In December, President Donald Trump in an executive order told his attorney general to expediate a rulemaking process related to rescheduling marijuana as a less-dangerous drug.
Publicly traded cannabis stocks popped but have since eased back. The excitement and then caution has been a characteristic play for marijuana investors for some time, as they’ve learned to be skeptical amid the glacial pace of federal marijuana reform.
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Political gains among Democrats in 2020 and 2021 failed to produce meaningful federal legislative reform. And bills that would legalize marijuana or provide more incremental changes have languished in Congress. Meanwhile, the status quo costs the industry billions of dollars in tax benefits enjoyed in federally legal industries.
At the heart of Trump’s executive order is a rulemaking process to drop cannabis to a Schedule 3 drug from its current place as a Schedule 1 substance, alongside heroin and LSD.
How Reclassification Could Boost Cannabis Stocks
A rescheduling would be a huge deal for the state-legal cannabis industry. Companies that grow, manufacture and sell marijuana products, also known in the industry as “plant-touching” businesses, in states that have legalized it still technically are committing a crime under federal law, where the drug remains illegal. Because they are “trafficking” in a Schedule 1 substance, Internal Revenue Service Code Section 280E prohibits marijuana companies from taking certain tax deductions and credits that federally legal businesses enjoy.
A downgrade to Schedule 3 would remove that tax headache and pave the way for more institutional investment and traditional banking services.
“The reclassification to Schedule 3 will have a material impact on the valuation of cannabis stocks because of the elimination of IRS Code Section 280E,” says Matt Karnes, founder of cannabis industry financial analysis and research firm GreenWave Advisors. “Upon Schedule 3, many companies will turn to profitability, or post reduced losses, and the accrual or payment of 280E-related tax stops.”
Risks to Marijuana Stocks Even After Rescheduling
But there are also risks to the industry. “Without protections for state markets, a quick move to Schedule 3 could decimate existing state-regulated infrastructure and quickly devalue licensed assets in adult-use markets,” says Brandon Dorsky, cannabis industry lawyer and CEO of THC edibles company Fruit Slabs.
That could result in many pot stocks trading lower than they already are after a years-long slump, he says.
On the other hand, a rescheduling could improve acceptance of investing in marijuana companies and could bring more institutional capital to the market as well as trigger exchanges listing cannabis-related companies, he says.
Additionally, while rescheduling could ease research barriers and soften some enforcement risk, it does not fix banking at the federal level, interstate commerce restrictions or federal securities compliance issues, notes Braden Perry, partner at Kennyhertz Perry, a law firm that advises the medical marijuana industry.
So, there are more big wrinkles to iron out. Cannabis companies headquartered in the U.S., or anywhere that marijuana isn’t legal, cannot raise money in the stock market by listing on the New York Stock Exchange or Nasdaq if they grow, process or sell marijuana. (Many publicly traded cannabis companies are headquartered in Canada, where the drug is federally legal, or trade over the counter.) They also face expensive paperwork to access the federally regulated banking system. In addition, prohibition on interstate commerce means even large multistate operators face inefficiencies.
Why Now Could Be a Good Time to Buy Marijuana Stocks
All of these headwinds have caused public marijuana companies to lose a tremendous amount of value over the years, but that could provide bargain-hunting opportunities.
“Valuations are already quite bad,” says Paul Holmes, an analyst at BrokerListings.com. “They’ve fallen about 90% over the past five years, which shows how much the hype has died down and improved risk/reward for those who were previously concerned about valuations.”
With that in mind, here’s a look at seven ways to invest in the cannabis industry:
— Green Thumb Industries Inc. (ticker: OTC: GTBIF)
— Curaleaf Holdings Inc. (OTC: CURLF)
— Trulieve Cannabis Corp. (OTC: TCNNF)
— Tilray Brands Inc. (TLRY)
— Innovative Industrial Properties Inc. (IIPR)
— AdvisorShares Pure US Cannabis ETF (MSOS)
— AdvisorShares Pure Cannabis ETF (YOLO)
Green Thumb Industries Inc. (OTC: GTBIF)
Green Thumb Industries is a vertically integrated multistate operator, or MSO, and is one of the few cannabis stocks that has been consistently profitable.
Vertical integration means that Green Thumb sells marijuana products that it cultivates, processes and manufactures itself, rather than buying weed wholesale to mark up and sell in dispensaries. The business model gives Green Thumb more control over how its products are grown and made, so the company doesn’t have to pay a premium to buy marijuana from others. The model also creates operational efficiencies.
Karnes says Green Thumb is the only operator that has paid all of its taxes on a timely basis. He also points out that the company has been able to retain roughly 60% of its cash from operations on a cumulative basis from 2019 through the third quarter of this year.
Curaleaf Holdings Inc. (OTC: CURLF)
This multistate operator is another top performer when it comes to total sales, and is one of Holmes’ top picks. Like Green Thumb, Curaleaf has solid cash flow while still expanding in a disciplined way, he says. “These two operators combine operating profitability and reinvestment without blowing up their balance sheets,” he says.
Keep in mind, however, that, according to Karnes, Curaleaf has not generated enough cash from operations to satisfy its 280E obligation on a cumulative basis. So reclassification would particularly benefit this marijuana operator.
Trulieve Cannabis Corp. (OTC: TCNNF)
Holmes says another standout is Trulieve. “It has scale in Florida and a strong medical footprint that provides a recurring revenue base,” he says. “Most competitors lack that.”
In addition to Florida, Trulieve has leading market positions in Arizona and Pennsylvania. Trulieve is among the large multistate operators that generate cash flow from operations even after paying taxes, Karnes says. It’s been able to retain about 20% of its cash from operations, he explains.
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Tilray Brands Inc. (TLRY)
Because of U.S. federal illegality, American companies that grow, process or sell marijuana domestically can’t list on big U.S. exchanges.
That’s not the case for companies based in Canada, where the drug is federally legal, nor for U.S. companies that don’t earn money from plant-touching businesses in the U.S. Tilray falls into the latter category and has secured a coveted Nasdaq listing.
The company has diversified its global portfolio beyond recreational marijuana to include beverages, spirits, wellness products and consumer-connected lifestyle brands.
Innovative Industrial Properties Inc. (IIPR)
Adjusted operating income is a metric that can be helpful when comparing cannabis companies. This method adjusts reported income for changes in the fair value of biological assets and often excludes one-time items. This real estate investment trust, or REIT, has historically been strong in the adjusted operating income department.
The company acquires cannabis real estate locations and then leases them back to cannabis operators. That offers operators an alternative to specialty cannabis industry loans, which can be expensive.
Innovative Industrial Properties says it is the first publicly traded company on the NYSE to provide real estate capital to the regulated cannabis industry.
AdvisorShares Pure US Cannabis ETF (MSOS)
In an industry as complicated and risky as the legal cannabis business, some investors may want to avoid picking individual stocks.
They may favor exchange-traded funds, or ETFs, because these funds offer instant diversification among many companies all housed under a single ticker symbol.
MSOS is the biggest of the cannabis ETFs listed on VettaFi’s ETF database. MSOS’ assets under management stood at $881.3 million as of Dec. 29. It has an expense ratio of 0.78%, meaning investors will pay $78 in annual fees on a $10,000 investment. The fund’s literature says it is the first actively managed U.S.-listed exchange-traded fund with dedicated cannabis exposure focusing only on U.S. companies, including multistate operators.
“MSOS is the purest play on U.S. operators,” Holmes says. “A lot of the Canadian names you could argue are still overvalued or speculative, at least in a relative sense. Having a quality revenue base helps a lot.”
AdvisorShares Pure Cannabis ETF (YOLO)
ETFs can also offer geographic diversification in addition to company-specific diversification. As the globally diversified version of MSOS, YOLO has holdings from Canada, the U.K. and Israel. It holds some stocks outright but also uses swaps, and it holds part of its allocation in MSOS, which is focused on the U.S.
“YOLO is my secondary pick,” Holmes says. “Federal restrictions are naturally a big part of the sector. YOLO balances U.S. operators with ancillary businesses that aren’t handcuffed by those.”
Despite the diversification, investing in marijuana industry-specific themed ETFs still carries risk. “ETF diversification does not insulate against sudden policy reversals, enforcement shifts or capital-market constraints,” Perry says. “They do, much like any other industry ETFs, protect against (setbacks in) single-company issues, and not the industry as a whole.”
YOLO has an expense ratio of 0.51%.
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7 Best Marijuana Stocks and ETFs to Buy in 2026 originally appeared on usnews.com
Update 12/30/25: This story was previously published at an earlier date and has been updated with new information.
