The Future of the Marijuana Industry in America

As the push for legalization grows, marijuana is garnering significant attention from investors, suppliers, and researchers. Despite marijuana still being illegal under federal law as a Schedule I drug, the retail market for legal marijuana was projected at $57 billion by 2028, up from $39 billion in 2024.

A total of 38 states and the District of Columbia have legalized marijuana for medicinal use. Also, 24 states and the District of Columbia allowed adults to use it recreationally as of May 2024. That number may continue to rise as more and more people are accepting the idea of legalizing marijuana across the U.S.

This article looks at the state of the legal marijuana industry and its prospects for further development.

Key Takeaways

• More than half of Americans believe marijuana use should be legal.
• The drug is already legal for medicinal purposes in 38 states, with 24 states allowing adults to use it for recreational purposes.
• Policies are changing as we find out more about the medicinal uses of marijuana and derived products.
• In 2024, the U.S. Department of Justice proposed reclassifying marijuana from a Schedule I drug to a Schedule III drug. This would ease restrictions on research into possible benefits and side effects.

Changing Attitudes Toward Marijuana

Attitudes toward marijuana use in the U.S. have come a long, long way since the release of the iconic 1936 film “Reefer Madness”—a supposedly educational film that has become a cult classic satire. In the film, a group of high school students try marijuana and soon become deranged criminals. These days, such ideas are laughable.

More Americans have been smoking marijuana in recent years. In 2023-24, 15% of Americans reported smoking marijuana, more than double the 7% who said so in 2013. Age, gender, education, and political affiliation were all factors in the results. More than a quarter (26%) of those aged 18 to 34 reported smoking, compared to 11% of those 55 or older. Men smoked at a higher rate than women (19% vs. 14%), people with a college degree smoke less than people without them (9% vs. 21%), and more Democrats (23%) than Republicans (10%) said they smoke it.

Though marijuana smokers are in the minority overall, there is widespread support for legalization. According to a Pew Research Center survey, 88% of Americans believe the use of marijuana should be legal for medicinal or recreational use, and 57% say it should be legal for both.

Important

The Justice Department has proposed reclassifying marijuana from a Schedule I drug to a Schedule III drug.

Marijuana is still a Schedule I controlled drug under federal government guidelines, but the Justice Department has proposed reclassifying it as a Schedule III drug. As a Schedule III drug, marijuana would remain illegal at the federal level, but could be lawfully dispensed by prescription. In addition, restrictions on research into its benefits would be eased, as would some penalties for illegal possession.

Policy Reform

Having seen significant change at the state level, marijuana policy reform advocates are hopeful legislative change could occur on the federal level.

President Joe Biden has pardoned many marijuana-related offenses, including possession, attempted possession, and simple use. His biggest move, though, was the Department of Justice looking to reclassify cannabis to the less restrictive Schedule III category.

The passage of the SAFE Banking Act would give marijuana-related businesses a big boost. Because cannabis-related businesses are illegal under federal law, most struggle to access traditional banking and financial services, including deposit accounts and lines of credit. The SAFE Banking Act, which has drawn bipartisan support, would prohibit federal banking regulators from penalizing a bank for providing services to state-sanctioned marijuana businesses.

Under current law, banks could lose their deposit insurance for allowing cannabis companies to open accounts or borrow money, significantly affecting access to capital and the ability of cannabis businesses to process payments. The act passed a key Senate committee in late 2023 but has yet to pass both chambers of Congress.

CBD

Marijuana has been used as a means of treating illnesses in different cultures for thousands of years, and is increasingly seen as useful for patients who suffering from ailments including chronic pain, anxiety, and seizures.

Now CBD (cannabidiol) is catching on as well. CBD is a natural compound found in cannabis plants that is non-psychoactive, meaning it doesn’t get people high. But it is claimed to provide relief from many of the same ailments marijuana is used to treat, such as pain, anxiety and depression. It is sold as an ingredient in oils, oral sprays, creams, pills, or edibles like gummies and lollipops.

Global Market Insights estimates the North American market for CBD will grow from a $22.8 billion-dollar market in 2023 to a $108 billion market by 2032. No wonder big names such as Philip Morris and Altria Group are investing in marijuana businesses.

The FDA and CBD: Softening Stance?

The U.S. Food and Drug Administration (FDA) is responsible for regulating CBD products. In June 2018, the agency a marijuana-derived drug, GW Pharmaceuticals’s (GWPH) Epidiolex, for the first time ever . It was designated a Schedule V drug by the U.S. Drug Enforcement Administration (DEA), which means it has low potential for abuse.

However, under federal rules it is illegal to market food products or dietary supplements that contain CBD, something the marijuana industry is obviously keen to change. The FDA has said that the current regulatory framework for CBD products is not appropriate, given their unique risks, and that it would work with Congress on drafting rules that seek a balance the public’s desire for CBD products with the FDA’s safety concerns. This is encouraging for the many companies betting on the compound.

Big Marijuana

Many experts say the era of Big Marijuana is coming and will happen quickly if the SAFE Banking Act is passed and/or the drug is legalized at the federal level, with the legal marijuana industry ultimately following the same patterns seen in so many other industries. There has been plenty of consolidation in the industry already, and more is likely.

“I know it’s probably an unpopular thing to say, but the way I see the cannabis sector developing over the next 10-15 years, you’re probably going to have five to a maximum of 10 large players,” said Boris Jordan, co-founder and executive chair of Curaleaf.

Technology is also shaping the industry, giving investors additional opportunities in “cannatech” or “weedtech” companies, as they’re called. They include Dutchie, an e-commerce and point-of-sale company for merchants, which raised $100 million at a valuation of $400 million in early 2024. You should also expect to hear words like machine learning, automation, and blockchain used more often concerning.

Will Medical Marijuana Market Continue to Grow as Recreational Marijuana Spreads?

Even as recreational cannabis use becomes more common, the market for medical marijuana is projected to grow to as much as $27 billion by 2026.

How Do Cannabis Businesses Bank?

Under federal law, banks are at risk of losing their deposit or share insurance if they lend to or offer accounts to cannabis businesses. Despite this, some local and regional banks choose to offer services to cannabis businesses.

Why Is There So Little Research on the Effects of Marijuana?

Until 2024, marijuana was a Schedule I drug, defined as one with no currently accepted medical use and a high potential for abuse. This made medical research on the drug difficult, requiring background checks, close tracking and controlled disposal of the drug, specific sourcing requirements, and other bureaucratic hurdles.

The Bottom Line

The marijuana industry has come a long way since California became the first state to legalize medical marijuana, which it did in 1996, and all signs indicate that legal marijuana is here to stay. As the legal frameworks around the marijuana industry continue to loosen and more states legalize the drug, the industry is poised to grow at an incredible pace in the coming years.