Well…it’s finally over. The 2024 election, after a seemingly endless runup (and more spam texts than we can count) has been decided. Two things are for sure: 1) We can expect the unexpected re: people and process, and 2) there are likely, and ironically given the winning party, some major changes in store for the cannabis industry.

In General (Election) – Will Republicans Bring Real Change to Cannabis?

In short: We think it’s more likely, on a relative basis, that they will.

There is A LOT to unpack re: cannabis given Trump’s victory and Republican control of both chambers of Congress. We don’t choose a political side at Frontier Risk, but we have a deep understanding of just how political the cannabis industry is (all the way down to the local municipal level). But to take a step way back, all bets are off regarding traditional views of what Republicans are likely to do by way of cannabis reform, and I think we can all agree that all bets are off in terms of what it even means to be a Republican or Democrat. On the whole, we take the view that this “Republican” administration breaks the mold, and that’s a good thing for cannabis reform. The alternative view strengthens this point: Kamala Harris made “federal legalization” a top-10 policy issue later in her campaign, but Democrats did very little under the Biden/Harris administration to advance the core issues. Those pointing to the Rescheduling kickoff as real progress – we’ll deal with that later. So, expect the unexpected. Up is down, left is right, and all bets are off. Allow us to explain.

Rescheduling – Where Are We, and Where Are We Going?

Let’s start off with Rescheduling – the process underway for moving cannabis from Schedule I to Schedule III, as proposed, of the Controlled Substances Act. This is probably the most complicated topic in this article given the myriad permutations of the process from an administrative law perspective, and there have been some very recent developments (even post-election) that aren’t easy to understand.

For starters, and at the highest level, we don’t think the Trump administration will derail the process that was initiated under Biden, and it’s questionable whether or not his administration would be able to even if he wanted to (according to traditional process, but see above re: all bets being off on people and process). There are real reasons to believe that the Trump administration may actually supercharge the process and let it sail through without slowing down the timeline.

First, Matt Gaetz, Trump’s Attorney General (AG) nominee, is not only a staunch supporter of Rescheduling, he’s a staunch supporter of Descheduling. He’s made his views known plenty of times, from X (Twitter) posts, to public hearings in which he’s lambasting DEA Administrator Anne Milgram for standing in the way of a speedy resolution. The nomination was universally shocking, and cannabis industry bulls couldn’t believe their luck – he may be the most pro-cannabis Republican, radically so, some would say, out there. There’s a catch: He may not be confirmed as AG by the Senate. There are strong arguments on both sides among constitutional law experts on if and how he may or not get approved, and that discussion is beyond the scope of this article. If he gets appointed, even via the recess appointment strategy on a temporary basis, expect real Rescheduling support. If he doesn’t, rumored AG backup picks that we’ve heard about are not staunchly prohibitionist (in the way that Jeff Sessions was under the first Trump administration, for example).

Second, you have RFK Jr. nominated to lead the Department of Health and Human Services (HHS). Another cannabis advocate, another rescheduling advocate, another loud voice, albeit less than Gaetz, on the absurdity of the Schedule I classification of cannabis. Despite being a controversial figure overall, RFK Jr., in our view, is far less likely to receive the same level of scrutiny during confirmation hearings, although this is all relative considering we’re making a comparison to Gaetz.

Third, we saw some real public support from Trump himself on Rescheduling, albeit tangentially and conceptually. Trump, after meeting with Kim Rivers from Trulieve, came out publicly in support of Florida’s Amendment 3 (an amendment to convert the Florida market to Adult Use from Medical), an initiative that ultimately failed (and unfortunately, it wasn’t even that close). His public commentary included overtures on decriminalization, which leaves us feeling that while this is not a priority for Trump, it’s not something he’ll stand in the way of. We’ve written previously about our beliefs that on a personal level, Trump doesn’t care about cannabis at all (a positive) given Jared and Ivanka’s support on the criminal justice reform element of the dialogue, relative to Biden, who, given family issues, personally believes cannabis is a gateway drug that shouldn’t be liberalized.

Our focus on the AG and HHS nominations by Trump is purposeful, and leads us to the recent administrative law hurricane on the Rescheduling matter. In short, there’s now real question as to which department or entity should really be controlling this process versus the status quo of the ball being squarely in the DEA’s court to finalize. A few things have happened very recently:

The administrative law judge (ALJ) overseeing the public hearings process (and probably a bit more of the process than just that), John Mulrooney, turned the first, and some hoped only, public hearing on Rescheduling from a real hearing into a preliminary read-in because he felt there wasn’t enough information on the credentials of the various expert witnesses chosen by the DEA to appear in the case. There’s a lot here, but net-net, this will delay the rescheduling process by several months from the original timeline

A cannabis and psychedelics researcher named David Heldreth filed a federal motion to delay the administrative hearing due to improper blocking of witnesses, essentially arguing that the administrative courts should postpone this section of the Rescheduling process until Trump takes office

Finally, a new lawsuit is seeking to remove the DEA as the deciding body on the Rescheduling process altogether, citing multiple improprieties, from Administrator Milgram not signing the proposed rule (her boss, AG Merrick Garland, signed it instead…) all the way to big-pharma-backed, prohibitionist lobby group Smart Approaches to Marijuana (SAM) and the DEA having improper, behind the scenes dialogue that may have influenced part of the process

It's all over the place. Expect delays. While the most recent lawsuit – the one that says the DEA should be removed from the process – is likely the most flimsy one in terms of the likelihood to survive a motion to dismiss, it brings us back to the importance of Gaetz and Kennedy as AG and HHS picks, respectively. Because if the DEA is actually deemed to have bungled this process, it’s likely that the organizations that Gaetz and Kennedy oversee (if they take office), will be making the final call on this, instead of the DEA administrator. As of today, that ALJ has issued a ruling A) confirming and denying certain aforementioned witnesses (he’s disqualified a few pro-Rescheduling witnesses, but this is seen as normal given the process generally prioritizes those claiming they would be adversely impacted by Rescheduling), and B) declaring the suit pushing for DEA’s removal (third bullet point above) “wholly unpersuasive” and something he’ll rule on separately as a standalone motion. He also, today, gave the DEA one week to address allegations of illegal talks with SAM, calling the allegations “serious”. Bravo. Of course, that’s all moot if Trump nominates a DEA administrator who is easy-going on cannabis and Rescheduling. As of the time of this writing, that nomination hasn’t been made yet.

On the whole, there’s more here that says Rescheduling is not in jeopardy than less.

On to the legislative approaches to progress in the cannabis industry.

SAFER Banking during Lame Duck?

In short: very, very unlikely.

The usual slate of Democrats and Republicans who support and talk about SAFER Banking, the act that would effectively allow banks and insurance companies to service the space in a federal capacity, are making the usual noise about this bill. We’re even less convinced now than we were during the last 7-8, depending on how you count, times that this group has brought this up.

First, they call it the lame duck session for a reason. If they couldn’t get it done before, why is it more likely now before a major change in government? Those who argue there may be hope because Democrats, sore after a loss, want to stick it to their Republican colleagues on the way out the door – that’s just not possible, we’re afraid. There are too many other legislative priorities to jam through.

A lot people saw a glimmer of hope when SAFER Banking passed through the Senate Banking Committee last year – the first time the initiative had originated from the Senate side (after multiple originations, and failures, from the House side). Here’s the problem: the pro-cannabis reform Republican senator, Sherrod Brown, who chairs that committee and was largely responsible for the process with the best chances, just lost his re-election bid. It doesn’t seem likely to us that A) he’ll go to battle again during lame duck, and B) if he does, anyone will listen to him.

It isn’t really worth discussing the various Democratic senators and their proposed avenues for passing SAFER Banking during lame duck. Most focus on attaching it to the National Defense Authorization Act (NDAA). This has failed multiple times before as other people on The Hill scratch their heads regarding cannabis as part of a military bill. We see them scratching their heads harder this time around.

And last but not least, Schumer. Unfortunately, Schumer pays only lip service to the issue as the person in control of SAFER Banking’s fate, in practical terms, to date. There’s mounting evidence that despite his public support, he’s moved against the initiative behind closed doors, making an enemy of the cannabis industry in the process. Now, even Sherrod Brown is saying publicly that he doesn’t know what Schumer is prioritizing. Case closed on this for lame duck, but we’d like to be wrong here.

SAFER Banking in the New Congress?

It’s too early to say, and not just because some states are actually still counting votes for House seats. On the whole, it doesn’t look to us like the new Congress will be more or less motivated to get something done here than the last / current Congress, but there are likely more reasons to be a bit pessimistic.

The biggest reason for pessimism is the promotion of John Thune (R-SD) to Senate Majority Leader. Make no mistake, Thune is bad news for the cannabis industry. He has not only openly opposed legalization (no surprise), but he’s actively opposed Rescheduling and SAFER Banking. He was a signatory on a letter from Republican lawmakers outlining concerns about the health effects of cannabis in an effort to slow down the Rescheduling process, and called federal health officials “irresponsible” for bringing it up at all. He has openly criticized the attachment of SAFER-like language to appropriations bills in the past. It’s not all doom and gloom: Thune has admitted that national views on cannabis are “evolving”, and has made overtures that some interpret as support of medical cannabis relative to Adult Use cannabis. But, it’s mostly doom and gloom with him.

There’s some doom and gloom elsewhere, and it’s a strategy that’s not very well-masked. Senator Thom Tillis (R-NC) has come out as recently as this week discussing his view that the cannabis industry needs comprehensive reform at the federal level; it should be regulated like alcohol and tobacco. More importantly, he was quoted Tuesday as saying Rescheduling and SAFER Banking are “half-assed measures”. Some in the industry are interpreting this and his other comments as positive – a push for major, comprehensive reform. We’ve worked with federal lawmakers for years in cannabis, and to us, this is code for “I’m going to pretend like important incremental steps don’t go far enough and use that as an excuse to shut down any realistic prospect of any reform at all”. Nice try. He’s learned from the best – Schumer and Booker.

But again, see: All bets are off, above. If Trump and his cabinet want to get this done, there’s mounting evidence that even true prohibitionist believers will fall in line rather than get on Trump’s naughty list. We think people ought to question, at a fundamental, the way things get done going forward. We predict a major shift to executive action over legislative processes in this next cycle, which, on the whole, given Executive Branch (pending) support described above, is better for cannabis reform.

What On Earth is Happening with Hemp?

There’s been so much movement on the 2025 update to the 2018 Farm Bill that it’s difficult to keep track, but in general, the latest movement seems to be good news for cannabis operators. Further, if you really read into things, you can infer a bit about legislative branch priorities on regular-way cannabis reform (like SAFER Banking).

The positive news for the cannabis industry is seemingly bipartisan support to close the current loophole that “allows” for other/biosynthetic cannabinoids like delta-8 and delta-10 THC, referred to by many as the THCA loophole. Lawmakers on both sides of the aisle agree that these compounds in their final product forms, often referred to as “gas station weed”, are dangerous on an absolute basis and relative to delta-9 THC. And they’re absolutely right.

What’s less clear is what will happen with CBD. There are some lawmakers who are trying to paint CBD in the same light as delta-8 THC, and some who view it as completely safe, but either way it seems to be grouped in the same loophole category that will get closed in the 2025 Farm Bill – potentially. Our guess is that further specificity will come into the language and lawmakers won’t throw the baby out with the bathwater.

Gas station weed competes with the legal cannabis market, as much as some may not believe that. If those products are shut down, it’s better for the legal cannabis market and cannabis operators across the country should be optimistic about this recent movement.

When it comes to making these deeper inferences about cannabis legislation from the draft 2025 Farm Bill – and we may be stretching here – but there’s some signal among the noise that cannabis legislation like SAFER Banking may be even further away. Consider the fact that there are already two draft 2025 Farm Bills (both House and Senate versions). Then consider that many states have taken emergency measures to ban synthetic cannabinoids like delta-9 THC, viewing them as somewhat of a public health emergency (we agree). Finally, consider the flurry of movement in the draft legislation itself is almost entirely focused on closing the THCA loophole – all of this points to the fact that lawmakers are prioritizing this in a major way. Shanita Penny, Co-Executive Director of the Coalition for Cannabis Policy, Education and Regulation (CPEAR) recently told MJBizDaily the two Farm Bill drafts and their revisions mean Congress sees fixing the hemp legal framework “as a priority before some of the other, incremental cannabis reforms”, such as banking and insurance protections (referring to SAFER Banking, which includes fixes for the insurance industry).

Capital Markets

Nothing to see here.

Equity capital markets remain lifeless on the floor. There are rumors that the new administration’s perceived stances on cannabis have caused some prominent hedge funds and venture capital firms to spend a bit more time planning for the future, but we’ve heard that before. We expect some new life to come back into US cannabis equities if and when Rescheduling makes it through, but as we’ve written before, there’s no bid on any of these equities. There are no buyers outside of tiny volumes of retail investors, only skiddish retail investors (and the odd major institution like Citadel taking a massive short position in the industry given Ken Griffin’s personal crusade to kill Amendment 3 in Florida).

Credit will continue to remain dominant, in our view, as equity investors remain in hiding. Creditors are still demanding significant insurance requirements, particularly in the form of high property limits, as, in most cases, cultivation buildings and properties are the only real form of valuable collateral that they can collect upon in a workout or state receivership situation (federal bankruptcy protection remains unavailable for cannabis companies).

It’s all about custody, as we’ve written before. The cannabis market has no institutional bidders, and it has no institutional bidders, regardless of thesis, because these prospective bidders can’t hold these equities at U.S. banks. Rescheduling doesn’t fix this. SAFER Banking does. If you’ve taken away from this article that Rescheduling is more likely to happen, and a lot sooner, than SAFER Banking, that was the point, and the logical conclusion is that there won’t be any major institutional inflows for some time. The same applies to many global insurance carriers and reinsurance institutions, although we applaud those in the latter group that recognize it is perfectly legal to provide services to the industry, especially when you’re guided on the intrinsic price of cannabis risk by an expert underwriter and distributor.

Conclusion

We’ll end the same way we started, by saying that all bets are off regarding people and processes. Up is down, left is right, and all that jazz. It’s easy to pontificate about what’s likely to happen when you’re using a framework from the past, but I think we’ve all seen that the new administration is planning on shaking up that framework, to put it mildly.

Still, the US has been around for this long because of checks and balances – the ability of the federal government to slow anything and anyone down – regardless of how much a new administration chants “this time things will actually be different”.

It’s not that we disagree things will actually be different this time – there’s a lot to point to the fact that it will. Our claim is that you can expect this from the Executive, not Legislative, branch. The question is: how much into Legislative will Executive reach on cannabis, causing wild debates among constitutional lawyers?

On that, we’re as curious as you for the answer. Time to make some popcorn.