INDIANA's STANDARDS FIRST CANNABIS PROGRAM

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Indiana stands uniquely positioned to become the first state to implement a

pharmaceutical-grade, standards-driven cannabis regulatory framework—leveraging its

unmatched pharmaceutical infrastructure anchored by Eli Lilly, world-class agricultural research

at Purdue University, and the hard-earned lessons of every neighboring state that legalized

before it. Federal rescheduling of cannabis from Schedule I to Schedule III, initiated by HHS in

2023 and advanced through a DEA proposed rule in 2024, creates a narrow but powerful

window for Indiana to leapfrog competitors. The convergence of rescheduling (and its

elimination of the punitive IRS Section 280E tax burden), ASTM D37 consensus standards

maturation, and Indiana's existing life sciences ecosystem forms the backbone of a

differentiated market-entry strategy. This briefing synthesizes research across ten critical

domains to support the comprehensive business plan.

Federal rescheduling is the catalytic event reshaping the

entire industry

The federal rescheduling process represents the single most consequential regulatory shift in

cannabis history. In August 2023, HHS Secretary Xavier Becerra formally recommended to the

DEA that cannabis be moved from Schedule I to Schedule III, following an extensive FDA

scientific review initiated by President Biden in October 2022. The DEA published its Notice of

Proposed Rulemaking on May 16, 2024, triggering a public comment period that generated over

40,000 submissions. Multiple parties requested an Administrative Law Judge hearing, which

the DEA granted in late 2024, significantly extending the timeline.

The Trump administration, which took office in January 2025, inherited this in-progress

rulemaking. During the 2024 campaign, Trump expressed support for state-level cannabis

autonomy and indicated openness to rescheduling. The user's reference to a December 17,

2025 executive order related to cannabis rescheduling is plausible given Trump's stated

positions and the political dynamics of late 2025, though specific details of this order require

verification against Federal Register records and White House presidential actions archives. If

such an executive order directed DOJ to expedite finalization, it would represent a significant

acceleration of the timeline, potentially putting a final rule on track for H1 2026.

The practical implications of Schedule III reclassification are transformative but bounded.

Schedule III does not legalize recreational cannabis at the federal level—state-legal

operations would still technically conflict with federal law absent additional legislation like theSTATES Act. However, it eliminates the most punishing regulatory barriers: it removes IRS

Section 280E's prohibition on business deductions, dramatically eases federally funded

research, reduces criminal penalties, and opens clearer FDA pathways for cannabinoid

therapeutics. For a state designing a new program, Schedule III creates the regulatory

architecture for a pharmaceutical-grade approach—cannabis becomes a substance that can be

prescribed, researched, and manufactured under established pharmaceutical frameworks.

The SAFER Banking Act, which would enable traditional financial institutions to serve cannabis

businesses, has been repeatedly introduced but not enacted as of the most recent confirmed

data. Banking reform remains a critical complementary priority to rescheduling.

Section 280E relief could unlock $2 billion annually and

transform business viability

IRS Section 280E, enacted in 1982, prohibits businesses trafficking in Schedule I or Schedule II

controlled substances from deducting ordinary business expenses. This provision has

functioned as a de facto punitive tax on state-legal cannabis operators, pushing effective tax

rates to 40–80% of gross profit versus the standard 21% corporate rate. The cannabis industry

has collectively paid an estimated $10+ billion in excess federal taxes since state legalization

began.

The text of 280E specifically references "schedule I and schedule II" substances. If cannabis

moves to Schedule III, 280E automatically ceases to apply prospectively—no additional

legislation is required. Industry-wide annual savings are estimated at $1.5–2.0 billion,

according to analyses from Whitney Economics, the National Cannabis Industry Association,

and Viridian Capital Advisors. For individual multi state operators, the impact is dramatic:

companies like Curaleaf and Green Thumb Industries, which have reported effective tax rates of

60–80%, would see profitability improve by 20–40% overnight.

The retroactive question is more complex and legally contested. Some cannabis tax attorneys

argue that businesses could file amended returns for open tax years (generally three years, or

six if more than 25% of gross income was omitted) to claim previously denied deductions. The

IRS has not issued formal transitional guidance addressing the rescheduling-to-280E

relationship, creating significant uncertainty. Leading cannabis law firms—including Vicente

LLP, Harris Bricken, and Greenspoon Marder—have been advising clients to file protective

refund claims, maintain detailed expense records, and continue complying with 280E until

rescheduling is finalized. Several Tax Court cases remain pending, including challenges building

on precedent from Harborside Health Center v. Commissioner and Standing Akimbo v. United

States.

For Indiana's business plan, the 280E elimination timeline is critical. A new Indiana cannabis

program launching post-rescheduling would never operate under 280E constraints—givingIndiana licensees a structural profitability advantage from day one that operators in mature

markets spent years suffering without.

Indiana's political landscape is shifting but remains conservative

Indiana is one of the most restrictive states in the nation on cannabis. It has no medical

marijuana program, no adult-use legalization, and no decriminalization at the state level,

though limited hemp-derived CBD became legal following the 2018 Farm Bill and state

legislation (SB 516, 2019). Cannabis possession remains a Class B misdemeanor (up to 180

days in jail), escalating to a Level 6 felony for amounts exceeding 30 grams.

Governor Mike Braun, inaugurated January 2025 after serving as U.S. Senator, brings a

nuanced record. As a senator, he co-sponsored the STATES Act, a federalism-based bill that

would let states set their own cannabis policies without federal interference—a significant signal

for a conservative Republican. He supported hemp legalization through the 2018 Farm Bill and

indicated openness to studying medical marijuana during his gubernatorial campaign, though he

stopped short of endorsing full legalization. His positions as governor on specific cannabis

legislation require current verification.

The Indiana General Assembly, where Republicans hold supermajorities in both chambers, has

repeatedly seen cannabis bills introduced and stall. Notable legislative champions include Rep.

Jim Lucas (R-Seymour), a vocal advocate for full legalization, and Sen. Greg Taylor

(D-Indianapolis), who has introduced medical cannabis bills in multiple sessions. The 2023

interim study committee on public health examined cannabis policy—a small but meaningful

step. Bills in recent sessions have addressed medical marijuana (SB 0263, SB 0007), adult-use

legalization (HB 1039), and hemp-derived cannabinoid regulation. Current 2025-2026 session

bills should be tracked through iga.in.gov.

Public opinion strongly favors reform. Ball State University Bowen Center polling has found

approximately 70–75% of Indiana voters support some form of legalization, with medical

marijuana polling at 80%+ support. However, Indiana lacks a ballot initiative process, meaning

legalization must pass through the resistant legislature—a structural barrier the business plan

must address through strategic framing.

The Indiana Chamber of Commerce has been cautious but increasingly pragmatic,

acknowledging the economic arguments for legalization while raising concerns about workplace

safety and federal-state conflicts. The key opposition coalition includes the Indiana Prosecuting

Attorneys Council, law enforcement associations, Drug Free Indiana, and the Indiana Family

Institute.

A $30+ billion US market with massive upside from rescheduling

The US legal cannabis market reached an estimated $30–33 billion in 2024, with

adult-use/recreational accounting for roughly 70–75% of revenue and medical programs

comprising the remainder. Growth has decelerated from the early hypergrowth phase (15–20%

CAGR from 2018–2024) to a projected 8–14% CAGR through 2030, depending heavily on

federal policy. New Frontier Data projects the market could reach $72 billion by 2030 in an

optimistic federal reform scenario, while BDSA estimates a more conservative $46–53 billion.

As of late 2024, 24 states plus DC had legalized adult-use cannabis, with 38–40 states

operating medical programs. The market is characterized by severe price compression in

mature markets (wholesale flower prices in Michigan fell from $3,000–4,000/lb to under

$1,200/lb), while newer markets like Ohio, New York, and New Jersey drive growth.

Multistate operator valuations tell the story of an industry awaiting its catalyst. Top MSOs trade

at dramatic discounts to comparable consumer companies. These valuations reflect the "cannabis discount"—most MSOs trade 60–80% below 2021 peaks due to regulatory overhang. Comparable consumer goods companies trade at 15–25x

EV/EBITDA. Viridian Capital Advisors estimates rescheduling could trigger $20–50 billion in

institutional capital inflows over 3–5 years, as major exchange uplisting (NYSE/NASDAQ)

becomes feasible, traditional banks begin lending, and mutual funds and pension funds gain

allocation clearance. Analyst models suggest MSO valuations could re-rate to 8–15x EV/EBITDA, implying 100–300% upside.

The MSOS ETF (AdvisorShares Pure US Cannabis ETF) has been the primary barometer of

sector sentiment, experiencing sharp volatility correlated with federal reform news cycles. The

sector's "crypto winter" parallel—a prolonged downturn following speculative

euphoria—positions rescheduling as the structural catalyst for a significant recovery.

ASTM D37 has built the standards infrastructure a pharmaceutical-grade program needs

ASTM International's Committee D37 on Cannabis, established in 2017, has published

approximately 25–30 consensus standards covering the full cannabis supply chain—making it

the most comprehensive standards program in the industry. These standards span analytical

testing (potency, pesticides, heavy metals, residual solvents, terpenes, moisture content, water

activity, microbiological contaminants), quality management systems, packaging and labeling,

chain of custody, laboratory quality assurance, cultivation practices, and personnel training.

Key published standards include D8196 (cannabinoid content determination), D8197 (heavy

metals), D8230 (pesticides), D8282 (residual solvents), D8379 (microbiological testing), D8300

(laboratory QA), and D8347 (packaging guide). The committee's subcommittee structure covers

quality management, flower, concentrates, edibles, industrial hemp, laboratory operations,

packaging, security, and—critically for Indiana's workforce strategy—personnel training and

assessment.

The FOCUS Foundation (Foundation of Cannabis Unified Standards) operated as the bridge

between ASTM's consensus standards and state regulatory adoption. FOCUS worksed directly

with state regulators to incorporate D37 standards into cannabis regulations, publishing

implementation guides and model regulatory language. States that have adopted or referenced

ASTM D37 standards include California, Nevada, Michigan, Connecticut, New York, New

Jersey, Illinois, and Virginia—though no state has comprehensively mandated the full D37

suite.

Third-party accreditation for cannabis testing laboratories centers on ISO/IEC 17025, with

accreditation bodies including A2LA, PJLA, and ANAB offering cannabis-specific scopes.

Multiple states now require or strongly encourage ISO 17025 accreditation. Complementary

standards efforts from AOAC International (analytical method performance), USP

(pharmaceutical monographs), and NSF International (GMP frameworks) enrich the ecosystem.

Indiana's opportunity is to be the first state to comprehensively mandate the full ASTM

D37 standards suite, combined with ISO 17025 laboratory accreditation and

pharmaceutical GMP requirements, creating a regulatory framework that no other state has

achieved. This "standards-first" approach addresses conservative legislators' safety concerns

while creating a quality premium that attracts pharmaceutical-grade investment.

Indiana's agricultural assets are underutilized but strategically valuable Indiana's hemp program, administered by the Office of Indiana State Chemist (OISC) at

Purdue University, experienced the national pattern of boom and contraction. Licensed acreage

peaked at roughly 7,000–12,000 acres in 2019 before contracting significantly to an estimated

1,000–3,000 acres by 2023–2024, with perhaps 100–200 active licensed growers. The

contraction was driven by CBD market over saturation, price collapse, and processing

bottlenecks—the same dynamics that affected hemp nationwide.

Purdue University's Hemp Project has been a national leader. The program conducted

extensive variety trials for grain, fiber, and CBD hemp, published critical Extension research on

planting density, fertilizer optimization, harvest logistics, and economic modeling. Former hemp

Extension specialist Dr. Marguerite Bolt was the first such specialist in the US. The project's

research on fiber hemp—covering biomass yield, fiber quality, and processing methods—is

particularly relevant as the industry shifts from CBD-dominant production toward fiber and grain

applications with more sustainable market fundamentals.

Beck's Hybrids, the largest family-owned retail seed company in the US (headquartered in

Atlanta, Indiana), has not publicly entered hemp seed genetics as of the most recent available

information. Beck's expertise in corn, soybean, and wheat seed genetics, combined with their

distribution network and precision agriculture investments, would make them a formidable

player if they chose to enter the hemp or cannabis seed market. Their potential involvement

represents a strategic opportunity for the business plan rather than a confirmed asset—requiring

direct engagement.

Indiana's hemp processing infrastructure remains the critical bottleneck. The state lacks

large-scale fiber decorticating facilities, and many CBD extraction operations scaled back during

the market contraction. However, Indiana's broader agricultural infrastructure—grain elevators,

processing facilities, cold chain logistics—provides a foundation that could be adapted. Elanco

Animal Health (Greenfield, IN) has explored hemp applications in animal health, and Corteva

Agriscience maintains an Indianapolis presence that could intersect with cannabis agricultural

science.

Eli Lilly provides the credibility anchor no other state can match.

Eli Lilly, headquartered in Indianapolis since 1876, has grown to a market capitalization of

approximately $700–800 billion (as of late 2024/early 2025), ranking among the top 10 most

valuable companies globally and vying with Novo Nordisk for the world's most valuable

pharmaceutical company. Revenue was projected to exceed $40 billion in 2024, driven by

blockbuster GLP-1 receptor agonists Mounjaro/Zepbound (tirzepatide), with peak annual sales

projections of $25+ billion for the franchise alone.Lilly has not made public statements endorsing or opposing cannabis legalization—a neutral

posture typical of major pharmaceutical companies. The company has no publicly announced

cannabinoid drug development programs. However, two historical and strategic dimensions are

significant.

First, Eli Lilly was a producer of cannabis-based medicines before prohibition. In the late

19th and early 20th centuries, Lilly manufactured and sold Cannabis indica and Cannabis

Americana tinctures—standard pharmaceutical products listed in the U.S. Pharmacopeia until

the Marihuana Tax Act of 1937. This historical connection, while not a current commercial

relationship, provides compelling narrative framing for a pharmaceutical-grade cannabis

program in Lilly's home state.

Second, Schedule III reclassification creates direct opportunities for pharmaceutical companies:

easier federally funded research, clearer FDA pathways for cannabinoid therapeutics, patent

opportunities for cannabinoid-based medicines, and potential insurance coverage for Schedule

III cannabis products. Lilly's deep expertise in neuroscience (they developed Prozac),

metabolic disease, and pain management intersects with cannabinoid therapeutic areas. The

Indianapolis pharmaceutical ecosystem—including Roche Diagnostics, the Indiana

Biosciences Research Institute, 16 Tech Innovation District, and BioCrossroads—provides the talent density and research infrastructure to support cannabinoid research at scale.

The strategic value of Lilly as an anchor is primarily credibility and workforce. Indiana has the

deepest bench of pharmaceutical scientists, regulatory affairs specialists, quality assurance

professionals, and GMP-trained manufacturing workers of any potential new cannabis state. A

standards-first program leverages this existing human capital rather than building from scratch.

Neighboring states offer a playbook of what to do—and what not to do!

Indiana is surrounded by operational cannabis markets, each providing critical lessons:

Michigan is the cautionary tale. With 1,400+ retail licenses and no caps on licensing, the state

experienced severe oversupply that crashed wholesale flower prices from $3,000–4,000/lb to

under $1,200/lb. Total sales peaked around $3.0–3.1 billion in 2023 before declining to an

estimated $2.7–2.9 billion in 2024. Lab shopping and inconsistent test results have been

persistent quality issues despite ISO 17025 requirements. Michigan demonstrates the

destructive consequences of unlimited licensing and inadequate quality controls.

Illinois pioneered legislative legalization with comprehensive social equity provisions through its

2021 Cannabis Regulation and Tax Act. The market generated approximately $1.8–2.1 billion

annually with over $500 million in tax revenue. However, its social equity program—despite being nationally recognized in design—was heavily criticized for slow implementation, with 185

authorized social equity licenses delayed by litigation and funding barriers. Illinois shows that

strong standards and high taxes can sustain a premium market, but that social equity requires

dedicated funding mechanisms to succeed.

Ohio launched adult-use sales on August 6, 2024 through existing medical dispensaries,

generating over $100 million in the first months. The Division of Cannabis Control oversees

approximately 120–130 dispensaries. Legislative modifications to the voter-approved Issue 2

created political tension. The combined market is projected to reach $2–3 billion at maturity.

Ohio demonstrates the advantage of building on existing medical infrastructure.

Kentucky signed medical cannabis legislation (SB 47) on March 31, 2023, with sales projected

to begin January 2025. The program is restrictive—initially prohibiting smoking of flower.

Missouri launched adult-use sales in February 2023 and quickly reached $1.5+ billion in

first-year sales through a limited-license model. Minnesota legalized through legislation in May

2023 but adopted a deliberately slow, phased rollout with retail sales not expected until 2025.

No state has implemented a comprehensive "standards-first" or "pharmaceutical-grade"

approach. Connecticut and Maryland included relatively detailed quality provisions in their

legalization frameworks, and several states reference ASTM D37 methods for testing. But no

state has mandated the full ASTM D37 standards suite, required pharmaceutical GMP

compliance across the supply chain, or built its entire regulatory framework around consensus

standards and third-party accreditation. This represents Indiana's clearest differentiation

opportunity.

Indiana's late-mover advantages include learning from every predecessor's mistakes,

implementing highest-quality standards from inception, leveraging pharmaceutical infrastructure,

and designing a purpose-built framework. The disadvantages—ongoing revenue leakage to

neighboring states (estimated at hundreds of millions annually), established competitor scale,

workforce migration to legal states, and dissipated novelty premiums—reinforce the urgency of

action.

Cannabis workforce development is a rapidly growing but fragmented field.

The legal cannabis industry supports an estimated 400,000–440,000+ full-time equivalent

jobs nationally, according to the Leafly annual jobs report, with projections suggesting

500,000–1,000,000+ jobs by 2030. The workforce spans cultivation technicians, extraction

specialists, analytical chemists, dispensary staff, compliance officers, supply chain managers,

and corporate functions.Academic cannabis programs have proliferated across the country. Notable programs include Northern Michigan University's Medicinal Plant Chemistry B.S. (one of the first four-year programs), the University of Maryland's Cannabis Science and Therapeutics M.S., Colorado State University Pueblo's Cannabis Biology and Chemistry B.S., and Stockton University's cannabis studies minor. Community colleges including Clackamas (Oregon), Cuyahoga (Ohio), and multiple California institutions offer certificates and coursework.

Ivy Tech Community College, Indiana's statewide system and the largest singly accredited

community college in the nation with 40+ locations, does not currently offer cannabis-specific

programs—a direct consequence of Indiana's prohibitive legal environment. However, existing

programs in agriculture, horticulture, laboratory science, biotechnology, supply chain

management, HVAC technology, and quality assurance provide immediately adaptable

foundations. Ivy Tech's statewide reach makes it the natural platform for rapid workforce

deployment once legalization enables curriculum development.

Illinois, New York, New Jersey, and California have all incorporated workforce development

mandates into their social equity provisions, creating funded training pathways. The USDA's

National Institute of Food and Agriculture has funded hemp-specific workforce development

through research grants. ASTM International itself offers training on cannabis standards

implementation—directly relevant to a standards-first program.

Conclusion: Indiana's window of strategic advantage...The research converges on a single strategic insight: Indiana First pharmaceutical-grade cannabis regulatory framework. 

The convergence of federal rescheduling (eliminating 280E and enabling legitimate pharmaceutical research), ASTM D37 standards maturation (providing ready-made consensus standards for comprehensive adoption), Eli Lilly's pharmaceutical anchor (lending credibility and workforce depth), Purdue's agricultural research leadership, and the documented failures of neighboring states' approaches creates a compelling case for a standards-first program.

The business plan should emphasize three novel insights from this research. 

First, the280E-free launch advantage—Indiana operators entering post-rescheduling would never face the tax burden that crippled early operators in every other state, making Indiana licenses

immediately more valuable. 

Second, the pharmaceutical credibility arbitrage—by mandating

standards no other state requires, Indiana creates a quality premium that justifies premium

pricing, attracts institutional capital, and appeals to the conservative legislature's safety-first

instincts. 

Third, the agricultural renaissance framing—positioning cannabis alongside corn,

soybeans, and specialty crops through Purdue research and potential Beck's Hybrids

engagement transforms the narrative from drug policy to economic development and

agricultural innovation.

The critical uncertainties to resolve are the specific provisions of the December 2025 executive order, Governor Braun's current legislative posture, the 2025-2026 session bill landscape, and the precise rescheduling finalization timeline. These should be verified against current Federal Register records, the Indiana General Assembly website (iga.in.gov), and the Governor's office communications before finalizing the business plan.