Rescheduling is not legalization, however, and it will have limited impact beyond providing the much-need after-tax margin boost. That’s why the MSOS ETF has already given back the lion’s share of the 78% gain it saw in the immediate aftermath of the EO, as investors came to grips with implications of the fact that the activities of state-licensed cannabis companies will still be federally illegal. Schedule III drugs require FDA approval, which would certainly not be forthcoming for most of today’s cannabinoid products. Few suppliers have the resources to pursue federal approval for more pharmaceutical-like goods, nor any motivation to do so unless states require it for continued licensure. Cannabinoid companies will not have access to the full range of traditional financing options until the federal position gels. 

The Supreme Court Affirms Federal Power Over Cannabinoid Commerce

That’s because the state-licensed industry remains in the federal crosshairs given the Supreme Court’s earlier demurral to hear arguments in Canna Provisions v. Bondi. The case was probably quixotic from the start: an effort to get the federal government out of the cannabis regulation business altogether.

The plaintiffs argued the Controlled Substances Act unconstitutionally prohibits intrastate cannabis activity, contravening the Commerce Clause which limits federal control of markets to interstate commerce.

But precedent was against the industry: Dating back to Wickard v. Filburn in 1942 courts have allowed federal regulation of even trivial non-commercial intrastate activity (in that case, a single farmer growing his own cattle food) when it could conceivably affect interstate commerce. In 2005’s Gonzales v. Raich the principle had already been applied to cannabis (caregivers growing in their own homes), even though there is no legal interstate cannabis commerce to be affected. Lower courts had ruled against Canna Provisions and its partners in the suit, and by its demurral the Supreme Court let those rulings – and hence federal prohibition – stand.

The Hemp Ban: Congress Decrees Winners and Losers 

Those late-2025 judicial and executive actions leave the legal fate of cannabinoids at the federal level up to Congress. In the short term, that looks like very bad news given its inaction all these years. For myriad reasons, hemp is the only area Congress has ever addressed, and that in directly contradictory fashion in 2018 and 2025.

Companies that jumped into the loophole created by the 2018 Farm Bill face unmitigated disaster if the new ban takes effect on schedule in November 2026. Even those marketing only CBD products could be shut down, given the challenges of growing and processing Cannabis sativa while keeping THC levels below the new 0.4%-by-weight limit. On the other hand, it’s good news in the near term for licensed cannabis companies, who are looking at a revenue upside if the hemp ban really does limit the availability of psychoactive Delta-8 THC, Delta-9 THC and THCa products at mainstream retailers (see “Did the Feds Just Double the Growth Rate of Legal Cannabis?”. 

OK, DC Woke Up; Now What?

Now, the era of federal irrelevance (to cannabis) and schizophrenia (regarding hemp) is coming to an end. As with any government action in the economic arena, the question is “who will be the winners and losers?” For the overall cannabinoid market, the best outcome would clearly be the limited approach proposed by the newly formed One Plant Alliance: testing, labelling and age-verification laws, and nothing more.

Hemp had a regulatory baseline, prior to the November ban, that would be a far more business-friendly place to start: Adding federal-level testing, labelling and age-restriction standards to what was hemp’s basically free-market model would make for a far healthier industry than creating a hybrid federal-state regime based on the command-and-control policies that most states have imposed on licensed cannabis operators

In many ways, the cannabinoid industry will miss the days now ending when it grew stupendously while DC wasn’t paying attention. But there’s reason for hope: as that federal edifice of denial crumbles even strict prohibitionists are aware (though most will still only grudgingly admit) that:

• Hemp and cannabis are the same plant
• Many of its compounds have demonstrated medical uses, and more will likely prove out over time.
• Whatever harms are found by science in the future, it will be damaging to the federal government’s credibility if mortal threats like alcohol and tobacco turn out to be more liberally regulated than cannabinoids.

There’s little doubt that the federal government’s involvement in cannabis will be hugely expensive for the industry. Beyond excise taxes and compliance costs, regulatory-capture costs (lobbying expenses, campaign contributions, etc.) are huge, but necessary, business expenses for federally regulated businesses. For cannabis and hemp companies alike, it will be the price of admission to the financial corridors of power. Commercial banks, stock exchanges and institutional investors will continue to stay away while federal prohibition remains absolute. 

All the industry can do is hope it gets access to much-needed financial resources via not-too-onerous regulations like those the Bureau of Alcohol, Tobacco and Firearms enforces in its three areas of purview. If the cost of financial legitimacy is iron-fisted FDA regulation with it’s billion-dollar trials and decade-long approval processes, only a handful of legal cannabinoid companies would make the transition; most would disappear. Then cannabis consumers will just go back to doing what they did before – buying on the street and growing their own. 

The current political balance of power is precarious for legal cannabinoids. Democrats are legalization’s natural proponents but have traditionally favored an active federal role dating back to the civil rights struggle of the 1960s. Republicans generally champion state’s rights, but many are knee-jerk prohibitionists on cannabis.

All we know for sure at this point is that there will be no going back from the three days in late 2025 that finally brought the federal government to the forefront of the cannabis legalization debate.

TOM ADAMS, president of Tom Adams Research, is the most experienced strategic consultant in legal cannabis. As founder of Adams Media Research, head of Industry Intelligence at BDSA, and CEO of Global Go Analytics Tom pioneered many of the analytical tools used to develop strategies in explosively growing new consumer product categories. He can be reached at tom@adamsresearch.net