2024 was another busy and interesting year of legal and political developments for cannabis. Here are some key issues and must-watch cases for the year ahead.

1. Rescheduling Hearing Delayed

Although many had hoped rescheduling would be completed by the end of the year, that was not meant to be. Following the Justice Department’s May 21, 2024, proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) after scientific review, the Drug Enforcement Administration (DEA) set a rescheduling hearing for Dec. 2, 2024, to gather additional expert input. However, in October, DEA Chief Administrative Law Judge (ALJ) John Mulrooney issued a preliminary order indicating that the information about the proposed participants was insufficient, in part because “there [was] no indication in the four corners of the [participant list] as to whether the ‘participants’ support or oppose the [notice of proposed rulemaking] or how the ‘participants’ satisfy the ‘interested person’ definition set forth in the regulations.” 

Judge Mulrooney delayed the evidentiary hearing on the merits of the rescheduling proposal into 2025. Then some interesting motions were filed, including one on behalf of Hemp for Victory and Village Farms International, pro-cannabis non-profits that had been invited to participate in the hearing, which disputed the DEA’s role as a “proponent” of the rescheduling rule and sought its removal from that position. The motion raised concerns about the agency’s impartiality by pointing to its strong opposition to the rescheduling proposal despite the Department of Health and Human Services’ recommendation. It also alleged engagement in unlawful ex parte communications with anti-cannabis group Smart Approaches to Marijuana. Although Judge Mulrooney denied the motion, he did so on the grounds that it was statutorily beyond ALJ authority to grant removal of the DEA, but noted, “[t]here is no question that the allegations raised by the [motion] are distasteful and arguably unhelpful to the public’s perception that the proceedings will be transparent.” To date, the DEA’s legal counsel has not clarified where the agency stands on rescheduling. Judge Mulrooney has asserted that the DEA has no obligation to be a “cheerleader” for the proposed rule and has been careful to state that the issues before him are “narrow” and he is not deciding whether cannabis is “good” or “bad.”

Judge Mulrooney also denied other requests to postpone the merit-based hearings further. A request from a coalition of health professionals (in Doctors for Drug Policy Reform et al. v. DEA et al.) asked for a stay until a federal court could rule on their petition (currently pending before the U.S. District Court for the District of Columbia) challenging the DEA’s denial of the coalition’s participation in the proceedings. And another request (Panacea Plant Sciences Inc. et al. v. Garland et al.) raised many of the same points brought by the same interested party in an April 2024 lawsuit (currently pending before the U.S. District Court for the Western District of Washington) that federal agencies violated a Clinton-era executive order to first consult with tribal entities on rulemaking decisions that impact them. The request sought to delay the hearings until at least President-Elect Trump’s administration can review the rulemaking.

Under the schedule established by Judge Mulrooney, testimony is set to begin on Jan. 21, 2025, and will continue through the week of March 3, 2025, at least. Of course, Donald Trump will be President again by then. It remains to be seen whether the incoming Trump administration will impact the hearings or otherwise affect the trajectory of rescheduling. During his first term, his administration rescinded the 2013 Cole Memorandum and proposed ending federal protections for state medical cannabis programs. Yet during his most recent campaign, President-elect Trump expressed support for rescheduling cannabis from Schedule I to Schedule III, expanding banking access to the cannabis industry, and a (failed) Florida ballot measure to legalize recreational use in that state.

If, at the end of this process, cannabis is rescheduled to Schedule III, it would transform the regulatory landscape for the industry. For cannabis operators, the most significant benefit of rescheduling would be the removal of cannabis from Section 280E of the Internal Revenue Code, which prohibits businesses involved in the cultivation, production, or sale of Schedule I drugs from deducting operating expenses for tax purposes. But the DEA has been careful to point out that if the proposed rule is finalized, the manufacture, distribution, dispensing, and possession of cannabis would remain subject to the applicable criminal provisions of the CSA, and any drugs containing a substances within the CSA’s definition of “marijuana” would remain subject to the applicable provisions in the Federal Food, Drug, and Cosmetic Act. 

2. Canna Provisions Inc. v. Garland:  Will the U.S. Supreme Court Grant Certiorari?

In Canna Provisions Inc. et al. v. Garland, a coalition of cannabis companies challenged the constitutionality of the CSA. On July 10, 2024, the U.S. District Court for the District of Massachusetts dismissed the case.

RELATED: Judge Dismisses Lawsuit Challenging CSA’s Constitutionality, but Says Cannabis’s Regulation Under CSA Should Be Reexamined

In opposition to the government’s motion to dismiss, the plaintiffs argued that the CSA constituted congressional overreach under the Commerce Clause because it criminalized legal intrastate conduct within states that have legalized cannabis. The plaintiff also pointed to the federal government’s shift over the last two decades of abandoning the CSA’s goal of eliminating cannabis from interstate commerce as a reason that the U.S. Supreme Court’s 2005 decision in Gonzales v. Raich upholding the CSA warranted revisiting. Judge Mark G. Mastroianni rejected the argument that the circumstances under which Gonzalez was decided had changed so much that the opinion was no longer applicable precedent, concluding that Congress still has the power to regulate cannabis activities under the CSA pursuant to its authority under the Commerce Clause, even if those activities are intrastate and legal under state law. Judge Mastroianni further rejected the argument that CSA enforcement violates substantive due process rights, as there is no fundamental right to grow or consume cannabis.

Plaintiffs have appealed the decision to the U.S. Court of Appeals for the First Circuit. Oral argument took place on Dec. 5, 2024. The DOJ has warned that if the legal challenge succeeds, it “would frustrate” the ongoing effort to reschedule cannabis under the CSA because “Congress would lack congressional authority to regulate marijuana as a Schedule III drug for the same reasons that it could not regulate marijuana as a Schedule I drug.”

The First Circuit is likely to affirm Judge Mastroianni’s dismissal of the case. The plaintiffs will then file a petition for a writ of certiorari, asking the U.S. Supreme Court to take the case to revisit Gonzalez. Four of the nine Supreme Court justices would need to vote in favor of granting certiorari, and it remains to be seen whether there will be enough votes for the case to be reviewed by the highest court. 

3. Regulating Intoxicating Hemp: A Rapidly Evolving Landscape

One of the hottest issues of 2024 was the regulation—and, in some cases, prohibition of—so-called “intoxicating hemp” products, specifically, hemp-derived food, beverage, and dietary products intended for human consumption. As a consequence of the 2018 Farm Bill excluding hemp from the definition of “marijuana” under the CSA, intoxicating hemp products rapidly proliferated in the marketplace, leading many states to respond by cracking down on the sale and distribution of such products. For example, in September 2024, California’s Governor Newsom proposed “emergency regulations” effectively banning all intoxicating hemp products in the largest state in the country; those regulations went into effect shortly thereafter, and a lawsuit challenging them failed.

We could see changes at both the federal and state levels in 2025. At the federal level, the 2018 Farm Bill must be reauthorized in 2025.

RELATED: Farm Bill Gets Another 1-Year Delay, Leaving Hemp, THCA Untouched—For Now

As the 2018 Farm Bill’s extension approached its expiration on Sept. 30, 2024, several State Attorneys General called on Congress to add language to the next Farm Bill regulating “intoxicating hemp” products. In a draft version of the 2025 Farm Bill released in November 2024, Congress aims to close the loopholes that allowed hemp businesses to produce and sell intoxicating hemp products by redefining “industrial hemp” as limited to non-cannabinoid parts of the cannabis sativa L. plant and explicitly excluding all the parts used to create intoxicating compounds. The draft also seeks to define hemp to include “total THC” levels, keeping all variants to a maximum total 0.3% limit. With a new Congress and new President arriving in Washington, D.C., in January 2025, it is hard to predict how federal lawmakers will approach the issue.

Related: THCA in the Farm Bill: Amendment Goes Far Beyond Closing ‘Loopholes’

In the meantime, states have attempted to regulate intoxicating hemp on their own, but regulations have been all over the map, spanning a wide range of standards from outright bans to restricting dosage content. Key issues to watch out for in 2025 will be whether state-level bans will be lifted or extended (for example, California’s emergency ban is set to expire on March 25, 2025); whether legal challenges to state-level bans will prevail or force amendment of state hemp laws (for example, New Jersey was enjoined from enforcing its amended hemp law and to date has not indicated whether it intended to begin cracking down on hemp-derived THC products); and whether more regulations are on the horizon (for example, Texas, where Lt. Governor Dan Patrick has proposed legislation banning all intoxicating hemp products in his state, despite growing public support for either full legalization or decriminalization of cannabis).

RELATED: A Legal Tug of War on Hemp-Derived Cannabinoid Regulations

4. New York:  Will The Market Finally Find Its Footing?

When New York legalized adult-use cannabis in March 2021, the state put restorative justice at the center of its framework in ways no other state had done, to prioritize—in terms of licensing and financial support from the state—people most harmed by the war on cannabis. But getting this program off the ground proved to be very challenging. The rollout of social equity licenses took longer than expected, and illegal dispensaries proliferated. There were lawsuits and injunctions. By March 2023, only six legal adult-use dispensaries were in operation throughout the state.

In 2024, Gov. Kathy Hochul got involved. In April, she announced the New York Cannabis Control Board (CCB) had issued 403 adult-use cannabis licenses to bolster the legal market. The CCB also approved a resolution authorizing the issuance of adult-use cannabis licenses across the supply chain and empowering the Office of Cannabis Management (OCM) to issue provisional licenses to give holders the opportunity to begin operations swiftly and foster a competitive marketplace and strengthen the supply chain. The OCM announced on Jan. 2 that the state’s adult-use cannabis market surpassed $1 billion in cumulative sales since retail operations launched in late 2022.

But in December 2024, another lawsuit resulted in another injunction. The suit, Organic Blooms, LLC et al. v. New York State Cannabis Control Board et al., claimed that the OCM acted improperly by permitting potential cannabis retailers to apply for licenses without first securing physical store locations or informing local governments. On Dec. 12, the judge handling the case granted a preliminary injunction, ceasing review of applications pending legal resolution—creating more delays and stymying the state cannabis industry’s anticipated growth. As this case proceeds, the impacts on New York’s adult-use market and legalization framework will certainly be something to keep an eye on.

5. Will The Supreme Court Permit Civil RICO Claims Against the Cannabis Industry? 

In October 2024, the U.S. Supreme Court heard oral argument in Medical Marijuana, Inc. v. Horn, and is likely to issue a decision in early 2025. The lawsuit was brought by a truck driver who was fired from his job after a CBD wellness product, marketed as THC-free, that he took for chronic pain caused him to fail a routine drug test. He sued the manufacturers of the product, a cannabis testing company, and John Does, who are “the law firms, accountants and financial entities who have assisted Defendants” under the federal Racketeer Influenced and Corrupt Organizations Act (RICO Act) for injury to his “business or property.” The district court granted summary judgment to defendants and dismissed the suit on grounds that plaintiff’s injury was personal. However, the Second Circuit held that while RICO’s language implies that a plaintiff cannot sue for personal injuries, that implication did not bar a plaintiff from suing for injuries to business or property simply because a personal injury was antecedent to those injuries, noting that “the phrase ‘business or property’ focuses on the nature of the harm, not the source of the harm.”

As we’ve analyzed before, most cannabis RICO claims are dismissed in the early stages. If the Supreme Court deems that personal injury “economic damages” constitute business or property injuries recoverable under civil RICO, this may open the gates to turning personal injury tort cases into civil RICO cases authorizing treble damages and attorneys’ fees. 

Note, however, that even if the plaintiff wins the appeal, he still has a long road ahead—his case would return to the lower courts for further proceedings.

6. Increased Industry Consolidation on the Horizon?

In December 2024, two deals signaled that more industry consolidation could be on the horizon.  First, the business combination of Florida-based, vertically integrated MSO Cansortium, which operates under the Fluent brand, and RIV Capital, which operates Etain Health in New York, closed on Dec. 19, 2024.  The newly combined company will have operations in Florida, New York, Pennsylvania, and Texas.

Second, multistate operator Vireo Growth announced it had received $75 million in equity financing and had acquired four single-state cannabis operators, including Proper Brands—expanding Vireo’s operations to seven states, 48 dispensaries, 9 cultivation facilities, and over a million square feet of cultivation and manufacturing space. Vireo also acquired a cannabis delivery and analytics platform in the merger. 

We will be on the lookout for more signs of industry consolidation as we move into 2025.

Jennifer Fisher is a partner in Goodwin’s Complex Litigation & Dispute Resolution practice, and a co-chair of the firm’s Cannabis practice. Jessica Huang is an associate in Goodwin’s Complex Litigation & Dispute Resolution practice and a member of the firm’s Cannabis practice. Brett Schuman is a partner and the co-chair of Goodwin’s Intellectual Property Litigation practice, and a co-chair of the firm’s Cannabis practice.