Cannabis Stocks Rally as June 29 DEA Rescheduling Hearing Looms

Cannabis equities are experiencing their most concentrated period of federal momentum in decades, and the numbers tell the story. The AdvisorShares Pure US Cannabis ETF (MSOS) has gained 31 percent in the last month and 69 percent over the past year. Individual multi-state operators are posting profitable quarters for the first time. And the catalyst driving it all — a DEA administrative hearing beginning June 29 that could extend Schedule III status to marijuana broadly — is now less than four weeks away.

The April 23 Order That Changed Everything

To understand why cannabis stocks are moving now, you have to start with what happened on April 23, 2026. The Department of Justice issued a final order rescheduling FDA-approved marijuana products and marijuana products subject to qualifying state-issued licenses from Schedule I to Schedule III of the Controlled Substances Act.

The order was narrower than many had hoped — it covered state-licensed medical cannabis operations and FDA-approved products, not recreational marijuana. But its financial impact was immediate and substantial. Schedule III classification means cannabis businesses operating under qualifying state licenses are no longer subject to Internal Revenue Code Section 280E, the tax provision that has prevented marijuana companies from deducting ordinary business expenses for years.

For multi-state operators that have been paying effective tax rates of 70 percent or higher, the relief is transformative. Curaleaf, one of the largest MSOs, reported that 280E relief alone would improve its annual EBITDA by tens of millions of dollars. Trulieve, the dominant operator in Florida, projected similar gains.

The market's response was swift. MSOS surged in the days following the order, and the momentum has continued into June as investors position ahead of the broader rescheduling hearing.

What the June 29 Hearing Could Decide

The DEA's April 23 order was just phase one. Simultaneously, the agency announced an expedited administrative hearing process to consider whether marijuana as a whole — including adult-use cannabis — should be moved to Schedule III. That hearing begins June 29, 2026.

Interested parties had until May 28 to submit written notices of participation, and the DEA is expected to notify selected participants by June 22. The hearing will evaluate scientific, medical, and public health evidence on marijuana's classification, with findings that could inform a broader rescheduling decision.

If the hearing results in a recommendation to reschedule all marijuana to Schedule III, the implications would be enormous. Every state-legal cannabis operation — not just medical programs but recreational markets in 24 states — would gain access to 280E relief. Interstate commerce restrictions could begin to loosen. Banking access, already improving under current rules, would expand further.

For investors, the hearing represents the next major binary event. A favorable outcome could catalyze another leg higher for cannabis equities. An unfavorable one, or significant delays, could trigger a pullback from current elevated levels.

Who's Leading the Rally

The rally has not been evenly distributed. Large-cap MSOs with strong balance sheets and exposure to growing state markets have outperformed smaller operators and Canadian licensed producers.

Trulieve Cannabis (TCNNF) has been a standout performer, benefiting from its dominant position in Florida — a market that could add recreational sales through a November 2026 ballot initiative — and its improving profitability under 280E relief. The company reported positive free cash flow in Q1 2026 for the second consecutive quarter.

Curaleaf Holdings (CURLF) has benefited from its national footprint across 17 states and its growing European operations. The company posted its first GAAP-profitable quarter in Q1 2026, a milestone that management attributed directly to 280E tax relief.

Green Thumb Industries (GTBIF) continues to trade at a premium valuation relative to peers, reflecting its consistent profitability and strong same-store sales growth in key markets including Illinois, New Jersey, and Ohio.

On the ETF side, MSOS remains the primary vehicle for institutional and retail exposure to US cannabis operators. The fund holds its positions through total return swap agreements — a structure necessitated by the gap between federal and state cannabis laws — which gives it direct exposure to MSO equity performance without holding the stocks directly on a US exchange.

The Legal Risk Factor

The rally is not without headwinds. Smart Approaches to Marijuana and the National Drug and Alcohol Screening Association filed a lawsuit in May seeking to reverse the DOJ's rescheduling order, arguing that the administration exceeded its authority and that the reclassification conflicts with international treaty obligations.

Legal experts are divided on the lawsuit's prospects. The DOJ's order relied on FDA medical and scientific evaluations that found marijuana meets the criteria for Schedule III classification, and courts have historically deferred to agency expertise on scheduling decisions. However, the novel aspects of the order — particularly the state-licensing component — introduce untested legal questions.

If the lawsuit succeeds in obtaining an injunction, 280E relief could be suspended for qualifying businesses, which would reverse much of the financial improvement that MSOs have reported in recent quarters. This legal uncertainty is one reason cannabis stocks remain below their 2021 peaks despite the significant recent gains.

Valuation Context

Even after the recent rally, cannabis stocks trade at valuations that would look inexpensive in almost any other high-margin consumer industry. The average MSO trades at roughly 4 to 6 times forward EBITDA, compared to 12 to 15 times for comparable consumer packaged goods or alcohol companies.

This discount reflects the remaining regulatory uncertainty, the illiquidity of OTC-traded cannabis stocks, and institutional reluctance to hold positions in companies operating in a federally ambiguous space. If rescheduling proceeds broadly and cannabis companies eventually uplist to major exchanges like the NYSE or NASDAQ, the valuation gap could narrow significantly.

Analysts at several firms have noted that the current environment resembles early 2021, when federal reform optimism drove a massive cannabis rally, but with one critical difference: this time, the regulatory changes are actually happening rather than being speculated about.

What to Watch Through June 29

Several catalysts and risk events sit between now and the hearing. The DEA will announce its list of hearing participants on June 22, giving investors a sense of which voices — pro-reform, anti-reform, or scientific — will be most prominently represented.

Q2 earnings season for Canadian licensed producers begins in mid-June, with Tilray (TLRY) among the first to report. While Canadian LPs have underperformed US MSOs in this cycle, positive results could contribute to broader sector sentiment.

Florida's recreational ballot initiative will also draw attention as November approaches. If polling shows strong support, operators with Florida exposure — particularly Trulieve, which holds more than 30 percent of the state's dispensary market — could see additional upside.

For long-term cannabis investors, the June 29 hearing is the most significant regulatory event since the April 23 rescheduling order. For those considering entering the sector, the current combination of improving fundamentals, favorable valuations, and identifiable near-term catalysts makes this one of the more compelling entry points in recent years — with the caveat that regulatory and legal risks remain real and could materialize quickly.