Many developments in the bioeconomy depend on the use of genetically modified microorganisms (GMMs). GMMs are used in bioreactors to convert biomass into food, feed, and energy products. The recent judgment by the Court of Justice of the European Union on gene editing technologies has affected the use of GMMs. A heated debate has started on whether and under what circumstances GMMs should be considered genetically modified organisms. This kind of decision is extremely relevant, as it will have a strong effect on the innovation of sustainable supply chains in the bioeconomy. The question has been raised as to whether the regulatory policies on GMMs can be justified from a sustainability perspective and, in particular, whether they do not endanger the European Green Deal, the flagship policy strategy of the new European Commission under Ursula von der Leyen. This contribution will first provide an overview of GMMs and their importance for the development of the bioeconomy, followed by a theoretical framework for assessing investments in GMMs. The third part of the article includes a discussion of four scenarios for regulating GMMs in the future, derived from the EU legal environment. The potential implications of the scenarios are assessed by linking them with the benefits and costs of investments in GMMs, following a modified version of the model presented in Purnhagen and Wesseler (2019). The results show that reforms based on the current EU legal environment do not look very promising to further support the use of GMMs. This has important implications for reaching the objectives of the Green Deal, as more radical legal changes are needed for the success of the initiative.