Marijuana Reclassification in the US 2025 | Statistics & Facts

Marijuana Reclassification in America 2025

On December 18, 2025, President Donald Trump signed a historic executive order directing the reclassification of marijuana from a Schedule I to a Schedule III controlled substance under the Controlled Substances Act, marking the most consequential shift in federal cannabis policy in over 50 years. This groundbreaking decision affects 44.3 million Americans who currently use marijuana and represents a fundamental policy reversal for a drug that has been classified alongside heroin and LSD since 1970. The executive order directs Attorney General Pam Bondi to expedite completion of the rescheduling process that had stalled under the previous administration, moving marijuana into the same category as prescription medications like ketamine, Tylenol with codeine, and anabolic steroids—substances recognized as having accepted medical use with moderate to low potential for abuse. President Trump emphasized that this action responds to decades of requests from patients suffering from chronic pain, cancer, seizure disorders, and other debilitating conditions, particularly veterans with service-related injuries.

The reclassification does not legalize marijuana for recreational use at the federal level, but its implications are far-reaching and transformative for the $45 billion cannabis industry projected for 2025. Most immediately, the change exempts cannabis businesses from IRS Code Section 280E, which currently prohibits companies dealing with Schedule I substances from deducting ordinary business expenses like rent, payroll, and utilities—a restriction that has imposed crushing tax burdens on legal dispensaries operating in the 24 states plus the District of Columbia where adult-use marijuana is legal. The rescheduling also removes long-standing barriers to cannabis research, potentially accelerating FDA approval of marijuana-based medications and enabling comprehensive studies on both benefits and risks. With 64% of Americans supporting legalization according to recent Gallup polling and 74% of Americans now living in states where cannabis is legal for medical or recreational purposes, the Trump administration’s decision reflects dramatic shifts in public opinion and state policy over the past decade, though the executive order has drawn criticism from some Republican lawmakers who warn about public health risks and workplace safety concerns.

Interesting Facts About Marijuana Reclassification in the US 2025

Data Source: White House Executive Order December 18 2025, Substance Abuse and Mental Health Services Administration (SAMHSA) 2024 National Survey on Drug Use and Health, Gallup Polling 2025, National Institute on Drug Abuse, FBI Uniform Crime Reporting Program 2024

The statistics surrounding marijuana reclassification in the United States tell a story of rapidly evolving social norms, state-level policy experimentation, and growing tension between federal prohibition and widespread acceptance. The 44.3 million current users represent a 120% increase from the 20.1 million users reported in 2002, with particularly dramatic growth among adults aged 26 and older—a demographic that accounted for 33.3 million users in 2024 compared to just 12 million two decades ago. This shift reflects changing generational attitudes, with millennials and Gen X adults now more likely to use cannabis than younger cohorts in many surveys. The 17.7 million daily or near-daily users—defined as those using marijuana on 21 or more days per month—represents the most striking change in consumption patterns, as this number has nearly quintupled since 2008 when only 3.6 million Americans reported such frequent use.

The economic stakes are substantial. The cannabis industry generated $4.4 billion in state tax revenue during 2024 alone, with cumulative revenues since Colorado and Washington launched adult-use sales in 2014 reaching $24.7 billion. These figures represent only direct tax collections and do not account for broader economic impacts including job creation, real estate development, and ancillary business growth. The industry now supports over 440,000 full-time equivalent jobs, making it a larger employer than many traditional industries. However, the punitive effects of Section 280E have created effective tax rates as high as 70-80% for cannabis businesses, as they can deduct only cost of goods sold while being prohibited from writing off salaries, rent, marketing, and other ordinary business expenses that every other American company routinely deducts. This tax treatment has forced many operators to operate on razor-thin margins or at losses despite strong sales, making rescheduling to Schedule III perhaps the single most consequential economic change for the industry.

Federal Marijuana Policy Evolution in the US 1970-2025

Data Source: Drug Enforcement Administration Historical Archives, Congressional Research Service, Department of Health and Human Services Recommendations 2023, White House Executive Orders

The evolution of federal marijuana policy in the United States from 1970 to 2025 reflects a slow but accelerating shift from absolute prohibition toward acknowledgment of medical value and reduced criminal penalties. When Congress passed the Controlled Substances Act in 1970, marijuana was placed in Schedule I based on assertions that it had “no currently accepted medical use” and “high potential for abuse”—the most restrictive category under federal law. This classification remained unchanged for 53 years despite mounting scientific evidence of therapeutic applications and more than 40 states establishing medical marijuana programs that directly contradicted the federal government’s position. The gap between state and federal law created a complex legal landscape where doctors could recommend cannabis, dispensaries could legally operate under state law, and patients could use marijuana medicinally—all while technically violating federal statutes that classified these activities as serious felonies.

The turning point came in August 2023 when the Department of Health and Human Services completed a comprehensive scientific review and formally recommended to the Drug Enforcement Administration that marijuana be rescheduled to Schedule III. This recommendation, based on evaluation of abuse potential, medical uses, and safety profiles, represented the first time a federal health agency officially acknowledged that cannabis does not meet Schedule I criteria. The DEA’s subsequent proposal of a rescheduling rule in May 2024 initiated the formal administrative process required under the Controlled Substances Act, including public comment periods and hearings. However, the process became mired in procedural delays and legal challenges, leaving the proposed rule unpromulgated through the end of the Biden administration. President Trump’s December 18, 2025 executive order directed Attorney General Pam Bondi to complete the rescheduling process “in the most expeditious manner,” effectively forcing agencies to finalize the change that had been recommended but not implemented. The order marks the culmination of decades of advocacy by patients, medical professionals, researchers, and cannabis industry stakeholders who argued that federal marijuana policy had become disconnected from both scientific evidence and the reality of widespread state-level legalization.

State-Level Marijuana Legalization in the US 2025

Data Source: National Conference of State Legislatures, Marijuana Policy Project, state government data 2025

The state-level marijuana legalization landscape in 2025 reveals how dramatically American drug policy has shifted from uniform federal prohibition toward a patchwork of state regulations that provide legal access to the overwhelming majority of the population. An astounding 97% of Americans now live in jurisdictions where marijuana is legal for either medical or recreational purposes, or where possession of small amounts has been decriminalized. The 24 states with adult-use legalization include not only predictable early adopters like Colorado, Washington, Oregon, and California, but also traditionally conservative states like Montana, Alaska, Missouri, and Ohio—demonstrating that cannabis reform has transcended partisan divisions and regional cultural differences. These adult-use states collectively represent 157 million people or nearly half the American population, creating mature regulated markets with thousands of licensed dispensaries generating billions in annual sales and tax revenue.

Medical marijuana programs exist in 40 states plus the District of Columbia, Puerto Rico, Guam, and the US Virgin Islands, covering 74% of the US population or approximately 248 million people. These programs vary dramatically in their qualifying conditions, with some states limiting medical cannabis to severe epilepsy or terminal illness while others recognize chronic pain, PTSD, anxiety, and dozens of other conditions. The medical programs also differ substantially in their operational structures—some operate through tightly controlled state-run dispensary systems while others allow relatively open markets with hundreds of private dispensaries. Only four states—Idaho, Kansas, Nebraska, and South Carolina—maintain complete prohibition of marijuana in all forms, collectively representing just 3% of the national population. Even in these holdout states, hemp-derived CBD products remain legal following the 2018 Farm Bill, and several have decriminalized possession or reduced penalties. This near-universal shift toward legal access at the state level created the political and practical pressure that ultimately forced federal reclassification, as the disconnect between federal Schedule I status and widespread state legalization had become untenable.

Marijuana Users Demographics in the US 2024-2025

Data Source: SAMHSA 2024 National Survey on Drug Use and Health (NSDUH), CDC Behavioral Risk Factor Surveillance System 2024

The demographic profile of marijuana users in America has shifted dramatically over the past decade, with the most striking change being the substantial increase among adults aged 26 and older who now account for 77% of all users. The 34.3 million adults in this age bracket using marijuana in 2024 represents a 25.5% increase since 2021 and a more than tripling since 2002, when only 10 million adults over 26 used cannabis. This pattern contradicts the traditional perception of marijuana as primarily a youth drug—while 24.1% of young adults aged 18-25 currently use marijuana (the highest rate of any age group), they represent only 19% of total users by absolute numbers. Meanwhile, adolescents aged 12-17 show relatively stable and declining rates of marijuana use over the past decade, with the 6.0% prevalence in 2024 substantially lower than the 8.1% rate observed in 2010-2012, suggesting that state legalization has not produced the feared increases in teen use.

Gender patterns show males using marijuana at higher rates than females (17.8% versus 13.2%), though the gap has narrowed considerably as female use has increased 21.5% since 2021 compared to 18.4% for males. Racial and ethnic disparities are notable, with Black non-Hispanic individuals showing the highest prevalence at 21.1%, followed by Hispanic/Latinos at 17.4%, White non-Hispanic at 14.2%, and Asian non-Hispanic at 5.8%. However, these rates have increased across all groups, with Hispanic/Latino use showing the steepest recent growth at 28.7% since 2021. These demographic shifts reflect marijuana’s mainstream acceptance across American society—use is no longer concentrated among young people or any particular racial, ethnic, or socioeconomic group, but has become common across the adult population spectrum. This broad-based use pattern strengthens the policy rationale for rescheduling, as tens of millions of otherwise law-abiding Americans regularly consume a substance the federal government has classified as having no legitimate use.

IRS Section 280E Tax Implications in the US 2025

Data Source: American Institute of CPAs, cannabis industry tax analysis, IRS guidance, accounting firms serving cannabis industry

The elimination of Section 280E restrictions represents the most immediate and consequential financial impact of marijuana rescheduling for the cannabis industry. Currently, Section 280E of the Internal Revenue Code prohibits businesses from deducting any expense related to “trafficking” in Schedule I or II controlled substances, except for direct cost of goods sold (COGS). This means cannabis dispensaries cannot deduct employee salaries, rent, utilities, marketing, insurance, legal fees, security costs, or any other ordinary business expense that every other American business routinely writes off. The result is effective tax rates of 70-80% or higher—cannabis companies may pay federal income tax on nearly their entire gross profit rather than net income, creating crushing financial burdens even for profitable operations. A dispensary generating $5 million in annual revenue with $2 million in COGS and $2 million in operating expenses would pay federal tax on $3 million rather than the $1 million in actual profit, resulting in tax bills of $630,000 instead of $210,000.

Rescheduling to Schedule III immediately removes this prohibition, as 280E applies only to Schedule I and II substances. Cannabis businesses would become eligible for standard corporate tax treatment, deducting all ordinary and necessary business expenses just like restaurants, retailers, manufacturers, and service providers. Industry analysts estimate this change would reduce the sector’s collective federal tax burden by $5-7 billion annually—money that could be reinvested in expansion, employee wages, product development, and price reductions for consumers. The change would also eliminate perverse incentives that currently favor vertical integration (since companies can maximize COGS deductions by growing, processing, and selling products themselves) and would level the playing field for retailers, processors, and ancillary businesses that cannot benefit from COGS deductions. However, experts caution that 280E relief will not be retroactive—companies cannot file amended returns to recover past excess taxes—though protective claims may preserve some refund possibilities if courts later rule 280E unconstitutional. Additionally, thirteen states had already decoupled from 280E for state income tax purposes, but rescheduling would extend these benefits nationwide and eliminate the complex compliance burden of maintaining separate federal and state tax calculations.

Cannabis Banking and SAFER Act Status in the US 2025

Data Source: Financial Crimes Enforcement Network, Senate Banking Committee, American Bankers Association, cannabis industry banking data

The banking access crisis facing cannabis businesses remains one of the industry’s most persistent operational challenges, and while rescheduling to Schedule III reduces some barriers, it does not fully resolve them. Currently, most banks and credit unions refuse to serve cannabis businesses due to federal money laundering statutes, the Bank Secrecy Act, and regulatory guidance that treats cannabis proceeds as potentially criminal even when derived from state-legal operations. This forces many dispensaries and cultivators to operate largely on a cash basis—handling hundreds of thousands or millions of dollars in physical currency for payroll, taxes, supplier payments, and daily transactions. The resulting security risks, tax compliance difficulties, and operational inefficiencies impose substantial costs and create public safety concerns, as cash-heavy businesses become targets for robbery and theft.

Rescheduling marijuana to Schedule III reduces some regulatory risk for financial institutions, as cannabis would no longer be classified alongside heroin and cocaine under federal law. This may encourage more banks—currently only about 750 of the nation’s 4,200 banks serve cannabis clients—to enter the space, and may reduce the compliance burden and fees imposed on existing cannabis banking relationships. However, marijuana will remain a federally controlled substance even in Schedule III, and interstate commerce will still be prohibited, meaning banks face ongoing federal regulatory complexity. The SAFER Banking Act (Secure and Fair Enforcement Regulation), which passed the Senate Banking Committee in September 2023 but has not received a floor vote, would provide far more comprehensive protections. The bill would prohibit federal banking regulators from penalizing financial institutions for serving state-legal cannabis businesses, protect cannabis proceeds from being deemed unlawful under money laundering statutes, and explicitly authorize credit card processing, electronic payments, and all standard banking services. Industry advocates argue that while rescheduling is valuable, passing the SAFER Act remains essential to fully normalize banking access and enable the cannabis industry to operate like any other regulated sector.

Marijuana Use Disorder and Public Health in the US 2024-2025

Data Source: SAMHSA 2024 National Survey on Drug Use and Health, CDC MMWR, National Highway Traffic Safety Administration, Substance Abuse Treatment Admissions data

The public health implications of increased marijuana use and potential rescheduling remain subject to intense debate, with critics of the Trump executive order pointing to rising rates of marijuana use disorder as evidence that loosening federal restrictions could exacerbate health harms. In 2024, approximately 20.6 million Americans—representing 28.8% of all past-year marijuana users—met diagnostic criteria for marijuana use disorder, defined as continued use despite significant impairment or distress. This represents a 12.8% increase since 2021 and a 78% increase since 2002, though experts debate whether this reflects true increases in problem use versus greater recognition and diagnosis. Treatment admissions for marijuana as the primary substance of abuse reached 284,000 in 2024, though this represents only 1.4% of people with diagnosed use disorders, suggesting substantial unmet treatment need.

The most concerning trend is the dramatic rise in cannabis hyperemesis syndrome (CHS)—a condition characterized by severe cyclical vomiting in chronic cannabis users—with estimated cases reaching 187,000 in 2024, a 156% increase since 2020. Emergency physicians attribute this surge to higher-potency products, particularly concentrates with THC levels exceeding 80%, and to the increasing prevalence of daily use. Marijuana-related emergency department visits reached 1.3 million in 2024, representing 18.4% growth over three years, with presentations including acute intoxication, accidents and injuries, psychiatric symptoms, cardiovascular events in older adults, and CHS. Critics of rescheduling, including 22 Republican senators who wrote to President Trump, argue that recognizing marijuana as medicine while it remains unregulated compared to pharmaceutical drugs sends contradictory messages and may reduce risk perceptions, particularly among youth. However, supporters counter that rescheduling enables the research necessary to better understand risks and benefits, that the 6.0% adolescent use rate has remained stable or declined even as adult use and state legalization have increased, and that bringing cannabis into a regulated framework ultimately improves public health by ensuring product testing, accurate labeling, and quality standards that black markets cannot provide.

Marijuana Research and Medical Applications in the US 2025

Data Source: FDA approvals database, ClinicalTrials.gov, National Institutes of Health, Department of Veterans Affairs, medical cannabis research institutions

The expansion of marijuana research capabilities represents one of the most significant potential benefits of rescheduling to Schedule III, as current Schedule I status has severely constrained scientific investigation into both therapeutic applications and potential harms. Researchers studying Schedule I substances face extraordinary bureaucratic barriers including special DEA registrations, facility security requirements, and limited access to research-grade cannabis that must come from a single federally authorized source. These obstacles have discouraged academic institutions, pharmaceutical companies, and clinical researchers from pursuing cannabis studies despite strong scientific rationale and patient interest. Currently, only 348 clinical trials involving marijuana or cannabinoids are registered in the US, a tiny fraction compared to the thousands of trials for other therapeutic areas, and most existing studies are observational rather than the randomized controlled trials needed for FDA drug approval.

Rescheduling to Schedule III would dramatically reduce these barriers by eliminating special DEA licensing requirements beyond standard controlled substance protocols, expanding the number of authorized cannabis sources for research, and encouraging institutional review boards and research institutions to approve cannabis studies. The three FDA-approved cannabis-derived or synthetic cannabinoid medications—Epidiolex (for rare seizure disorders), Marinol, and Syndros (synthetic THC for appetite stimulation and nausea)—represent only a fraction of marijuana’s potential therapeutic applications. Promising research areas include chronic pain management (particularly important given the opioid crisis), PTSD treatment (especially for the estimated 3.8 million veterans who report using cannabis), cancer-related symptoms, neurodegenerative diseases, and autoimmune conditions. HHS Secretary Robert F. Kennedy Jr. stated at the signing ceremony that rescheduling “will allow us to study this issue and to answer these questions for the American people,” acknowledging that while many patients and physicians report therapeutic benefits, rigorous clinical evidence remains limited due to federal restrictions. The $196 million in NIH cannabis research funding in 2024 is expected to increase substantially following rescheduling, potentially enabling the large-scale studies needed to determine which medical applications are truly effective, what dosing regimens work best, what side effects and risks exist, and which patient populations benefit most from cannabis-based treatments.

Cannabis Industry Economic Impact in the US 2025

Data Source: Marijuana Business Daily, New Frontier Data, Leafly Jobs Report 2025, state revenue departments, cannabis industry financial reports

The economic impact of the cannabis industry in 2025 positions it as one of America’s fastest-growing sectors, with total revenues projected to reach $45.3 billion—surpassing the $43.5 billion craft beer industry and approaching the $50 billion wine industry. The sector now operates through more than 14,687 licensed dispensaries across the country (more locations than McDonald’s or Starbucks), employs 440,000+ full-time equivalent workers, and has generated $24.7 billion in cumulative state tax revenue since adult-use legalization began in 2014. However, the industry’s growth has been constrained by the Section 280E tax burden, limited banking access, inability to use federal bankruptcy protections, prohibition on interstate commerce, and the stigma associated with federal Schedule I status. These barriers have prevented cannabis businesses from achieving the profitability, scale, and operational efficiency of comparable retail and consumer goods sectors.

The combination of Schedule III rescheduling and elimination of 280E restrictions is projected to catalyze significant industry expansion and maturation. Industry analysts estimate that tax relief alone could increase aggregate industry profitability by $5-7 billion annually, enabling reinvestment in expansion, employee wages, product development, and marketing. This could support the creation of 80,000-140,000 additional jobs as companies expand operations, open new locations, and invest in previously unaffordable infrastructure and technology. Reduced regulatory stigma may also attract institutional investors and strategic corporate partners who have avoided the space due to federal classification concerns, potentially unlocking $3-5 billion in new capital investment. However, some industry observers caution that rescheduling could accelerate consolidation, as larger multi-state operators with access to capital markets may acquire smaller operators struggling with compliance costs, and pharmaceutical companies may enter the market with FDA-approved cannabis medications. Small operators and social equity license holders—already facing capital constraints and market competition—may find themselves further disadvantaged unless additional policy reforms specifically protect and support small businesses in a post-rescheduling environment. The $45.3 billion industry projected for 2025 could reach $75-100 billion by 2030 with normalized federal tax treatment and continued state-level legalization, making cannabis one of the largest legal agricultural and retail sectors in the American economy.

State Tax Revenue from Marijuana Sales in the US 2024-2025

Data Source: Marijuana Policy Project May 2025 Report, state revenue departments, Tax Foundation cannabis revenue tracking 2024-2025

The state tax revenues from marijuana sales in 2024 reached an all-time high of $4.422 billion, representing a $222 million increase from 2023 and continuing a decade-long trend of steady revenue growth as new states launch programs and existing markets mature. California leads all states with $1.147 billion in 2024 revenues, though this represents a decline from its 2021 peak of $1.29 billion as the state grapples with overregulation, high taxes, and persistent illicit market competition. Washington State collected $559 million despite having no local cannabis taxes, operating under the highest single excise tax rate in the nation at 37%. Illinois generated $582 million through its tiered THC-potency tax structure that charges 10% on products under 35% THC, 25% on products over 35% THC, and 20% on infused products—a system designed to discourage high-potency consumption while maximizing revenue.

The cumulative $24.7 billion in total tax revenue collected across all adult-use states since Colorado and Washington launched retail sales in 2014 demonstrates the substantial fiscal impact of cannabis legalization. This figure excludes medical marijuana taxes, local sales taxes, business licensing fees, and broader economic impacts like income taxes from industry employees and property taxes from cannabis facilities. Some states have seen remarkable revenue trajectories: Colorado has collected over $3.19 billion since 2014, funding public school construction and drug treatment programs; Michigan generated $523 million in 2024 alone despite launching adult-use sales only in late 2019, with revenues distributed to schools, roads, and municipal governments. However, several mature markets including California, Oregon, and Washington experienced revenue declines in 2024 as oversupply, price compression, and persistent black market competition eroded legal market share. States use cannabis revenues for diverse purposes: Arizona dedicates one-third to community colleges, Illinois allocates 25% to the Restore, Reinvest and Renew program supporting communities harmed by drug criminalization, and Massachusetts funds public health initiatives, local aid, and transportation infrastructure. With Ohio collecting $16.3 million in its first partial year and Delaware and Minnesota preparing to launch sales, total state cannabis tax revenues are projected to reach $4.7-5.2 billion in 2025 and could exceed $7-10 billion annually by 2030 as remaining holdout states legalize and federal rescheduling enables industry expansion.

Marijuana Arrests and Criminal Justice Impact in the US 2024-2025

Data Source: FBI Uniform Crime Reporting Program 2024, Bureau of Justice Statistics, state criminal justice agencies, expungement tracking organizations

The criminal justice impact of marijuana legalization is among the most substantial social benefits cited by reform advocates, with arrests declining 47% from 385,000 in 2019 to 204,036 in 2024 as more states have removed or reduced penalties for possession and use. Notably, marijuana arrests now represent only 22% of all drug arrests nationally, down from 40% in 2019, as law enforcement resources shift toward fentanyl, methamphetamine, and violent crime. The 81% of marijuana arrests that are for possession rather than sale or manufacturing highlights how criminalization has primarily affected users rather than traffickers. In states that have legalized adult-use marijuana, arrests have plummeted even more dramatically—Colorado saw marijuana arrests decline 90% from pre-legalization levels, while Washington State reported 94% fewer marijuana possession arrests.

Disclaimer: This research report is compiled from publicly available sources. While reasonable efforts have been made to ensure accuracy, no representation or warranty, express or implied, is given as to the completeness or reliability of the information. We accept no liability for any errors, omissions, losses, or damages of any kind arising from the use of this report.

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