The US Cannabis Sector at a Crossroads in Mid‑2026
The US cannabis industry finds itself at a pivotal moment where improving federal policy prospects clash with subdued market performance. After years of underperformance, many investors are watching closely for concrete policy shifts that could unlock the sector’s next growth phase.
How the Sector Performed in the First Half of 2026
According to Dan Ahrens, Managing Director, Chief Operating Officer, Chief Investment Officer and Portfolio Manager at AdvisorShares Investments, the broader US cannabis market has risen roughly 50 % over the past twelve months. This recovery follows a prolonged period of declining valuations that stretched back four to five years.
However, the momentum has stalled in 2026. Year‑to‑date returns have flattened, with Ahrens describing the trend as “treading water.” He notes that price movements are now driven more by anticipation of federal reforms than by underlying company fundamentals.
Rescheduling as a Market Catalyst
The most consequential development in 2026 has been the long‑awaited rescheduling of medical cannabis from Schedule I to Schedule III. This change has already produced tangible effects:
- Trulieve Cannabis (NYSE:TRLV) and Glass House Brands (NYSE:GLAS) both cited the rescheduling as a key enabler for their NYSE uplists, with Glass House stating the move would have been impossible beforehand.
- The shift has created a performance divergence between US and Canadian cannabis stocks. Ahrens’ AdvisorShares Pure Cannabis ETF (ARCA:YOLO), which holds a mix of US, Canadian and international names, has seen US‑focused holdings outperform Canadian peers over the past year, driven by expectations of further federal reform.
Administrative Law Judge (ALJ) hearings on rescheduling adult‑use cannabis concluded on July 15, 2026, and market participants anticipate a favorable outcome that could pave the way for broader federal acceptance.
Expert Perspectives on What Rescheduling Means
Austin Stevenson, Chief Revenue Officer of ACT LAB, emphasizes that a Schedule III classification does not equate to a “looser” regulatory environment. Instead, it demands greater accountability:
“Companies that benefit most will be those already investing in clean data, reliable testing, strong quality systems and transparent compliance.”
Matt Baumgartner, CEO of cannabis‑infused beverage company Keef, highlights the stability rescheduling could bring:
“Better access to lending and banking, relief from outdated tax burdens and a clearer federal posture would give operators more room to invest in growth, innovation, compliance and responsible expansion.”
He also suggests a tiered approach where milder products appear on mainstream shelves while high‑potency items remain in specialized dispensaries, noting that any federal framework must respect the existing state‑by‑state patchwork.
Banking Reform and Tax Outlook
Ahrens believes the progress on rescheduling will ease the path for the SAFER Banking Act, which has stalled in previous Congresses. Once rescheduling is solidified, he expects the legislation to move from a contentious political issue to a routine administrative fix.
Adam Stettner, CEO of FundCanna, cautions that introduction does not guarantee enactment, but notes the current bipartisan momentum and increased engagement from Senate Banking Committee Chairman Tim Scott as promising signs.
Looking further ahead, Ahrens points to two structural changes that could materially improve earnings:
- The elimination of Section 280E tax treatment, which currently forbids cannabis businesses from deducting ordinary business expenses. Removing this barrier would boost bottom lines significantly.
- The closure of the “hemp loophole” that allows billions of dollars of CBD and hemp‑derived products to flow through a lightly regulated channel. Ahrens estimates this shift could redirect substantial revenue into state‑licensed cannabis markets by November 2026.
These changes are expected to reshape the 2027 earnings landscape, making multi‑state operators (MSOs) the primary beneficiaries, given their cultivation, dispensary and state‑licensed assets.
Investor Takeaway
Despite the optimistic policy backdrop, sentiment remains split. A segment of informed cannabis investors expresses strong optimism about rescheduling and related federal reforms, while the broader market remains largely disengaged, awaiting definitive legal milestones before re‑entering the space.
Ahrens acknowledges that many investors still carry the psychological scars of the sector’s multi‑year downturn, describing a need for “treatment for PTSD” among those who have weathered the last cycle.
For those tracking the sector, the coming months will hinge on the ALJ outcomes, final rescheduling decisions, and progress on banking and tax reforms—each poised to provide multiple legs of support for a potential recovery.
Source: Here
