administration’s (DEA) proposal today for cannabis rescheduling. Specifically, as many anticipated, the DEA will exercise its authority to reschedule cannabis from a schedule I controlled substance to a schedule III controlled substance on the Controlled Substances Act (CSA). This cannabis rescheduling comes in part from the recommendation of the Department of Health and Human Services to reschedule cannabis from a I to a III on the CSA. The DEA’s proposal must now go before the White House Office of Management and Budget (OMB) for review and approval. The OMB’s primary functions relate to budget formulation and execution, legislative coordination and clearance, executive orders and proclamations, information and regulatory affairs, and mission-support areas and management initiatives. OMB will very likely review this DEA proposal for budget impact, regulatory impact, and legislative coordination.