The federal shutdown that began on October 1, 2025, has frozen the $32 billion cannabis sector, prompting a Hemp THC ban and federal cannabis rescheduling. This pause stalls regulatory progress and leaves hemp‑derived THC products, delta‑8 and THCA flowers in a state of uncertainty.
Federal Shutdown Pauses Cannabis Rescheduling Initiative
Donald Trump’s August promise to decide on moving cannabis to Schedule III within weeks has been effectively halted as the DEA and FDA run with minimal staff. This pause in cannabis reform shut down all scientific assessments and public‑comment periods. Cannabis businesses are now confronting immediate and severely disruptive impacts on profit margins and investor confidence.
A federal rescheduling of cannabis would eliminate Section 280E tax penalties that currently impose 60‑70 % effective tax rates on state‑legal operators. These firms employ 450,000 Americans, but must wait for the key agencies to reopen before any tax relief or banking reforms can take place.
Source: https://mjbizdaily.com/hemp-thc-ban-cannabis-reform-in-limbo-during-federal-shutdown/
Hemp THC Ban Legislation Stalled in Politics
Congress is working on budget bills to fund the government, yet the Hemp THC ban remains deadlocked. The Harris Amendment proposes broadening the definition of hemp to cover every THC isomer below 0.3 percent, not only delta‑9. This move to ban delta‑8 seeks to seal the “hemp loophole” that has let intoxicating hemp products proliferate at gas stations and convenience stores.
Rep. Andy Harris is spearheading the effort, while hemp‑growing states like Kentucky and North Carolina resist. Sen. Rand Paul cautions that stringent THCA rules could jeopardize rural employment and the tax income derived from hemp cultivation and processing.
Financial Impacts Amplifying Industry Hurdles
The shutdown deepens the fiscal strain on cannabis firms already hampered by federal tax rules and scarce banking options. NewLake Capital Partners points out that the deadlock over rescheduling further dents investor confidence. While cannabis shares surged after the president’s CBD remarks, they have since tempered amid ongoing political gridlock.
State‑Level Hemp Rules Keep Advancing
State officials are pressing forward despite a standstill at the federal level. Texas introduced fresh age limits and licensing mandates for hemp‑derived THC products effective October 1, with violations punishable as Class A misdemeanors for selling any cannabinoid‑containing vape. California’s AB 8 now brings intoxicating hemp under its stringent cannabis regulatory scheme. In Florida, courts have determined that police cannot conduct vehicle searches solely on the scent of marijuana. These 2025 cannabis compliance measures underscore growing worries about untested hemp‑based products.
Potential Setback for Cannabis Research and Banking Changes
Moving cannabis to Schedule III would provide notable advantages, such as removing the Section 280E tax penalty, improving banking availability, and broadening research possibilities. The American Institute of Certified Public Accountants has called for federal direction to aid companies in getting ready. However, the shutdown now indefinitely delays those benefits. Industry poll data indicate that 97 % of cannabis experts view rescheduling as essential for sustained viability, while merely 34 % think it will occur within the year.
Industry Outlook: Steering Through Prolonged Uncertainty
Analysts caution that the shutdown may extend into mid‑November or later, pushing back decisions on product clearances and financial services even further. Absent federal intervention, firms must adjust to a mosaic of state rules while gearing up for eventual nationwide reform.
Hemp Sector Confronts a Critical Challenge
Industry representatives warn that the federal prohibition on THC in hemp would wipe out roughly 95 % of products currently derived from the plant. The U.S. Hemp Roundtable highlights hemp’s role in preserving rural employment and generating tax revenue. States such as Utah and New Mexico are concentrating on “naturally derived, non‑intoxicating” criteria, whereas other jurisdictions adopt expansive definitions that encompass any psychoactive substances.
Expert Outlook: What Lies Ahead
Michael Bronstein, speaking for the American Trade Association for Cannabis and Hemp, points out that executive bodies could still reclassify cannabis even if the agency is shuttered. However, rolling out regulatory guidance and overhauling banking rules will depend on a functional Congress. Analysis of public feedback reveals that 42 % of respondents back a rescheduling of cannabis, while 71 % favor complete descheduling, underscoring a robust public appetite for sweeping reform.
Strategic Implications for Cannabis Enterprises
Cultivators, processors, and wholesale purchasers need to keep an eye on state compliance mandates and sustain cash reserves to endure continuing setbacks. Companies that broaden their product portfolios, nurture robust state‑level connections, and adopt a cautious planning approach will be best equipped to capture opportunities when federal reforms restart.
Conclusion: Political Stalemate Endangers Industry Advancement
The government shutdown marks a pivotal point for cannabis reform, illustrating how political deadlock can halt years of momentum toward nationwide legalization. While the sector awaits Washington’s funding resolution, cannabis and hemp firms must remain in compliance with current regulations and gear up for a landscape where federal rescheduling and hemp THC restrictions reshape the market.
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