WASHINGTON – A $44 billion American industry that employs 425,000 people, operates legally in 24 states, and is projected to exceed $47 billion this year cannot open a standard business bank account, deduct ordinary operating expenses from federal taxes, or guarantee its workers the protections available in virtually every other sector of the American economy. Senate Democrats moved to close that gap on Wednesday.
Seventeen senators, led by Cory Booker of New Jersey, Minority Leader Chuck Schumer of New York, and Ron Wyden of Oregon, reintroduced the Cannabis Administration and Opportunity Act – a bill that would fully remove marijuana from the federal Controlled Substances Act, replacing prohibition with a framework of federal regulation and a tax structure designed to redirect revenue toward communities dismantled by decades of drug enforcement.
The timing was deliberate. The reintroduction came one day after the Drug Enforcement Administration wrapped up an administrative hearing on marijuana’s legal classification – a process triggered by an April 23 executive order that rescheduled state-licensed medical cannabis from Schedule I to Schedule III, the most significant federal action on marijuana in more than 50 years.
Schedule III status narrows the problem. It does not solve it.
For the cannabis industry, the rescheduling removes the most punishing provision in the federal tax code: Section 280E, which bars companies trafficking Schedule I or II substances from deducting standard business expenses, producing effective federal tax rates that in some cases exceeded 70 percent. Analysts at law firm Foley Hoag estimated the change would produce more than $2 billion in annual cash flow improvements for state-licensed operators. The catch: the April order applied only to medical marijuana, leaving adult-use operators – who account for the majority of retail sales in California, Colorado, Illinois, and most other large markets – in the same constrained position as before.
The CAOA would deschedule marijuana entirely. Under the legislation, cannabis would join alcohol and tobacco as a federally legal substance governed by a new regulatory framework, with the Treasury Department collecting a tiered federal excise tax. The bill would also fund automatic expungement for prior federal marijuana convictions, establish protections against employment and housing discrimination for cannabis users, and create a trust fund to invest in communities hit hardest by federal drug enforcement over the past half-century.
“For decades, generations have suffered unjustly under the failed War on Drugs,” Booker said at a press conference in Washington on Wednesday. “It is long overdue that we stand up for them.”
What the sponsors did not address Wednesday is whether 60 votes exist in the Senate to pass it. The Republican majority has shown no appetite for full descheduling. President Trump endorsed reclassifying cannabis to Schedule III – the step already taken – but his advisers have consistently opposed outright legalization. The CAOA has been introduced three times since 2021. It has never received a floor vote.
What is different in 2026 is the pressure coming from the industry itself.
The US legal cannabis market was roughly $8 billion in 2017. Eight years later, with the market at $44 billion and two dozen states already running adult-use frameworks, the cost of federal inaction has shifted from an abstract policy objection to a concrete competitive disadvantage – one borne most acutely by the hundreds of licensed operators who pay inflated effective tax rates while their Canadian and European counterparts do not.
“The cannabis industry is in the middle of a consolidation wave,” one analyst tracking US cannabis stocks on OTC markets told Eastern Herald. “Weaker operators are selling or shutting down. Stronger ones are acquiring distressed assets. That is not the story of a thriving industry – that is the story of an industry that cannot access normal capital.”
Banking remains the sharpest operational edge. Because cannabis remains federally illegal under current law, most commercial banks will not extend credit or basic deposit services to cannabis businesses, even those operating fully within state law. The SAFE Banking Act – a narrower measure that would simply allow banks to serve cannabis companies without federal penalty – has passed the House seven times since 2019. It has never passed the Senate.
The CAOA would resolve the banking problem as a byproduct of full descheduling. But whether the bill can move before the November midterms is uncertain. Democrats are in the minority in both chambers. Schumer told reporters he intended to force a floor vote, but procedurally, that depends on majority cooperation he does not have. The more likely scenario, according to Senate aides, is that the bill functions as a midterm marker – a signal to the 68 percent of Americans who, according to Gallup’s most recent national poll, support federal marijuana legalization that the two parties have arrived at very different positions on how fast to move.
The DEA hearing that closed on July 15 will produce a final administrative determination on broader rescheduling. The CAOA proposes to make that determination irrelevant by removing cannabis from the scheduling framework altogether. One or the other will eventually govern an industry that, according to current projections, is on course to exceed $55 billion in annual revenue by 2030.
The question is whether it happens on the industry’s timeline or Congress’s.
