US Cannabis Market Size, Share, Trends and Forecast by Source, Derivatives, Cultivation, End Use, and Region, 2026-2034

US Cannabis Market Summary:

The US cannabis market size reached USD 25,078.34 Million in 2025. The market is projected to reach USD 320,772.68 Million by 2034, growing at a CAGR of 32.74% during 2026-2034. The market is driven by ongoing federal cannabis rescheduling efforts and policy reform momentum that began with the DEA publishing a proposed rulemaking to move cannabis from Schedule I to Schedule III in May 2024, continued state-level market expansion with medical cannabis adoption reaching 40 states following Nebraska voters overwhelming approval of medical cannabis initiatives in November 2024, and the evolution of banking and financial services access through the SAFER Banking Act supported by 32 state attorneys general in July 2025. Technological innovations including AI-powered cultivation systems and operational efficiency improvements are also expanding the US cannabis market share.

US Cannabis Market Outlook (2026-2034):

The US cannabis market is positioned for exceptional growth, propelled by anticipated federal rescheduling of cannabis to Schedule III that would eliminate substantial tax burdens under IRC Section 280E and improve banking access for state-licensed operators. State-level momentum continues accelerating with medical cannabis programs expanding to 40 states and Pennsylvania, Hawaii, and other populous states considering adult-use legalization. The advancement of the SAFER Banking Act through bipartisan support will address critical financial services constraints, enabling cannabis businesses to access traditional banking and reducing dangerous cash-only operations that currently characterize the industry, thereby strengthening regulatory oversight and tax collection capabilities throughout the forecast period.

Impact of AI:

Artificial intelligence is transforming cannabis cultivation through precision agriculture applications that optimize growing conditions in real time. To improve yields while minimizing resource loss, AI-powered systems use sensors and cameras to monitor environmental elements such as temperature, humidity, light levels, and soil composition. They then provide data-driven suggestions. AI-driven robotics and analytics technologies for automated harvesting, pest detection, and quality control have been developed by businesses including Bloom Automation, Grownetics, and Motorleaf. Additionally, AI is being deployed in retail operations for personalized product recommendations, inventory management, compliance monitoring, and customer experience optimization, positioning the technology as a key driver of operational efficiency throughout the cannabis supply chain.

Market Dynamics:

Key Market Trends & Growth Drivers:

Federal Cannabis Rescheduling and Policy Reform Momentum

When the Drug Enforcement Administration released a Notice of Proposed Rulemaking in May 2024 suggesting that cannabis be moved from Schedule I to Schedule III under the Controlled Substances Act, the federal government started a historic change in cannabis policy. The Department of Health and Human Services recommended in August 2023 that cannabis have currently recognized medical uses and a lesser potential for abuse than what the Schedule I classification implies. This recommendation led to the creation of this regulatory proposal. During the 60-day public comment period that closed in July 2024, the DEA received an unprecedented 43,000 comments with approximately 69 percent supporting rescheduling to Schedule III or less restrictive schedules, demonstrating overwhelming public and industry support for federal reform. The proposed rescheduling would fundamentally transform the financial landscape for state-licensed cannabis businesses by eliminating the application of Internal Revenue Code Section 280E, which currently prohibits standard business expense deductions and creates effective tax rates exceeding 70 percent in some high-tax states. However, the administrative hearing originally scheduled for January 2025 was postponed indefinitely following procedural appeals regarding witness selection, placing the rescheduling timeline in uncertainty under the Trump administration. Despite this delay, the initiation of formal rescheduling proceedings represents the most significant federal cannabis policy development in decades and signals potential alignment between federal law and the reality that 24 states have legalized adult-use cannabis while 40 states permit medical use. The US cannabis market growth trajectory remains closely tied to resolution of this federal policy framework, as rescheduling would not only provide immediate tax relief but also facilitate improved banking access, reduced regulatory burden, and enhanced opportunities for medical research that have been constrained under Schedule I classification.

State-Level Market Expansion and Medical Cannabis Adoption

State-level cannabis legalization continues progressing despite federal prohibition, with medical cannabis now permitted in 40 states and adult-use cannabis legal in 24 states representing approximately 55 percent of the US population. In November 2024, Nebraska voters overwhelmingly approved two ballot initiatives to legalize and regulate medical cannabis, with 71 percent and 67 percent approval rates respectively. The measures established the Nebraska Medical Cannabis Commission to regulate production and sales, with framework development required by July 2025, marking Nebraska as the 40th state to allow medical cannabis in some form. This expansion reflects consistent public support for cannabis access, as polling demonstrates that approximately 90 percent of Americans support medical cannabis legalization while over two-thirds favor full adult-use legalization. Several populous states including Pennsylvania, Hawaii, and Texas have active legislative discussions regarding medical or adult-use legalization that could significantly expand addressable market size during the forecast period. Pennsylvania emerged as particularly promising with bipartisan cannabis legalization bills introduced and strong voter support demonstrated in polling, potentially positioning the state to join neighboring New Jersey, New York, and Maryland with adult-use programs. The medical cannabis segment is experiencing particularly robust growth as healthcare providers increasingly recognize therapeutic applications for conditions including PTSD, chronic pain, cancer-related symptoms, epilepsy, and neurodegenerative diseases. New York state exemplifies market maturation dynamics, surpassing one billion dollars in combined medical and adult-use sales during 2024 with over 260 licensed dispensaries operational and projections suggesting 500 dispensaries statewide by end of 2025. State-level expansion creates substantial economic impact through job creation, with regulated cannabis businesses providing approximately 425,000 full-time equivalent positions nationwide and generating over USD 4.4 Billion in state tax revenue during 2024.

Banking and Financial Services Access Evolution Through SAFER Act

Cannabis businesses operating legally under state law face severe financial services constraints due to federal prohibition, forcing the industry to operate predominantly in cash despite reaching USD 30.1 Billion in annual sales during 2024. Only approximately 830 financial institutions out of roughly 12,000 nationwide actively serve cannabis-related businesses as of September 2024, representing just 6.9 percent of total institutions, creating public safety risks and regulatory oversight challenges. In July 2025, 32 state and territorial attorneys general endorsed the proposed Secure and Fair Enforcement Regulation Banking Act, which advanced through the Senate Banking Committee with bipartisan support. They emphasized that the lack of banking access makes risky cash-only operations vulnerable to theft while impeding tax collection and regulatory compliance. Although the industry created over 425,000 employment nationally, legal cannabis retail sales reached USD 30.1 billion in 2024, up 4.5 percent from 2023. However, cash-only operations present significant regulatory difficulties and security issues for both businesses and communities. Financial institutions, such as banks, credit unions, and insurance companies, would have safe harbor protections under the SAFER Banking Act, allowing them to serve state-licensed cannabis businesses without risk of federal penalties, loss of FDIC insurance, Federal Reserve services, or regulatory approval. Several credit unions and community banks have pioneered cannabis banking despite regulatory uncertainty, with institutions like USF Credit Union launching dedicated cannabis banking programs in summer 2025, implementing rigorous screening and compliance protocols to monitor high-risk accounts appropriately. However, mainstream banking adoption remains limited pending federal legislation, as financial institutions face reputational risks, intensive compliance requirements including Suspicious Activity Report filings for each cannabis-related transaction, and potential regulatory sanctions. Resolution of banking access challenges represents critical infrastructure development for industry maturation, as traditional financial services would enable electronic payments, payroll processing, business loans, merchant accounts, and real estate financing that currently remain largely inaccessible to state-licensed operators.

Key Market Challenges:

IRC Section 280E Tax Burden and Financial Constraints

Internal Revenue Code Section 280E, enacted in 1982 to prevent drug traffickers from deducting business expenses, prohibits cannabis businesses from deducting ordinary business expenses that non-cannabis companies routinely claim, creating effective tax rates that frequently exceed 70 percent in high-tax states like California. Cannabis operators paid over USD 2.3 Billion in federal taxes during 2024 according to Whitney Economics analysis, with the excess payments stemming directly from Section 280E restrictions that disallow deductions for marketing, salaries, rent, and other operating expenses while permitting only cost of goods sold deductions. This punitive tax treatment has devastating impacts on industry profitability, as less than 30 percent of registered cannabis operators reported profitability during the 2022-2024 period, down from 42 percent in 2021 when pandemic-era demand drove higher margins. The tax burden becomes particularly crushing when combined with state-level excise taxes, sales taxes, and local fees, exemplified by California where the state excise tax increased from 15 percent to 19 percent in July 2025, a 26 percent rate increase that further compressed already tight margins. Major multi-state operators including Curaleaf, Cresco Labs, and Ascend Wellness have filed amended tax returns seeking hundreds of millions in refunds while challenging 280E application through constitutional arguments including Commerce Clause violations, Equal Protection challenges, and claims of excessive financial punishment under the Eighth Amendment. However, until cannabis is rescheduled to Schedule III or lower, or Congress explicitly exempts cannabis from 280E application, the tax burden persists as fundamental impediment to industry sustainability, particularly affecting smaller operators lacking economies of scale to absorb excess taxation.

Fragmented Regulatory Landscape and Compliance Complexity

The cannabis industry operates under extraordinarily complex regulatory frameworks due to conflict between federal prohibition and state-level legalization programs, with each of the 40 states permitting medical cannabis and 24 states allowing adult-use cannabis implementing unique licensing structures, product regulations, testing requirements, packaging standards, marketing restrictions, and tax regimes. Multi-state operators must navigate inconsistent regulations across jurisdictions, preventing economies of scale and requiring specialized compliance expertise for each market, while federal prohibition blocks interstate commerce that could rationalize supply chains and reduce costs through geographic arbitrage. States employ vastly different taxation approaches including price-based excise taxes, weight-based taxes, potency-based levies, or hybrid models, with rates varying from single digits to over 30 percent when combining state and local levies, creating pricing disparities that affect competitive dynamics and consumer purchasing patterns. Licensing delays and regulatory bottlenecks plague emerging markets, exemplified by Delaware where FBI rejection of the state fingerprinting system in December 2024 left 125 lottery-selected businesses unable to open, while New York Governor Hochul characterized her state adult-use rollout as a disaster with only approximately 50 licensed stores operational nearly three years post-legalization. Compliance costs consume substantial operational resources as businesses must implement seed-to-sale tracking systems, maintain detailed inventory records, conduct mandatory product testing for potency and contaminants, follow strict packaging and labeling requirements, and file extensive regulatory reports, with compliance technology and personnel representing significant fixed costs that disadvantage smaller operators. The regulatory fragmentation extends to employment law, with workers compensation, labor relations, and workplace safety regulations varying by jurisdiction, while banking restrictions necessitate cash management protocols and armored car services that add further operational complexity and expense.

Illicit Market Competition and Price Compression

Legal cannabis businesses face persistent competition from illicit markets that operate without regulatory compliance costs, taxation burdens, or testing requirements, enabling black market operators to significantly undercut licensed retailers on price while avoiding quality standards and consumer protections. California authorities seized over USD 534 Million in illegal cannabis during 2024, with nearly 800 tons of cannabis worth more than USD 2.8 Billion confiscated and destroyed since 2019, representing substantial untaxed market activity that diverts revenue from legitimate operators and government tax collection. High state tax rates and 280E federal tax burden create pricing gaps that incentivize consumers toward illicit channels, particularly in mature markets like California where legal cannabis sales declined from USD 5.1 Billion in 2023 to USD 4.6 Billion in 2024 as excessive taxation and oversupply drove major operators including Cresco Labs and Curaleaf to exit the state. Price compression affects most established markets as increased cultivation capacity and retail competition drive wholesale prices downward, exemplified by Michigan where wholesale prices declined from USD 300-350 per ounce to approximately USD 225, compressing margins for cultivators while retail prices face downward pressure from consumer price sensitivity and competitive dynamics. The US Cannabis Spot Index fluctuated by 21 percent between May and September 2024, falling to USD 944 per pound in early May with regional pricing varying dramatically from Oregon markets down 23 percent in one month to New Jersey climbing nearly 5 percent to USD 2,298 per pound, demonstrating volatility and fragmentation across state-by-state markets. Oversupply in mature markets creates inventory gluts that further depress pricing, while newer markets face opposite challenges with insufficient retail access and supply constraints driving elevated prices, yet interstate commerce prohibition prevents market equilibration that could address these imbalances efficiently.

US Cannabis Market Report Segmentation:

IMARC Group provides an analysis of the key trends in each segment of the US cannabis market, along with forecasts at the country and regional levels for 2026-2034. The market has been categorized based on source, derivatives, cultivation, and end use.

Analysis by Source:

• Hemp
  • Hemp Oil
  • Industrial Hemp
• Marijuana
  • Flower
  • Oil and Tinctures

The report has provided a detailed breakup and analysis of the market based on the source. This includes hemp (hemp oil and industrial hemp) and marijuana (flower, and oil and tinctures).

Analysis by Derivatives:

• CBD
• THC
• Others

A detailed breakup and analysis of the market based on the derivatives have also been provided in the report. This includes CBD, THC, and others.

Analysis by Cultivation:

• Indoor Cultivation
• Greenhouse Cultivation
• Outdoor Cultivation

The report has provided a detailed breakup and analysis of the market based on the cultivation. This includes indoor cultivation, greenhouse cultivation, and outdoor cultivation.

Analysis by End Use:

• Industrial Use
• Medical Use
  • Chronic Pain
  • Depression and Anxiety
  • Arthritis
  • Post-traumatic Stress Disorder (PTSD)
  • Cancer
  • Migraines
  • Epilepsy
  • Alzheimer’s Disease
  • Multiple Sclerosis
  • AIDS
  • Amyotrophic Lateral Sclerosis
  • Tourette’s Syndrome
  • Diabetes
  • Parkinson's Disease
  • Glaucoma
  • Others
• Recreational Use

A detailed breakup and analysis of the market based on the end use have also been provided in the report. This includes industrial use, medical use (chronic pain, depression and anxiety, arthritis, post-traumatic stress disorder (PTSD), cancer, migraines, epilepsy, Alzheimer’s Disease, multiple sclerosis, AIDS, amyotrophic lateral sclerosis, Tourette’s syndrome, diabetes, Parkinson's disease, glaucoma, and others), and recreational use.

Analysis by Region:

• Northeast
• Midwest
• South
• West

The report has also provided a comprehensive analysis of all the major regional markets, which include Northeast, Midwest, South, and West.

Competitive Landscape:

The US cannabis market exhibits intense competition among vertically integrated multi-state operators, regional cultivators, and specialized brand companies navigating complex state-by-state regulatory frameworks while facing federal prohibition constraints. Market consolidation accelerates as larger operators with stronger balance sheets acquire distressed assets and expand footprints through mergers and acquisitions, targeting limited-license states and high-growth markets to establish dominant positions before federal legalization potentially enables interstate commerce and national branding strategies. Competition centers on cultivation efficiency, product quality, brand differentiation, retail experience, regulatory compliance capabilities, and access to capital, with profitability remaining elusive for many operators burdened by Section 280E tax treatment and high regulatory compliance costs. The largest multi-state operators including Curaleaf, Trulieve, Green Thumb Industries, Verano, and Cresco Labs command substantial market share through geographic diversification and vertical integration strategies controlling cultivation, processing, and retail operations, though regional specialists and craft cultivators maintain strong positions in specific markets through premium product offerings and local brand loyalty.

US Cannabis Industry Latest Developments:

• September 2025: For a total payment of USD 1.35 million, Standard Wellness Holdings successfully acquired GreenBud LLC, which operates as Greenstock, a licensed dispensary in Seville, Ohio. The strategic acquisition brought Standard Wellness total number of operating dispensaries in Ohio to four, with the company announcing plans to add four more dispensaries over the following 12 to 18 months as part of its growth strategy to provide convenient access to high-quality cannabis products across key markets in the state.
• September 2025: The Cannabist Company Holdings announced a partnership with Queen Mary, an award-winning California wellness-focused cannabis brand, to launch premium rosin gummies across all 19 Cannabist retail locations in Colorado. The partnership expanded to include wholesale distribution to additional Colorado dispensaries, with Queen Mary products becoming available to retailers statewide through The Cannabist Company distribution network, reinforcing the company strategy of partnering with mission-driven brands prioritizing product quality and community impact.

US Cannabis Market Report Coverage:

Key Questions Answered in This Report:

• How has the US cannabis market performed so far and how will it perform in the coming years?
• What is the breakup of the US cannabis market on the basis of source?
• What is the breakup of the US cannabis market on the basis of derivatives?
• What is the breakup of the US cannabis market on the basis of cultivation?
• What is the breakup of the US cannabis market on the basis of end use?
• What is the breakup of the US cannabis market on the basis of region?
• What are the various stages in the value chain of the US cannabis market?
• What are the key driving factors and challenges in the US cannabis market?
• What is the structure of the US cannabis market and who are the key players?
• What is the degree of competition in the US cannabis market?

Key Benefits for Stakeholders:

• IMARC's industry report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the US cannabis market from 2020-2034.
• The research report provides the latest information on the market drivers, challenges, and opportunities in the US cannabis market.
• Porter's five forces analysis assist stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the US cannabis industry and its attractiveness.
• Competitive landscape allows stakeholders to understand their competitive environment and provides an insight into the current positions of key players in the market.