America’s marijuana industry is wilting

No American president has been as ostensibly pro-pot as Donald Trump. During the campaign he declared support for various cannabis-reform measures, and said he would vote in favour of recreational use in a November ballot in Florida. Yet despite his victory, stocks continue to perform poorly. What killed the buzz?Expectations for a cannabis boom had been building to a high. In 2012 Washington and Colorado became the first states to allow pot to be sold for recreational use. Another 22 have followed since then. That created a sizeable market: in 2024 Americans spent about $29bn on legal marijuana (some for medical use).With President Joe Biden vowing during his 2020 campaign to decriminalise the herb, investors expected reform to sweep the country. The share prices of listed pot firms surged to record levels after his election. Money poured into startups. Towards the end of that year Casa Verde, a cannabis-investment firm co-founded by Snoop Dogg, a rapper, raised $100m.Mr Biden, though, never followed through on his promise of decriminalisation, and reform at the state level has slowed. Florida’s ballot measure failed. So did efforts in South and North Dakota. Meanwhile, America’s weed industry faces fierce competition from the illicit trade—which is thought to be twice as big and is not burdened by taxes and regulations—as well as from products made with intoxicating hemp, a less potent but legal cannabis variety. Wholesale prices for legal marijuana are at record lows.The result has been a slump in America’s weed industry. Total revenue growth was less than 1% in 2024. Profits have cratered. The American Cannabis Operator Index, which tracks the market value of firms in the industry, has fallen by more than 90% since February 2021.Investors remain unconvinced that Mr Trump will prioritise wide-reaching cannabis reform. The withdrawal of Matt Gaetz, a vocal proponent of federal legalisation, as Mr Trump’s nominee for attorney-general after allegations of sexual misconduct (which he denies) blunted what hopes the industry had.Still, some relief may soon come in the shape of tax reform. Because cannabis is designated as a “schedule-1 substance”, companies selling it cannot deduct normal business expenses from their tax bill. In December the Drug Enforcement Administration held preliminary hearings on whether to change that; these are expected to conclude in March. Allowing tax deductions would go some way towards improving pot-sellers’ profitability. That would give investors cause for cheer, even if Mr Trump’s other pro-pot promises go up in smoke.