Beginner’s Guide to Purchasing Cannabis Stocks

James Sterling February 25, 2026 7 min read

Investing in cannabis companies has transitioned from a specialized niche to a more conventional opportunity over the last ten years, coinciding with expanded legal access for numerous Americans. By January 2026, recreational marijuana is permitted in 24 states, along with Washington, D.C., and Guam, while medical cannabis is authorized in 42 states. Projections indicate the U.S. cannabis market will achieve approximately $47 billion in value by 2026, drawing substantial capital toward these prospects. Nevertheless, the marijuana sector continues to present distinctive complexities and elevated risks. This comprehensive guide outlines essential knowledge for prospective investors, details the industry’s framework, explores various investment avenues, and provides actionable steps to commence participation.

Essential Insights on Cannabis Investing

The cannabis sector primarily divides into U.S. Multi-State Operators (MSOs) and Canadian Licensed Producers (LPs). MSOs generate the highest revenues yet frequently list on Over-The-Counter (OTC) markets, whereas numerous Canadian LPs appear on prominent exchanges like NASDAQ or NYSE, though they lack direct entry into the U.S. consumer market.

Executive Order 14370, enacted in late 2025, reclassified cannabis to Schedule III status, potentially enhancing profitability by eliminating the burdensome 280E tax provisions. However, challenges related to banking access, asset custody, and exchange listings persist.
Investment choices include individual equities, which carry greater risk alongside potential for superior returns, or exchange-traded funds (ETFs) that offer diversified sector exposure with reduced company-specific vulnerabilities.
U.S. operators on OTC markets may prove difficult to acquire through certain brokerage platforms, featuring broader bid-ask spreads and diminished liquidity. In contrast, Canadian firms and ETFs typically provide smoother purchasing experiences.

Overview of the Cannabis Marketplace

Publicly listed cannabis enterprises are both scarcer and more recently established compared to those in most other sectors. Canada’s nationwide legalization of recreational cannabis in October 2018 has positioned many of the bigger public entities as Canadian-based. In general terms, cannabis businesses categorize into three main segments:

Growers and Operators

U.S. MSOs: These are vertically integrated businesses that cultivate, process, and distribute products to dispensaries operating across various states, such as Green Thumb Industries and Trulieve Cannabis. They dominate revenue generation in the U.S. landscape but, due to ongoing federal prohibitions, predominantly trade via OTC platforms.
Canadian LPs: These Licensed Producers, based in Canada like Tilray Brands and Canopy Growth, commonly list on major U.S. exchanges such as NASDAQ or NYSE. Nonetheless, they cannot directly serve the U.S. retail consumer base.

Industry Participants

These entities deliver targeted services or resources essential to the cannabis network, including pharmaceutical developers, packaging suppliers, or real estate investment trusts such as Innovative Industrial Properties (IIPR).

Ancillary Businesses

Such companies function beyond direct cannabis production or sales but cater to cultivators and retailers with offerings like technology solutions, hydroponic systems, or compliance management software.

Risk Characteristics: Businesses nearer to the cultivation and retail sales spectrum exhibit heightened volatility. Certain prominent cannabis equities have demonstrated volatility exceeding twice that of the S&P 500 in recent periods, and numerous public firms maintain modest market capitalizations, amplifying price fluctuations.

Risks Associated with Marijuana Equities and Recent Developments

Emerging and Speculative Nature. A significant portion of publicly traded cannabis firms are in the process of scaling operations and attaining consistent positive cash flows.
Regulatory and Legal Ambiguities. Variations in state-level regulations mean that shifts in legalization status or licensing approvals can profoundly impact income streams.
Federal Constraints and Trading Obstacles. Prior to rescheduling, federal statutes prohibited standard banking and exchange operations. The 2025 Executive Order 14370 shifted cannabis to Schedule III, anticipated to alleviate the restrictive 280E tax implications and thereby improve profit margins for U.S. entities. Full realization, however, requires time, with ongoing hurdles in custody and banking.
Liquidity Challenges and Market Dynamics. U.S. MSOs on OTC exchanges encounter expansive bid-ask differentials, reduced trading volume, and occasional barriers on consumer-oriented trading applications. Platforms like Robinhood and various major banks often restrict or prohibit OTC cannabis securities.
Share Dilution and Funding Demands. Smaller enterprises frequently raise capital through equity issuances to sustain activities, thereby diluting stakes held by current investors.

Investment Approaches for Cannabis Stocks

Two fundamental strategies exist for engaging with this space: acquiring shares in specific cannabis-associated companies or allocating funds to vehicles that mirror the broader industry.

Selecting Individual Equities

Purchasing stock in a particular cannabis enterprise holds the potential for substantial appreciation or equally significant declines. Apply the rigorous due diligence typical of any equity investment: review quarterly and annual financial statements, scrutinize balance sheets, grasp operational models, and evaluate competitive standings.

Critical Factors in Evaluating Cannabis Enterprises:

Patterns in revenue expansion and profitability metrics, including gross margins and EBITDA.
Available cash reserves and financing capabilities.
Extent of store and dispensary networks for MSOs, alongside revenue generated per location.
Exposure to regulations across states and stability of licenses.
Leadership expertise, levels of insider ownership, and historical success in strategic implementation.
Burden of debt and overall capital framework.
Trading venue (OTC versus NASDAQ/NYSE) and typical daily trading volume for liquidity assessment.

Prominent Players in the 2026 Landscape

Curaleaf Holdings (CURLF) — U.S. MSO
Green Thumb Industries (GTBIF) — U.S. MSO
Trulieve Cannabis (TCNNF) — U.S. MSO
Verano Holdings (VRNOF) — U.S. MSO
Tilray Brands (TLRY) — Canadian LP (NASDAQ)
Innovative Industrial Properties (IIPR) — REIT (NYSE)
Cronos Group (CRON) — Canadian LP (NASDAQ)
Cresco Labs (CRLBF) — U.S. MSO
Glass House Brands (GLASF) — U.S. Cultivator
Canopy Growth (CGC) — Canadian LP (NASDAQ)

Note that the cannabis environment evolves rapidly; regard these examples as research starting points rather than direct purchase recommendations.

Cannabis-Focused ETFs

Exchange-traded funds provide a more straightforward method to achieve diversified involvement in the sector, mitigating risks tied to individual holdings. Following consolidations and fund liquidations between 2023 and 2024, key remaining options encompass:

AdvisorShares Pure U.S. Cannabis ETF (MSOS) — The preeminent fund dedicated solely to U.S. operators.
Amplify Alternative Harvest ETF (MJ) — Offers worldwide coverage, with significant emphasis on Canadian LPs and alliances in tobacco and pharmaceutical sectors.
AdvisorShares Pure Cannabis ETF (YOLO) — Actively managed portfolio blending U.S. and international equities.
Amplify Seymour Cannabis ETF (CNBS) — Features active management strategies.
Roundhill Cannabis ETF (WEED) — Employs a tiered weighting index concentrating on U.S. MSOs.
Cambria Cannabis ETF (TOKE) — Targets value-oriented and high-quality components throughout the cannabis value chain.

Integrating Cannabis Stocks into Your Investment Portfolio

The cannabis domain retains higher risk profiles compared to established industries. Should you opt to participate:

Position marijuana stocks or ETFs within a speculative allocation of your portfolio, calibrating sizes appropriately. Financial advisors commonly recommend limiting such high-risk segments to a low single-digit percentage of total assets, adjusted for personal risk appetite and investment duration.
Opt for ETFs if avoiding the selection of individual outperformers or enduring stock-specific price swings is preferable.
Recognize that certain broad-market index funds or small-cap ETFs might already incorporate cannabis holdings; review existing positions prior to augmenting exposure.

Step-by-Step Process to Acquire Marijuana Stocks

Determine Desired Exposure Type. Choose individual stocks for prospects of amplified gains, ETFs for comprehensive coverage, or a balanced combination.
Select an Appropriate Brokerage Platform. Ensure support for targeted markets; U.S. MSOs via OTC necessitate brokers permitting such trades, like Fidelity or Charles Schwab. Verify accessibility, as many consumer apps restrict OTC cannabis securities. Canadian LPs and major-exchange ETFs remain broadly available.
Conduct Thorough Research. Analyze earnings releases, investor decks, and expert analyses; evaluate key financial indicators such as revenue, profitability margins, liquidity, debt levels, MSO store expansions, and state-specific regulatory risks.
Account for Market Mechanics and Order Strategies. Employ limit orders for OTC or illiquid securities to sidestep excessive spreads from market orders. Validate current quotes and average volumes.
Prioritize Diversification and Position Sizing. Avoid concentrating significant portfolio portions in one cannabis equity. Distribute across MSOs, LPs, ancillary firms, or leverage ETFs.
Track Regulatory Milestones. Federal rescheduling implementations, state ballot initiatives on legalization, and tax reforms like 280E adjustments can trigger rapid price movements.
Address Tax and Custody Matters. OTC transactions and small-cap dealings may involve unique tax obligations; engage a tax advisor. Maintain detailed records and explore tax-loss harvesting amid volatility.