Three trends affecting the US cannabis industry in 2026

As the US cannabis industry enters 2026, market dynamics are reshaping the way businesses operate and compete.

From licensing activity to price behavior, the patterns that emerged in 2025 provide a clear picture of where the regulated market is settling – and where pressures are still mounting.

Below are some numbers that help explain the state of the cannabis industry.

The tax exemption of 280E will greatly increase the profit of the seller, reinvestment

Notorious Internal Revenue Service Code Section 280E continues to crack down on marijuana-related businesses, often wiping out sellers’ profits even in strong markets. However, President Donald Trump’s marijuana deregulation order promises long-awaited tax relief for marijuana businesses.

In most states, the 280E tax burden exceeds the seller’s net profit, effectively eliminating it. In several markets, the average cannabis store is already operating at a net loss before accounting for expansion, reinvestment or other growth efforts.

The law also caps significant fees at the store level.

According to modeling from Seattle-based Headset, 280E means between $400,000 and more than $800,000 in additional tax liability per store each year. That reduces the operator’s ability to invest, rent or weather downgrades.

280E means that operators cannot deduct capital costs such as payroll, rent and compliance as business expenses on their corporation tax returns. That structure hits hard when margins are thin.

The impact is worst in competitive, mature markets where price pressure is greatest. In those states, retailers face a huge disparity between profits and taxes, as consumer demand remains strong.

Licensing trends vary by category

The number of active cannabis business licenses in the United States dropped to 37,555 in the most recent quarter. That’s down about 1% from the previous quarter, extending a decline that has been ongoing since late 2022.

Over the past two years, the total number of active licenses across the country has dropped by 13%, underscoring the long-term deal in the regulated cannabis industry.

Marijuana farmers accounted for a lot of losses during that time. Cultivation licenses decreased by 24%, or more than 5,000 permits, from the third quarter of 2023.

In comparison, the number of commercial licenses remained very low, decreasing by 330.

The decline in cultivation licenses may be a positive development, as some industry analysts believe the US marijuana market is oversaturated.

At the end of the third quarter, there were about 16,000 active cultivation licenses in the United States, compared to about 11,600 retail or dispensary licenses.

Some licenses may support more than one environment, but the imbalance is still noticeable.

In contrast, the Canadian market is heavily weighted towards sales. The country has an estimated 4 to 1 number of licensees to sell cultivation licenses, with more than 4,000 sales licenses and less than 1,000 cultivation licenses (910).

Commercial cannabis discounts are still on the rise

Marijuana sellers are relying heavily on discounts to deliver marijuana again in 2025 as competition remains fierce in many markets.

Promotions and discounts have become a standard marketing tactic, driven by the need to sustain foot traffic and clear aging inventory.

In many states, the average monthly discount for cannabis flowers has increased during the year.

Washington state recorded the highest cannabis flower discounts in the nation at 39%. This may be related to the fact that the state also has a very high tax burden, with a 37% tax on retail sales.

The struggling Arizona market followed with the second highest average discount rate of 35%, but peaked at 37% in April.

Expect discounts to continue through 2026, as retailers favor short-term sales volume and customer retention over strong pricing power.

Andrew Long can be reached at andrew.long@mjbizdaily.com.