The cannabis industry continues to evolve quickly. Operators, investors, and other stakeholders face growing financial pressure, regulatory uncertainty, and intense competition.

The Benzinga Cannabis Conference 2025 offered valuable insight into the market’s current condition and future direction. This analysis reviews seven key takeaways highlighted by the National Cannabis Industry Association.

1. Cannabis Operators Enter Survival Mode

The days of unchecked optimism in the cannabis industry appear to be over. Instead of waiting for market conditions to stabilize, operators are confronting current challenges directly.

Key developments include:

• Companies are prioritizing operational efficiency and sustainable cash flow.
• Price compression continues to reduce margins throughout the supply chain.
• Competitive pressure is forcing businesses to adjust their strategies.
• Operators are moving away from growth at all costs.
• Sustainable business models have become the primary focus.

This shift represents a maturing cannabis market. Companies increasingly recognize that long-term survival requires financial discipline and efficient operations.

In previous years, many operators expected conditions to improve. Today, they are adjusting their strategies and cost structures for continued competition. These changes can help them withstand difficult market conditions and build more sustainable businesses.

2. Cannabis Rescheduling Becomes a Political Issue

The possible rescheduling of cannabis from Schedule I to Schedule III has become increasingly political. According to conference discussions, the timing may depend partly on electoral considerations.

Key insights include:

• Rescheduling appears increasingly influenced by political priorities.
• Multistate operators (MSOs) are coordinating their lobbying efforts.
• Action could align with the Trump administration’s agenda and upcoming midterm elections.
• Cannabis reform remains secondary to other policy priorities.
• The process requires several regulatory and administrative steps.

Industry stakeholders generally agreed that the administration did not appear strongly opposed to rescheduling. However, cannabis reform was not considered a leading priority.

That could change as the midterm elections approach. Cannabis may become a more prominent political issue, potentially creating new momentum for rescheduling.

3. Cannabis M&A Activity Remains Limited

Many industry observers expected mergers and acquisitions to increase in 2025. Instead, major M&A activity remained limited as companies focused on survival.

Current market conditions include:

• Companies describe 2025 as a highly competitive, survival-focused year.
• Most MSOs lack the cash reserves needed for major acquisitions.
• Businesses are refinancing existing debt instead of pursuing expansion.
• Surviving challenging market conditions remains the main priority.
• Regulatory developments could delay consolidation rather than accelerate it.

Significant consolidation may still be 12 to 18 months away, particularly if expected regulatory changes do not occur.

Without those catalysts, lenders may become less willing to extend existing obligations. At the same time, efficient operators may continue to outperform weaker competitors. Together, these pressures could eventually drive more M&A activity.

Ironically, favorable regulatory changes could delay consolidation. Improved conditions might give struggling operators more time to recover instead of forcing them to sell.

4. Section 280E Remains a Major Tax Challenge

Section 280E of the Internal Revenue Code continues to create serious financial challenges for cannabis businesses. It prevents companies involved with Schedule I or Schedule II substances from deducting many standard business expenses.

Approaches discussed at the conference included:

• Some operators have reportedly withheld tax payments while anticipating future IRS settlements.
• Industry participants expect the IRS to litigate the issue within the next year.
• Some companies anticipate negotiating installment plans or discounted settlements.
• Lenders continue to treat unpaid 280E taxes as legitimate liabilities.
• Participants discussed whether Green Thumb Industries might follow similar strategies, although no public evidence confirmed this at the time.

Section 280E continues to affect profitability and cash flow throughout the cannabis industry. The growing amount of unpaid tax liability also creates significant risk.

Operators using this strategy appear to be betting that future settlements will cost less than immediate payment. However, financial institutions still consider these obligations when evaluating a company’s debt and overall financial health.

5. Hemp Regulations Create Uncertainty

The hemp industry faces an uncertain regulatory future. Conference participants expressed sharply different opinions about possible enforcement and market changes.

Key market dynamics include:

• Some experts expect regulators to crack down on intoxicating hemp products.
• Certain categories, such as hemp-derived beverages, could receive exemptions.
• Others expect current conditions to continue.
• Hemp products are increasingly competing with traditional cannabis sales.
• Hemp businesses reportedly benefit from attractive profit margins.
• More MSOs are considering entering the hemp market.

The lack of regulatory clarity creates both risk and opportunity. Traditional cannabis operators must decide whether to enter the hemp market or continue watching competitors capture potential sales.

Until clear rules emerge, hemp will remain one of the industry’s most unpredictable segments.

6. U.S. Operators Monitor International Markets

International cannabis markets continue to develop. However, most U.S. operators remain cautious about committing significant resources outside the country.

Key observations include:

• MSOs are monitoring international markets without making major investments.
• Many U.S. operators are still evaluating the scale of the global opportunity.
• Licensed producers (LPs) are more active in international markets.
• LPs have shown particular interest in Germany’s growing cannabis market.
• A regulatory crackdown on “greenwashing” practices in Portugal could benefit established LPs.
• International expansion remains a long-term consideration for most U.S. operators.

U.S. MSOs and international LPs are taking different approaches. MSOs remain focused on domestic financial and regulatory challenges. Meanwhile, Canadian LPs and other international companies are building positions in emerging global markets.

For most U.S. operators, international expansion is still a future opportunity rather than an immediate priority.

7. Cannabis Companies Prefer Debt Over Equity

Cannabis companies increasingly prefer debt financing, even though borrowing costs remain high. This shift reflects both current market conditions and operators’ desire to maintain ownership control.

Key financing insights include:

• The industry shows a strong preference for debt over equity.
• Survivorship bias may influence this trend because many remaining investors focus on credit.
• Annual borrowing costs remain between 15% and 25%.
• Current equity valuations make dilution difficult to justify.
• Most cannabis companies need additional capital.
• Capital constraints give lenders significant negotiating power.
• Lenders can be highly selective when evaluating potential investments.

For many operators, raising equity would require giving up too much ownership at current valuations. Debt can preserve that ownership, but it introduces high interest costs and additional financial obligations.

Until more capital becomes available, debt will likely remain the industry’s preferred financing option.

Conclusion

The Benzinga Cannabis Conference 2025 highlighted an industry at a critical point. Operators are navigating financial pressure, regulatory uncertainty, limited access to capital, and growing competition.

The market is also becoming more disciplined. Companies are prioritizing cash flow, reducing unnecessary costs, and building strategies around realistic conditions.

For cannabis operators, investors, and stakeholders, understanding these trends is essential. Businesses that maintain financial discipline and adapt to changing market conditions will be better positioned for long-term success.