As Zora Neale Hurston wrote, “There are years that ask questions and years that answer.”
It’s not much of an exaggeration to say that 2023 was a tough year in cannabis—one that asked a lot of challenging questions of operators, regulators, advocates and even marketers.
While Delaware and Minnesota are progressing toward exciting adult-use cannabis markets and voters flipped Ohio green, the feds didn’t make as much forward motion on banking reforms or legalization as the industry hoped. Revenues are down, California cannabis companies formed a coalition to solve the Golden State’s persistent industry tax crisis, and the hotly anticipated rollout of legal cannabis in New York drew plenty of criticism.
Despite the setbacks and heartbreaks that 2023 brought, we’re confident that 2024 will be a year that answers. From policy reform to the economy to bold new visions for what the cannabis and hemp industries could look like, we have three key cannabis industry predictions for 2024:
1. 2024 will be revolutionary for federal cannabis policy reforms.
When cannabis is officially rescheduled, as the Department of Health and Human Services (HHS) recommended in August of 2023, it’s absolutely going to reshape the industry in radical ways. If that happens in 2024, as we predict, it will truly be a historic moment—a.k.a. the biggest shift in federal cannabis policy since the passage of the Controlled Substances Act (CSA) in 1970.
There are still a lot of unknowns. Cannabis is currently a Schedule I substance—along with several psychedelics, including lysergic acid diethylamide (LSD), MDMA and peyote. Based on an assessment by the Food and Drug Administration (FDA), the HHS recommended moving cannabis to Schedule III.
That shift would effectively open up a national medical cannabis market, give the FDA industry oversight and cut down the 280E tax code that has sunk many a cannabis business. Moving cannabis to Schedule III would also address some of the ways that federal cannabis prohibition has contributed to systemic inequality, such as opening up public housing and immigration visa access to medical cannabis patients. However, because Schedule III wouldn’t recognize state-legalized recreational markets, interstate commerce would still be out of reach.
Which schedule is SAFER?
Still, it’s entirely possible that if the DEA doesn’t accept Schedule III for cannabis, the agency might “compromise” by accepting Schedule II. That would be deeply disappointing for a number of reasons—not the least of which is that we should really be talking about descheduling cannabis entirely, rather than merely rescheduling, as I wrote in Salon last fall.
However, moving cannabis to Schedule II would keep the SAFER Banking Act on the table as far as incremental Congressional policy reform. If SAFER passes, it would give cannabis businesses badly needed access to financial networks. Not only could customers potentially pay for their dispensary purchases without carrying cash, cannabis businesses would also be able to more easily secure investment capital, insurance and competitive retirement benefits for their employees—not to mention the standard business tax deductions available to other industries.
It’s important to remember that whatever move the DEA makes is historic progress. Although cannabis should be legal nationwide, incremental steps toward that goal are still valuable and important. At the very least, rescheduling, banking access—or better yet, both—would trigger a major uptick for the U.S. cannabis industry and will mark a new era for legal cannabis globally.
Reform would start with licensed operators, of course. But it’s not just plant-touching businesses that would benefit from rescheduling in 2024. Ancillary service providers like accounting and cannabis law firms would get a boost, too, as business owners seek out experts to help them understand the new paradigm. Cannabis software platforms and enterprise resource planning suites that handle payment processing and financing, as well as inventory and supply chain management, will be crucial to navigating major changes to the regulatory and compliance landscape.
2. 2024 is the year the cannabis industry finds new direction after the ‘Great Correction.’
For a solid decade, legal cannabis markets were something of a roller coaster as new states opened medical and recreational markets. Outsized valuations were common, and many brands sold for wild sums totally disconnected from their actual revenue.
As cannabis law firm Bianchi & Brandt note in their 2023 cannabis trend report, the economic boom that began in 2012 continued until 2020, when the pandemic spiked cannabis sales before a major drop-off occurred. The post-pandemic declines have been harrowing for many brands—especially those that over-scaled, then had to retract and rebuild.
We agree with Bianchi & Brandt that the “Great Correction” will take a few different forms. For one, rising inflation throughout 2023 and the post-pandemic fallout has proven that cannabis is not, in fact, “recession-proof.” Admitting that has changed investors’ outlook on cannabis brands and changed the way businesses are evaluated—and we can expect to see a lot of mergers and acquisitions as the industry finds a new equilibrium.
Hindsight shows the Green Rush turned into a replay of the Icarus myth, with brands and investors flying too close to the sun. Now the cannabis industry is reaching a new era, that of the Great Correction. Much like the economy as a whole performed after the Great Recession, it’s going to be a long road back from austerity to prosperity. But 2024 is when we’re going to see that shift begin in earnest—especially when rescheduling gives everyone a little breathing room and momentum.
3. In 2024, hemp-derived cannabinoids will step into the spotlight—and rightfully so.
One corner of the cannabis market that has more momentum than most is hemp-derived cannabinoids. While cannabis brands working with the most well-known of cannabinoids—Delta-9 THC—have labored under the limitations of Schedule I, others have innovated with hemp-derived cannabinoids (HDCs) that are legal (thanks to the 2018 Farm Bill) even in states that ban medical or adult-use THC products.
State-licensed cannabis markets haven’t embraced or appreciated HDCs such as Delta-8, Delta-10 and even Delta-9 for a variety of reasons. The truth is, however, that licensed cannabis operators in legal states should really send a thank-you note to many of their HDC counterparts for shifting perceptions of cannabis, reducing stigma and priming the total addressable market (TAM) for the legal cannabis ahead.
The Deal with Delta-8 and Other Hemp-Derived Cannabinoids
Because hemp-derived products aren’t limited to dispensaries, they’re popping up in broadly accepted spaces where consumers are already used to buying food and drink.
In Minnesota, hemp-THC drinks have made up as much as 40% of taproom sales at some microbreweries and 13% of revenue at bars. In Louisiana, HDCs are on the shelf at gas stations and regional chains like Rouses Supermarkets. Before Ohio’s 2023 legalization vote, Delta-8 was already on offer at liquor and package stores. Chicago’s celebrated culinary scene boasts a Delta-8 Bakery and coffee shop and a hamburger joint with Delta-8 infused mayonnaise, mocktails and desserts. And in St. Louis, dive bars are serving up hemp Delta-9 drinks by the can.
That accessibility is doing a lot to change the perception of cannabis. Even in stalwart prohibition holdouts like Wyoming and Nebraska, you can buy Delta-9 seltzers at big chains like Allsups / Yesway as easily as purchasing their famous chimichangas, a tobacco vape device or a six-pack of Bud Light. All without the hang-ups that keep more women from shopping and feeling comfortable in dispensaries at the same rate as male cannabis shoppers.
It’s ironic that hemp cannabinoids are more readily available in “third places” in prohibition states than in mature legal markets like Colorado. In most legal states, a legislative “grass ceiling” continues to hold back the emerging cannabis hospitality sector. Even in Denver, where cannabis is well-established and relatively popular, regulators have come down hard on consumption at private events even in 2023.
That hardline stance that limits cannabis sales to walled-off retailers will be harder to justify in places where consumers have gotten used to greater freedom of use. That’s especially true as more Americans become sober-curious, prompting the wider availability of non-alcoholic beverages in bars—including those infused with HDCs.
A lot remains to be seen in 2024. It’s a presidential election year, for one, and the dust is still settling on some of the bigger developments to hit the cannabis industry in 2023. But it will be interesting to see how policy, economics and the question of hemp-derived cannabinoids evolve.
Want to read more about our past predictions and see how they stack up? Check out: