How to play cannabis stocks in 2026

Well, cannabis stocks ended 2025 on a high note with the advisor shares pure U.S. cannabis ETF outpacing the S&P 500 last year. Things really picked up in December when President Trump signed an executive order urging the DOJ to speed up the process of rescheduling cannabis to Schedule three, a category that includes substances eligible for FDA approval as medications. So what is next for this industry in 2026? Stormy now on this, we got Dan Aarons, advisor shares pure U.S. cannabis ETF portfolio manager. Dan, it is good to see you. So big picture. You call this, Dan, here you say the most consequential federal cannabis policy shift in more than 50 years. Maybe start there. Dan, explain that for us. Why is this cannabis rescheduling, Dan, such a big deal for investors? Well, we've been waiting on regulation for cannabis in the United States for some time now. And after it is a Schedule one drug on the DEA list listed along with drugs that have no medical use whatsoever and very dangerous narcotics, cannabis shouldn't be a Schedule one drug. It never should have been there. And we already have a multibillion dollar industry in the United States. It's been allowed to grow on a state by state basis with the Feds basically having a look the other way approach. But these U.S. cannabis stocks can't list on the exchanges. They can't bank. They pay very punitive taxes and we're badly in need of the regulation after it was promised back when Biden was first running for president. And we've been in this quagmire for four or five years now. And now it seems with the executive order that President Trump is definitely asking for the process to be complete, to make it Schedule three, open up business and open up a great deal of medical research as well. Dan, you talk about how rescheduling cannabis here, you say enables 280 tax relief. Can you walk us through that in plain English? What is it? What does that mean? What would it potentially mean for a cannabis company's financials? Yeah, many people don't understand this. And again, we have Canadian cannabis companies that don't face taxes like this and can actually list on the Nasdaq and the New York Stock Exchange. But here we're talking about U.S. cannabis companies, mostly traded OTC in the United States. They are saddled with this 280 tax, which taxes them as narcotics traffickers. They cannot deduct any business expenses, not a single business expense, not even payroll, certainly not rents and mortgages, anything like that. It's a huge, huge tax. So this rescheduling should pretty much automatically remove the 280. If they're no longer a schedule one narcotics trafficker, they're not going to face 280 taxes. We don't know yet what it's going to look and smell like if it's going to automatically remove past years of taxes that many of these companies haven't actually paid. They've been letting some bills build up. There's a lot of things to unpack. And some people worry that, well, Trump asked for it, but it's not actually signed yet. Once it gets signed, which we think is definitely coming, we don't know yet what kind of safe harbors there might be, because removing the 280 tax is one thing. But people in our industry also want banking. We want listing on major exchanges. We want a lot of guidance from the DOJ for what adult use programs are going to look like around the country. So there's a lot to be learned still while we're waiting for this rescheduling to actually actually be enacted. What would you say, Dan, that the big regulatory risks still are, though, that we should be aware of, that we should have on our radar as investors, that that could derail all the potential upside we're talking about here? Well, mostly we have a lot of fear right now because cannabis investors have been burned so many times over and over again over the last four or five years when we almost got to the finish line with safe banking. We almost got to the finish line with the Moore Act. A number of different proposals that have been written in Congress and failed. And again, a lot of politicians, very empty promises. Again, starting back when Trump versus Biden was on the ballot five years ago, it's ridiculous. So what we have right now is a lot of investors on the sidelines waiting until it's real, waiting until it's signed. And the risks, as you asked for, are that we don't know if it's going to have safe harbor for banking, and I think I'm of the opinion that this rescheduling makes safe banking a much easier, much less controversial issue for Congress to pass. But hey, we're dealing with politicians here. How fast are they going to move on that? Are they going to negotiate it a lot? So the risks are we don't know the timing. We don't know how quickly these US operating companies can get the ability to list on NASDAQ or the New York Stock Exchange. We don't know if it's going to include banking. I'm viewing a multi-leg process, a big pop probably when we get the rescheduling, then maybe some volatility, maybe some pullback, and then multiple steps of figuring out banking, uplisting, medical programs versus adult use, recreational programs. So a lot of volatility ahead. And investors shouldn't invest in something they don't understand, in something that they can't handle the risks and volatility of. And cannabis has been the most volatile place to invest in the past year. Even as you showed when you're introducing me that our fund outperformed the S&P 500 in the last calendar year, it did so with a great deal more, much more volatility. And just on your ETF there, ticker MSOS, it is up about 40 percent here over the past year. I'm just curious, Dan, what makes your ETF sort of distinct and different than other vehicles track in the space? No, thanks for asking that. Our fund, MSOS, is by far, by far the largest cannabis fund in existence. And investors like the liquidity that it offers there for the options that are listed on it. It's an actively managed fund. And some people question, what does actively managed mean? We're not tactical. We're not trading it every day or every week. Actively managed simply means it's not an index. And when you have a unique industry, unique sector like cannabis, I will very readily say you don't want to be in a market cap weighted index. The largest isn't always the best. Our fund is very top heavy, very heavily weighted in the largest, most liquid, most successful cannabis companies in the United States, and then has some much more immaterial exposure to some of the smaller companies that, frankly, might have more upside in this federal reform marketplace that we're looking at. So it's a it's a spread out fund and we're very low turnover, but actively managed in the fact that we're not following an index. Dan, great to have you on the show, as always. Thank you. Thank you.