Institutional investors are starting to feel more optimistic about the future of U.S. cannabis stocks, but that positivity has not yet translated into actual checks being signed. According to a recent sentiment survey conducted by ATB Cormark Capital Markets, nearly half of institutional investors reported feeling more bullish over the last six months. However, roughly two thirds of those surveyed admitted they haven’t increased their positions in the sector. This disconnect highlights a frustrating reality for the industry: while the mood is improving, the structural barriers preventing massive capital inflows remain firmly in place.
The primary roadblock is the current federal classification of recreational cannabis as a Schedule I substance. Because it remains illegally categorized at the federal level, most cannabis companies are barred from listing on major U.S. stock exchanges, forcing them to trade on secondary markets in Canada. For large investment funds, these venues lack the necessary liquidity to handle high volumes of trades efficiently. Analyst Frederico Gomes notes that until regulatory reform occurs through federal rescheduling, there is little incentive or ability for big institutions to move significant money into the space regardless of how optimistic they may feel.
Beyond exchange access, the industry is fighting a grueling battle with the Internal Revenue Service under section 280E of the tax code. This rule prevents businesses dealing in Schedule I substances from deducting standard operating expenses like rent and payroll, creating a crushing tax burden that erodes profit margins. Companies are pinning their hopes on rescheduling to eliminate this penalty and perhaps even secure retroactive relief dating back to 2023. Without this shift, firms continue to carry heavy liabilities that stifle growth and discourage risk-taking among cautious fund managers.
Despite these hurdles, many operators have spent months preparing for a potential green light by restructuring their corporate homes and consolidating shares to meet Nasdaq or NYSE requirements. While Trulieve managed to carve out a path onto the New York Stock Exchange via its medical business, most others must wait for broader legislative changes. Once rescheduled, experts believe it will trigger a wave of mergers and acquisitions and allow highly leveraged companies to finally pay down debt using improved valuations and freed up cash flow. For now, however, investors find themselves in a holding pattern as court dates slip and bureaucratic delays extend an already long wait for legitimacy.