Industry Watch

Wrapping up 2025 and Predictions for 2026

January 8, 2026

2025 was another chaotic year in cannabis regulation, both state and federal.

In Minnesota, entrepreneurs applied for adult-use cannabis licenses in August 2024 and March 2025; capped license types then had to wait for the lotteries in June and July; and licensed businesses finally began to open in the second half of 2025, led by microbusinesses and the two med-combo licenseholders who had been Minnesota’s medical cannabis companies.

Minnesota’s tribes signed compacts with the state allowing them to conduct cannabis operations not only on tribal land, but also to open off-reservation dispensaries, which is unique in the nation, and also to sell products into the state-regulated market. Seven (of 12) tribes had signed compacts by year-end.

Minnesota’s thriving hemp THC market was dealt two punishing blows this fall: first, compliance changes driven by the change from being governed under Temporary Statute Minn. Stat. 151 to the cannabis statute (Minn. Stat. 342) proved to be much more substantial than players had expected, especially the end of delivery of hemp THC by mail. Second, at the federal level, Sen. Mitch McConnell successfully inserted a federal ban on intoxicating hemp into the bill to reopen the government in November; that ban will go into effect in November 2026.

On the adult-use side, Pres. Trump announced in November that he was directing federal agencies to restart the rescheduling of cannabis from Schedule I (very dangerous, no medical use) to Schedule III (controlled substances like ketamine). That process had been started by the previous administration but was dropped when Trump took office. Alcohol is not scheduled at all, and re-scheduling was not immediately effective.

In Minnesota, we closed the year with about 100 licensees and a couple of dozen dispensaries open, some of whom have obtained some supply of cannabis flower from the tribes or the med-combo licenseholders. Another 2,000 licensees are in process, of which 1,500 are microlicensees.

What I'm Watching in 2026

I expect a flood of dispensaries to open across in Minnesota in 2026, under micro, mezzo, and retail licenses as well as a few more tribal dispensaries and the nation’s first municipal dispensaries.

I expect the first non-tribal / non-medical harvests to hit the market in January, with supply steadily increasing as we head into the summer. In 1Q26, dispensaries will need relationships with cultivators or wholesalers to get access to the limited supply of flower. Testing bottlenecks will likely cause painful delays into mid-2026.

Flower (dried buds sold by weight) will fly off the shelves, but we’ll also start to see prerolls, vapes, concentrates, and other manufactured forms of cannabis become available in licensed dispensaries in the first half of 2026. While some customers will be familiar with the full product assortment from visiting dispensaries in legal states, most will need education to select between strains and delivery methods and identify quality products at a range of price points.

Many cultivators will be positioned to plant outdoors in summer 2026, so we’ll see large harvests come to market in October / November, pushing prices down. By the end of 2026, Minnesota will likely have too many dispensaries in some areas. Dispensaries that attract repeat customers through education, service, loyalty programs, or geographical advantages will begin to outpace others. Also important: hiring, training, and retaining good budtenders; financial and operational diligence, like good inventory control practices; and quickly building strong compliance programs to avoid missteps with OCM.

Regulatory uncertainty for the hemp-derived THC market has already driven some players into the adult-use cannabis market and others have ceased operations. We’ll likely know by April whether federal Congressional action will extend or modify the national ban on hemp that is currently set to go into effect on November 12, 2026. One option is that it could defer to states’ authority to regulate hemp. A beverage-focused carveout is also being discussed. The most likely outcome however, in my opinion, is that this Congress does not pass anything in time, causing mass disruptions to this once-promising market.

On the adult-use cannabis side, hopefully federal agencies will proceed expeditiously on federal rescheduling as directed by the recent presidential order. However, we saw the DEA successfully drag their feet under the Biden administration, so I’ll believe it when I see it. Cannabis businesses should continue to structure their businesses defensively, as if they will have to continue to comply with IRC Sec. 280E (the extra federal taxes on income earned on Schedule I drugs). However, hopefully rescheduling to Schedule III will be effective during 2026, easing that issue for the industry and hopefully sparking off other changes such as more normalized access to banking, insurance, and more.

Finally, a couple of additional predictions:

I think Minnesotans will support craft cannabis dispensaries and brands to a greater degree than we have seen in any other legal state so far. Our cannabis microbusiness structure was based on the craft brewery model, and I anticipate consumers will be similarly eager to buy quality local products and enjoy the experience of supporting a small business – as long as prices are comparable, the service is excellent, and they are aware of the existence of craft businesses.

At the same time, many social equity and other smaller players do not have the expertise or the financial resources needed to stand up compliant and profitable businesses in a highly-regulated industry. I expect that a significant portion of the microbusinesses (as well as some of the social equity mezzos and retail licenses) who are now in preliminary approval to never open their doors. Others will open and then close. By late 2026, I expect market consolidation to begin to happen – for example, sales of distressed assets. That is a painful cycle we have seen in other markets.

This spring we'll see what the Minnesota Legislature changes in MN's cannabis laws, as well. OCM is making a proposal to unify the medical & recreational cannabis supply chains. In short, that proposal would make it easier for smaller players to be part of the medical market (because medical cannabis would no longer need to be grown, processed, and sold separately), and would also tweak the med-combo license, probably increasing its canopy limit somewhat. Other changes are possible too (maybe we can get indoor consumption lounge licensing?); none are guaranteed.

Lastly, I see that in many sectors consumers are looking for experiences rather than purchases. Cannabis tourism will flourish: for example, consumption spaces, art classes, group tours, and activities that build community.

I believe legal cannabis will be a bright spot in Minnesota’s economy in 2026. We are filling vacant commercial space across the state and driving important tax revenue to the state’s coffers. In 2026, I hope we will see stigma shift into broader acceptance of cannabis as Minnesota’s newest legal industry. Disclaimer: These are Jen's insights and opinions and speak only as of the date made!

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