It’s not happening anytime soon.

But for the $25 billion state-regulated cannabis industry and the $47 billion underground and unlicensed pot economy, the dream of federal legalization has remained a nightmare. The legal marijuana economy is broken. Thanks to continued prohibition, folks cannot sell or distribute product over state lines and profits are crushed by a punitive federal tax rate created for drug traffickers.

The stock prices of cannabis companies are down 75% since 2020, when the outlook for legalization was positive. After 2022 ended without any significant reform, reality set in: despite cannabis legalization being hugely popular with voters—more Americans voted for marijuana legalization in Arizona (60%) than for Biden (49.4%) and more people in Mississippi voted to legalize medical marijuana (73%) than supported Trump (58%) during the 2020 election—it is not a political priority inside the Beltway.

Morgan Paxhia, who cofounded San Francisco-based cannabis investment firm Poseidon, which has $160 million in assets under management, was lobbying in Washington, D.C. late this spring when he finally accepted that America’s prohibition on pot is not going to end soon. Any hopes that the Biden Administration will remove marijuana from the list of controlled substances is “dead in the water,” according to the politicians and staffers Paxhia met with. “My feeling of federal legalization is that it could be 10 years or more,” he says.

The largest cannabis companies in America, including Curaleaf ($1.3 billion, 2022 sales) and Trulieve, which booked $1.2 billion in revenue last year, have stopped planning for federal legalization. Instead, they’re banking on modest progress. “We’ve been incorrect on all of our previous prognostications and we’re not going to be guaranteeing any timing at this point,” says Matt Darin, the CEO of Massachusetts-based Curaleaf. “These things happen incrementally, and I think the industry needs to be comfortable with that notion.”

Curaleaf, which has a $2.2 billion market cap after seeing its stock price drop 41% since last summer, has adopted a strategy focused on state reform, not federal legalization. “We’re not working off of any timelines for these things occurring,” Darin says. “We need to continue to do what we've done for the last 10 years, which is still operate in this state-by-state environments.”

Kim Rivers, CEO of Florida-based Trulieve, now believes that federal legalization will be “incremental” and will take years. She contends that the SAFE Banking Act, which would make it easier for cannabis companies to access the financial system, is the most likely reform to be passed at the federal level during Biden’s remaining term. Rivers, like many other CEOs, does not believe there is enough political capital to usher in de-scheduling or federal legalization right now. “We’re still stuck on first base,” she says.

The same buzzkill mentality is pervasive among investors. Jason Wild, a former pharmacist who launched cannabis hedge fund JW Asset Management ($600 million AUM) and is currently the chair of Canada-based cannabis operator TerrAscend, which has 35 dispensaries across California, Canada, Maryland, Michigan, New Jersey and Pennsylvania, laughs when asked if he incorporates federal reform in his business strategy. “We certainly do not model for federal legalization,” says Wild. “And, for that matter, we don’t model for incremental change. It’s a dangerous strategy. From a balance sheet perspective, you need to act like it’s not going to happen.”

Marijuana is still illegal federally for a very simple reason. “Politicians just don't really care,” says Paul Armentano, the deputy director of nonprofit legalization advocacy group NORML. “It's just not on their priority list. If it were, they would address it. They don't because it isn't. It’s simple stuff.”

Over the last 30 years, 23 states have legalized recreational use and 38 now allow some form of medical marijuana, but the Senate has never held a single vote on legislation to decriminalize—or legalize—cannabis, despite the fact that some 88% of the American public believe it should be legal.

As for President Biden’s request for HHS to review marijuana’s classification as a Schedule I narcotic, Armentano says he’s been through multiple re-scheduling petitions, which have all been denied by the Drug Enforcement Administration. The DEA has final approval over any rescheduling petition.

It gets more bureaucratically tangled from there. One of the key benchmarks marijuana must pass is whether it has recognized medical use in the United States. The only acceptable definition of medical utility in the U.S., according to the federal government, is approval by the U.S. Food and Drug Administration. “That's the federal government's position: no medical utility absent FDA approval,” Armentano says. “There's not going to be FDA approval of cannabis, at least not botanical raw plant cannabis.”