U.S. reform of federal medical marijuana laws is giving a boost to cannabis stocks, and there appears to be more upside potential as the government also considers reclassifying recreational marijuana as a less dangerous drug.
Over the past 52 weeks, the AdvisorShares Pure US Cannabis ETF (ticker: MSOS) has more than doubled. Part of the exchange-traded fund’s gains can be attributed to an April move by the Trump administration to drop state-licensed medical marijuana to a Schedule 3 drug from a Schedule 1 substance, a classification that includes heroin and LSD. At the time of the shift, the U.S. government also said it would initiate an expedited administrative hearing process to consider the broader rescheduling of marijuana beginning June 29.
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Increasing societal acceptance aside, companies that grow, manufacture and sell marijuana products for recreational use — also known in the industry as “plant-touching” businesses — are still technically committing a crime under federal law, where the drug remains illegal for recreational use. 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.
Additionally, 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 (MSOs) face inefficiencies.
A downgrade to Schedule 3 for recreational marijuana would remove that tax headache and pave the way for traditional banking services and more institutional investment.
Meanwhile, that’s already happening on the medical marijuana front. “The rescheduling of medical cannabis to Schedule 3 is a historic milestone that improves the credit profile of operators, reduces the 280E tax burden and begins to normalize how institutional investors view the sector,” says Anthony Coniglio, CEO of NewLake Capital Partners (OTC: NLCP), a cannabis real estate investment trust. “For investors with the patience to hold through near-term volatility, the setup heading into 2027 looks meaningfully better than where the industry has been.”
With that in mind, here’s a look at seven top cannabis industry stocks and exchange-traded funds, or ETFs:
— Green Thumb Industries Inc. (OTC: GTBIF)
— Trulieve Cannabis Corp. (TRLV)
— Cresco Labs Inc. (OTC: CRLBF)
— Verano Holdings Corp. (OTC: VRNOD)
— Innovative Industrial Properties Inc. (IIPR)
— AdvisorShares Pure US Cannabis ETF (MSOS)
— Amplify Alternative Harvest ETF (MJ)
Green Thumb Industries Inc. (OTC: GTBIF)
Matt Karnes, founder of cannabis industry financial analysis and research firm GreenWave Advisors, expects free cash flow to accelerate given the elimination of 280E as it pertains to medical businesses.
But some marijuana companies have already been able to fund their 280E obligations through existing cash flow, positioning them particularly well as federal tax laws change toward the cannabis industry.
Green Thumb Industries is one of those companies. It is a vertically integrated 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.
Trulieve Cannabis Corp. (TRLV)
With federal reform underway, Karnes expects the cannabis industry will see more uplisting to major stock exchanges.
As rescheduling improves acceptance of investing in marijuana companies, the uplistings could bring more institutional capital to the market, boosting stock prices.
Trulieve, another vertically integrated MSO, is leading the way on uplisting after the medical rescheduling. The company spun off its recreational marijuana business and listed its medical-only business on the NYSE in June.
The company already had a strong medical marijuana business in Florida, Arizona and Pennsylvania. Trulieve also has a history of being able to fund its tax obligations through cash flow instead of raising capital.
Cresco Labs Inc. (OTC: CRLBF)
This vertically integrated marijuana company is operational in eight states, with 13 production facilities and 71 dispensaries. Its strategy is dependent on consumer brands and retail operations through its Sunnyside dispensaries.
In May, the company registered state-licensed medical cannabis facilities with the U.S. Drug Enforcement Administration, a move the company said was a milestone for the company and industry.
“For the first time, the work we do is federally recognized — advancing normalization, reducing uncertainty and reinforcing safe, responsible access to medicine for patients across the country,” Charlie Bachtell, CEO of Cresco Labs, said in a statement at the time.
Karnes adds that Cresco Labs has also been generating enough cash flow to fund its 280E bill.
Verano Holdings Corp. (OTC: VRNOD)
For investors trying to gain exposure to weed through cannabis stocks, large MSOs offer advantages for those willing to buy shares and hold them for what will likely be a considerable time.
Larger companies have an advantage over smaller ones when it comes to surviving a tough regulatory environment. They are also well positioned to buy other distressed competitors and grow through acquisitions. Karnes expects more industry consolidation as federal reform moves forward.
Verano has a history of being acquisitive, and the MSO is active in 13 states, with more than 150 company-owned dispensaries and 15 cultivation and production facilities.
According to Karnes, Verano has generated enough cash flow from operations to foot its 280E tab on a cumulative basis from 2019 through 2025.
Innovative Industrial Properties Inc. (IIPR)
This real estate investment trust, or REIT, 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.
Investing in this REIT gives investors exposure to a diverse footprint of MSOs. The company owns 110 properties with 8.9 million rentable square feet in 19 states. Nearly 90% of its tenants are MSOs, with 65% of them being publicly traded.
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 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 has nearly $1 billion in assets under management. It has an expense ratio of 0.78%, meaning investors will pay $78 in annual fees on a $10,000 investment.
Amplify Alternative Harvest ETF (MJ)
Investors wanting to gain exposure to the global cannabis industry can consider this offering from Amplify. As the second-biggest cannabis ETF in the database, the fund is globally focused, passively managed and tracks the Prime Alternative Harvest Index. That index tracks companies benefiting from medicinal and recreational marijuana legalization initiatives.
The fund has an expense ratio of 0.75% and assets of $123 million.
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7 Best Marijuana Stocks and ETFs to Buy in 2026 originally appeared on usnews.com
Update 06/17/26: This story was previously published at an earlier date and has been updated with new information.
