US cannabis industry revenues are set to grow just 3.2% in 2025, as price compression, difficult economic dynamics and an increasingly complex political landscape put the brakes on the sector.
According to a new report from ATB Capital Markets, the market is set to have contracted by 0.2% in 2024, driven by slowing state regulatory reform, the failure of Florida to legalize recreational cannabis, and the ongoing delays to key federal changes like rescheduling and banking reform.
Though a modest recovery is expected to be seen next year, growth will continue to be hindered by price compression and operational challenges, especially in more mature markets like Colorado and California.
Its ‘2025 Life Sciences Outlook’ report, released this week, paints a cautiously optimistic picture of the long-term outlook for US cannabis, despite the short-term issues.
Legal cannabis sales are forecast to grow at a compound annual growth rate (CAGR) of 4.6% from 2024 to 2029, reaching $38bn by the end of the forecast period.
Regulatory reform remains the most significant potential catalyst for growth in 2025. Federal rescheduling of cannabis could remove punitive measures like 280E tax penalties and provide the regulatory clarity needed to attract capital and drive valuations higher.
Similarly, the SAFE Banking Act, if passed, could open the door for traditional banking services and new financing opportunities, particularly for retailers.
On the state level, Pennsylvania’s anticipated legalization of adult-use cannabis could unlock significant new market potential. However, ATB stresses that the industry must unite to bridge the gap between optimism and action by streamlining supply chain operations and addressing structural inefficiencies.
Emerging markets like New York and Ohio are expected to be key growth drivers in 2025. New York, in particular, is forecast to see a 27.6% CAGR in legal cannabis sales through 2029, as the state’s recreational market matures with more dispensaries coming online.
Meanwhile, mature markets continue to struggle with declining prices and intense competition, underscoring the importance of innovation and differentiation in maintaining market share.
Looking ahead, ATB’s report signals a pivotal year for the cannabis industry, but these are dependent on the aforementioned key reforms.
However, as ATB cautions, the success of these efforts will depend on industry collaboration and a proactive approach to addressing both regulatory hurdles and evolving market dynamics.
