Cannabis Stocks Are Heating Up Again — But Are They Still a Bargain?

The Sector Is Moving — But Is It Moving Enough?

Cannabis equities opened June in a familiar position: showing signs of life without fully breaking out. The AdvisorShares Pure US Cannabis ETF (MSOS) sits at $5.01, up 1.83% on the day. IM Cannabis (IMCC) leads the NASDAQ cannabis names at $0.304, up 5.56%. Trulieve Cannabis (TCNNF) carries a $9.29 close from Friday, down 3.99%.

These are not the numbers of a sector on fire. They are the numbers of a sector that has been given the most significant federal catalyst in its history — the rescheduling of medical cannabis from Schedule I to Schedule III on April 22 — and is still trying to figure out what it is worth.

The question for investors in June 2026 is whether cannabis stocks are a bargain hiding in plain sight or a value trap with structural headwinds that rescheduling alone cannot fix.

What Rescheduling Actually Changed

The April 22 order did two concrete things for cannabis businesses:

280E Relief: Section 280E of the Internal Revenue Code prohibited cannabis businesses from deducting ordinary business expenses because marijuana was a Schedule I substance. That prohibition no longer applies to products in Schedule III. For multistate operators (MSOs) that have been paying effective tax rates of 60% to 80%, the shift to normal corporate tax treatment is transformative. Analysts estimate that 280E relief alone could double the free cash flow of major MSOs.

Legitimacy Signal: The federal government officially recognizing cannabis as a substance with accepted medical use — the defining characteristic of Schedule III — is a signal to institutional investors, banking partners, and mainstream financial platforms that the sector is no longer regulatory pariah status.

What rescheduling did not do is equally important. Recreational cannabis remains illegal at the federal level. The broader rescheduling hearing starting June 29 will determine whether all marijuana moves to Schedule III, but that proceeding could take months and is already facing three consolidated legal challenges. State-by-state legalization remains the operative framework for adult-use markets.

The Robinhood Effect

About a month after federal rescheduling, Robinhood began offering trading access to major U.S. cannabis MSOs. Green Thumb Industries (GTBIF), Curaleaf Holdings (CURLF), and Trulieve Cannabis (TCNNF) joined Glass House Brands, which had listed on Robinhood in October 2025.

The symbolic importance of Robinhood access exceeds its near-term trading impact. Most retail investors who wanted cannabis exposure already had ways to buy OTC stocks through other brokerages. But Robinhood's user base skews young, mobile-first, and culturally aligned with cannabis normalization. Having MSO stocks appear alongside Apple and Tesla in the same app is a normalization event that introduces the sector to investors who might never have opened an OTC trading account.

The liquidity impact will take time to materialize. Cannabis stocks remain thinly traded compared to mainstream equities, and wider retail access should gradually increase daily volumes and tighten bid-ask spreads — both positives for share price discovery.

The Bull Case: Still Cheap by Any Standard Metric

By early 2026, cannabis stocks trade at valuations that would look inexpensive in almost any other high-margin industry. Here is the case that the sector remains undervalued:

Revenue Multiples: Major MSOs trade at 1x to 3x revenue, compared to 5x to 10x for comparable consumer brands and 10x+ for high-growth healthcare companies. Even accounting for cannabis-specific regulatory risk, these multiples reflect deep skepticism that is arguably overdone.

280E Cash Flow Expansion: The full impact of 280E relief has not yet flowed through financial statements. As MSOs file amended returns and begin recognizing normalized tax rates, reported profitability should improve dramatically. Investors who wait for the improved numbers to appear on quarterly earnings reports may be buying at higher prices.

Institutional Unlock (Eventually): Most large institutional investors — pension funds, mutual funds, insurance companies — still cannot or will not hold U.S. cannabis stocks because of federal custody restrictions and exchange listing rules. If broader rescheduling proceeds and cannabis companies eventually uplist to NYSE or NASDAQ, the institutional capital that enters the sector could dwarf current retail buying.

State Expansion: Pennsylvania, with 72% public support for legalization and a $5.1 billion budget deficit, is widely viewed as the next major legalization domino. Florida has a cannabis legalization initiative on the November 2026 ballot. Each new state market expands the total addressable market for MSOs with multi-state footprints.

The Bear Case: Structural Problems Rescheduling Cannot Fix

The case for caution is equally concrete:

Oversupply and Price Compression: Legal cannabis markets across the U.S. are dealing with persistent oversupply. Licensed cannabis retailers generated $956.7 million in sales in Q1 2026, down from $976.5 million in Q1 2025. In a growing industry, declining sales is a warning sign. Price compression — driven by too many growers, too many licenses, and competition from illicit markets — continues to erode margins even as 280E relief improves the tax picture.

The Illicit Market: The unlicensed cannabis market remains larger than the legal market in most states. Illicit operators pay no taxes, hold no licenses, and undercut legal prices by 30% to 50%. Rescheduling does nothing to address this structural problem, which requires state-level enforcement and tax reform.

Legal Risk: Three consolidated lawsuits are challenging the rescheduling order in the D.C. Circuit. If the court rules that the April 22 order was procedurally deficient, 280E relief could be clawed back — a catastrophic outcome for companies that have already adjusted their financial planning around normalized tax treatment.

Institutional Barriers Remain: Despite Robinhood access, the real institutional money is still locked out. U.S. cannabis companies remain on OTC exchanges with custody and compliance restrictions that prevent most asset managers from taking positions. Full institutional access requires congressional action (the SAFE Banking Act or equivalent) or NASDAQ/NYSE uplisting — neither of which has a clear timeline.

Dilution Risk: Many cannabis companies have funded operations through convertible notes, warrants, and equity issuances that will dilute existing shareholders as they convert. The improved outlook from rescheduling may paradoxically accelerate dilution as companies rush to raise capital on better terms.

What the June 29 Hearing Could Change

The DEA administrative hearing beginning June 29 is the next major catalyst. If the hearing results in a recommendation to reschedule all marijuana — not just medical products — to Schedule III, it would:

• Extend 280E relief to recreational operators, dramatically improving the financial picture for the largest MSOs
• Potentially open the door to major exchange uplisting and institutional investment
• Remove a key argument used by states to maintain cannabis prohibition

If the hearing produces a negative recommendation or is delayed by legal challenges, the sector could give back its post-rescheduling gains. The hearing runs through July 15, with a recess for Independence Day, so expect volatility through mid-July.

The Practical Framework for Cannabis Investors

Rather than making a blanket buy-or-avoid call, here is how to think about cannabis sector positioning in June 2026:

If you believe broader rescheduling will ultimately succeed (whether through the June 29 hearing, congressional action, or a future executive order), the current valuation multiples are historically cheap. The sector is priced for continued uncertainty, and any resolution that moves toward full federal legalization would re-rate these stocks significantly higher.

If you are skeptical about the regulatory timeline, the bear case arguments — oversupply, illicit market competition, legal challenges, and dilution — are real enough to keep the sector range-bound for another 12 to 18 months. In that scenario, buying individual MSO stocks carries more risk than a diversified approach through ETFs like MSOS.

Either way, position sizing matters. Cannabis remains a high-volatility, binary-outcome sector. A small allocation (2% to 5% of a portfolio) captures the upside if rescheduling plays out while limiting downside exposure if the legal challenges succeed.

The easy answer — that rescheduling guarantees cannabis stocks will go up — is tempting but wrong. The harder truth is that rescheduling removed one headwind while leaving several others intact. Whether the sector is a bargain depends entirely on whether the remaining headwinds clear — and how patient you are willing to be while you wait.

Note: This article is for informational purposes only and does not constitute investment advice. Consult a licensed financial advisor before making investment decisions.