Cannabis Reclassification in the US: What Investors Should Watch for in 2026

Industry investors are understandably optimistic for 2026, following the historic executive order by President Donald Trump on December 18. That's the view of Anthony Coniglio, CEO of NewLake Capital Partners, in a recent article for MjBizDaily.

Marijuana reclassification could be the catalyst for stock appreciation. However, this will only happen if Congress fulfills its promise and ensures that federal reform progresses, the expert suggests.

It is crucial to understand that legal change alone will not guarantee a lasting reassessment of companies. For this historic step to generate sustainable gains, advances in institutional access and financial performance of operators are required.

Institutional Access and Cannabis Reclassification

Sustained stock appreciation requires institutional capital inflow, the most powerful source of demand in the financial market. Currently, most institutions remain on the sidelines of US cultivation businesses due to compliance and custody restrictions.

The industry needs robust banking reform, such as the SAFER Banking Act. This would create a safe harbor for pension funds and insurers to participate in the sector post-cannabis reclassification.

With the substance moving to Schedule 3 of the Controlled Substances Act, banking reform becomes more feasible. Only this combination will transform the market, currently driven by retail, into a genuine institutional ownership environment.

Impact on Company Fundamentals

Even with doors open, major investors will focus on fundamentals: consistent profits, cash flow, and strong balance sheets. Marijuana reclassification immediately enhances this outlook by eliminating Section 280E of the tax code.

Repealing this tax rule increases post-tax profitability and corrects distortions in financial statements. While short-term impact may be mitigated, the long-term benefit is material for companies operating in multiple states.

However, many operators still struggle with compressed profit margins. Competitive pressure and regulatory costs remain challenges that cannabis reclassification helps mitigate but does not solve alone.

Hemp Competition and Regulation

Federal crackdown on psychoactive hemp-derived products should also support the regulated market. With the prohibition of certain products expected by November 2026, hemp producers will need to scale back operations, clearing the market of less controlled competitors.

As psychoactive hemp loses space, regulated cannabis regains pricing power. This scenario, coupled with cannabis reclassification, may bring back modest growth, especially in new markets like Virginia and Ohio.

Liquidity and Outlook for 2026

Historically, low cannabis stock liquidity hinders the entry of large institutions. Marijuana reclassification and banking reform can boost valuations, allowing companies to issue shares to clear debts and strengthen balance sheets.

This creates a positive cycle: strong balance sheets attract institutional capital, which sustains appreciation. However, expectations for transformative mergers and acquisitions should be moderated, maintaining a pattern of complementary businesses.

For 2026, the realistic scenario is gradual, not speculative, appreciation. The market will continue to favor long-term investors and companies with disciplined management, capable of navigating the final stages of federal uncertainty.

With information from MjBizDaily