In 2025, the cannabis industry saw both unprecedented challenges and opportunities. The setbacks included an 11th-hour intoxicating hemp crackdown inserted into the bill that reopened the government after a 43-day shutdown; contracting cannabis prices in mature markets; and an effort to overturn legalization in newly decriminalized states.
But 2025 ended on a high note. An executive order, signed in December, urged the Federal government to expedite the cannabis rescheduling process. While this order has not changed federal law, it is a monumental step forward in the years-long effort to de-escalate cannabis from a Schedule I drug (a status it shares with heroin, cocaine, and other hard drugs) to Schedule III (akin to codeine-coated Tylenol). This status change would have enormous positive implications for the cannabis industry, especially regarding tax liabilities.
Additionally, momentum is building for legalization efforts in several additional states, which could be spurred on by cannabis rescheduling.
With this context in mind, let’s explore these key developments and their potential impact on cannabis operators in 2026.
Cannabis rescheduling: Where it stands and what it would mean for the industry at large
Rescheduling would represent the most significant shift in federal regulation in decades. Cannabis operators would benefit from a lower tax burden, greater access to funding, and reduced regulatory hurdles to medical research.
The industry-reviled tax code 280E would no longer be relevant. This onerous code prohibits cannabis companies from making tax deductions. According to cannabis data firm Headset, this change alone would save retailers between $268K and $800K annually, depending on sales volume. Rescheduling could also help mainstream cannabis finances, allowing them access to traditional banks, loans, and other financial services. Additionally, rescheduling could reignite stalled bank reform under the SAFE and SAFER acts and encourage local legalization efforts.
It is important to note that no laws have changed yet, and there are more steps in the rescheduling process. That makes the timing of when rescheduling might take effect a little hazy.
States with legalization prospects
Twenty-four states (and Washington, D.C.) currently have legalized adult-use recreational cannabis. Five states could see legalization in 2026: Florida, Hawaii, New Hampshire, Pennsylvania, and Virginia. While some of these states, such as Hawaii and Florida, have narrowly failed in past legalization efforts, public support nationwide has grown to 87%, according to Pew Research. White House support of rescheduling could further tip the scales in favor of legalization in these states.
Forty-two states currently have legal medical cannabis. State elected officials in five of the eight holdouts have signaled their support for moving medical cannabis legislation forward in their states.
Price volatility
Price volatility and compression persist in mature cannabis markets due to significant oversupply, compelling operators to focus on efficiency and maintain strong balance sheets to safeguard their margins. With wholesale prices dropping by an average of 32% since 2021, many businesses are grappling with heavy debt. In newly legalized states, prices tend to be significantly higher (up to 4 times those in established markets), while mature markets are currently experiencing unprecedentedly low retail prices. In this challenging environment, over $3.8 billion in overdue payments are burdening the industry, with invoices typically around 6 weeks past due.
To navigate fierce competition, cannabis retailers heavily relied on discounts throughout 2025 to stimulate sales. With promotions and markdowns becoming common tactics to drive foot traffic and clear out aging inventory, the trend of increased discount rates is expected to persist into 2026 as retailers prioritize short-term sales volume over pricing power.
Also read: Reducing Risk and Strengthening Compliance in Cannabis Cash Management
Changing consumer tastes and demographics
The cannabis market is undergoing a notable transformation, with a clear shift towards wellness-focused consumption over intoxication. An increasing number of consumers are turning to cannabis for specific benefits like sleep, stress relief, and pain management, rather than solely for high THC content or recreational use. In fact, 64% of consumers now prioritize relaxation over intoxication, highlighting a growing preference for wellness-driven products. This trend is reflected in product diversification, where pre-rolls, especially infused and multi-packs, are leading as the fastest-growing category. Edibles, particularly gummies, and infused beverages are also gaining traction as discreet, low-dose alternatives to alcohol. In addition, there is a rising interest in minor cannabinoids such as CBN, CBG, and THCV, along with specific terpene profiles, as consumers seek targeted effects tailored to their needs.
The demographics of cannabis use are also expanding, with over 30% of women over 21 consuming cannabis. Also, cannabis use among seniors is growing. These changing demographics mean cannabis operators may need to explore new marketing approaches.
Lastly, the rise of digital shopping cannot be overlooked; online ordering and e-commerce integration are becoming vital for dispensaries, mirroring consumer demand for convenience and a seamless digital experience. Overall, these trends signify a deeper understanding of consumers’ preferences and needs as they explore the various benefits of cannabis.
Also read: Cannabis Trademarks: Understanding the Nuances of a Fraught Legal Space
Protect your cannabis business through the ups and downs
With cannabis rescheduling on the horizon and more states poised for legalization, 2026 could be the year long-held cannabis stigmas begin to crumble. But with more markets, product diversity, and shopping channels, there is more exposure to liability on multiple fronts. Additionally, changing regulations can create uncertainty, increasing the risk of errors and noncompliance.
McGowan Wholesale is dedicated to serving the rapidly evolving cannabis industry by offering a comprehensive suite of innovative and tailored insurance solutions. We understand that operators in this space face unique risks and regulatory hurdles, which is why our product range is specifically designed to address the changing needs of cultivators, processors, dispensaries, and ancillary businesses.
To receive a consultation tailored to your specific operations and to learn more about how our deep industry expertise can best serve you and secure your future, please get in touch with our wholesale cannabis division today.
