7 Surprising Ways to Profit from the Green Rush: The Top Cannabis ETFs to Buy Now

I. EXECUTIVE SUMMARY: THE 7 BEST CANNABIS ETFs FOR 2026

The global cannabis industry is transitioning from a nascent, fragmented market to a formidable economic force, projected to reach a massive $444 billion by 2030, representing a compound annual growth rate (CAGR) of 34%. While individual stocks (often referred to as “pot stocks”) garner significant attention, Exchange-Traded Funds (ETFs) provide a necessary degree of risk reduction through diversification across multiple firms and industry verticals.

The investment thesis for cannabis ETFs heading into 2026 is fundamentally tied to imminent regulatory catalysts—specifically, U.S. federal reform measures that promise to unlock massive hidden value currently suppressed by punitive taxation. The most lucrative opportunities lie in funds that are strategically positioned to capitalize on these regulatory shifts, balanced with exposure to resilient international markets.

Below are the top cannabis ETFs selected for their strategic positioning, asset size, and expense characteristics in the current volatile environment.

The Top Cannabis ETFs: An Actionable List

1. The U.S. Regulatory Play: AdvisorShares Pure U.S. Cannabis ETF (MSOS)
2. The Global Diversifier: Amplify Alternative Harvest ETF (MJ)
3. The Active Global Growth Seeker: AdvisorShares Pure Cannabis ETF (YOLO)
4. The Alternative Harvest Pick: Amplify Seymour Cannabis ETF (CNBS)
5. The Low-Cost Global Option: Cambria Cannabis ETF (TOKE)
6. The Active U.S. Leveraged Bet (High Risk): AdvisorShares MSOS Daily Leveraged ETF (MSOX)
7. The Performance Leader (Recent 1-Year Metric): AdvisorShares Vice ETF (VICE)

Table 1: The Cannabis ETF Competitive Landscape (Key Metrics, Late 2025)

ETF (Ticker)	Primary Investment Focus	Assets Under Management (AUM)	Net Expense Ratio	Management Style
AdvisorShares Pure U.S. Cannabis (MSOS)	U.S. Multi-State Operators (MSOs)	~$1.0 Billion	0.77%	Active
Amplify Alternative Harvest (MJ)	Global Cannabis & Alternative Harvest	$209.9 Million	0.75%	Passive/Index
Amplify Seymour Cannabis (CNBS)	Global, High-Conviction Active	$124.5 Million	0.76%	Active
AdvisorShares Pure Cannabis (YOLO)	Global, Health Care/Biotech Tilt	$47.7 Million	1.12%	Active
Cambria Cannabis ETF (TOKE)	Global Equities	$18.1 Million	0.43%	Active
Roundhill Cannabis ETF (WEED)	Global Equities	$7.02 Million	0.00% Net (Waiver)	Active

II. THE REGULATORY CATALYST: UNLOCKING LUCRATIVE RETURNS

The defining factor separating profitable cannabis investments from struggling ventures is the US federal regulatory environment. The sector’s current suppression is artificial, driven by federal prohibition that contradicts widespread state-level legalization. The primary opportunity, and therefore the core bet for investors, centers on the removal of key federal shackles.

2.1 The DEA Rescheduling Earthquake: The End of Section 280E

The most pivotal event for US cannabis operators in 2025 was the proposal by the Drug Enforcement Administration (DEA) to reclassify cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). This administrative move, while not outright federal legalization, carries immense financial implications that fundamentally reshape the sector’s valuation landscape.

The 280E Repeal and Valuation Reset

The statutory trigger for significant value creation is the repeal of 26 U.S.C. § 280E. This tax code provision currently denies taxpayers trafficking in substances listed in Schedule I or II the ability to take ordinary and necessary business deductions or credits, forcing most US cannabis businesses to pay effective tax rates as high as 70% to 90%.

By moving cannabis to Schedule III, Section 280E will cease to apply to state-legal operators for expenses paid or incurred after the rule’s effective date. The practical impact of this change is profound:

• Materially lower effective tax rates: Businesses will be able to deduct standard operating costs (salaries, marketing, utilities).
• Improved Cash Flow: The reduced tax burden leads to potentially positive EBITDA-to-cash conversion, radically improving the financial health of Multi-State Operators (MSOs).
• Renewed Investor Interest: The improvement in profitability makes the sector palatable to a wider base of sophisticated investors.

The financial markets immediately reflected the significance of this impending change. When the DEA’s intent to reschedule was initially reported, the AdvisorShares Pure U.S. Cannabis ETF (MSOS) surged dramatically by 26.94% in a single trading day, triggering multiple trading halts due to the Limit Up-Limit Down rule. This massive stock price correction was not driven by operational improvements but by the immediate expectation of regulatory relief. For investors, this event demonstrated that US cannabis stocks are currently discounted equities awaiting a mandatory accounting correction that will instantly inflate earnings per share (EPS), making funds concentrated in US MSOs a high-leverage bet on policy implementation.

The Paradox of New Compliance

While the removal of 280E is a monumental win for cash flow, it introduces new layers of complexity. In the absence of 280E’s simplified, albeit punitive, tax structure, cannabis businesses must now adhere to standard federal tax code provisions. This includes navigating the complexities of the interest expense limitation under IRC Section 163(j) and the Uniform Capitalization Rules (UNICAP) under Section 263A, which require capitalizing a portion of indirect period expenses related to inventory. These intricate calculations necessitate specialized tax expertise. This increased compliance burden effectively solidifies the financial advantage of large, well-capitalized MSOs who can afford sophisticated accounting and legal teams, ultimately strengthening the dominant players held by funds like MSOS.

2.2 The SAFER Banking Act: A Financial Gateway

The Secure and Fair Enforcement (SAFER) Banking Act, advanced by the Senate Banking Committee with bipartisan support, is the second critical catalyst. Although rescheduling to Schedule III would not automatically normalize financial services, SAFER offers a de facto legal framework.

De-Risking the Financial System

The Act’s passage would provide critical “safe harbor” protections to financial institutions, including banks, lenders, and insurers, ensuring they are not penalized by federal regulators for offering services to state-legal cannabis businesses. This protection is essential for addressing several systemic industry failings:

• Expanded Access to Credit: Legal cannabis businesses gain access to essential financial tools, including commercial loans, credit lines, payroll services, and merchant processing. This facilitates better underwriting transparency and allows for real estate financing for cultivation and dispensary facilities.
• Operational Risk Reduction: By facilitating non-cash transactions, the Act significantly helps reduce the risk of armed robberies and fraud that plague cash-heavy cannabis operations.

The M&A Liquidity Trigger

The expanded access to credit enabled by SAFER is crucial because it facilitates the necessary merger and acquisition (M&A) activity required for the industry’s long-term health. The US cannabis market currently suffers from a structural oversupply problem, characterized by large price fluctuations and regional disparities. Rationalization requires consolidation. MSOs have historically been unable to execute large M&A deals because they lack access to traditional, cheap debt and stable banking structures. SAFER provides the lower-cost financing and infrastructure needed for large operators to acquire struggling, oversupplied entities, leading to market maturity and healthier margins across the industry.

This regulatory de-risking—combining the profitability boost of 280E repeal with the financial stability provided by SAFER—is the necessary precursor for large institutional capital (pension funds, major asset managers) to enter the sector. Once these institutional players move beyond regulatory hesitation, sector liquidity and stability are expected to increase dramatically, signaling the normalization of the cannabis investment landscape.

Table 2: Financial Impact of Cannabis Rescheduling to Schedule III

Financial Metric	Pre-Rescheduling (Schedule I, §280E)	Post-Rescheduling (Schedule III)
Tax Deductions	Only Cost of Goods Sold (COGS) allowable; high effective tax rate	Ordinary and necessary business deductions allowed
Cash Flow	Constrained by punitive tax burden	Materially improved EBITDA-to-cash conversion
Capital Access	Reliance on expensive private equity/debt	Access to commercial loans, mortgages, and credit lines (via SAFER)
Business Valuation	Artificially suppressed due to poor net income	Fundamental valuation reset based on true profitability

III. DEEP DIVE: STRATEGIES, HOLDINGS, AND PERFORMANCE

Choosing the appropriate cannabis ETF requires understanding the fund’s geographic and strategic focus, balancing the high-risk U.S. regulatory play with the stability offered by global diversification.

3.1 AdvisorShares Pure U.S. Cannabis ETF (MSOS)

The AdvisorShares Pure U.S. Cannabis ETF (MSOS) is the undisputed leader in the U.S. cannabis investment space, boasting approximately $1.0 billion in Assets Under Management (AUM) and representing the first ETF to focus exclusively on the U.S. market. It serves as the single highest-leverage vehicle for betting on US federal reform.

The Mechanics of US Exposure

Due to federal illegality, U.S. Multi-State Operators (MSOs) cannot list their primary shares on major U.S. exchanges like the NYSE or NASDAQ. MSOS bypasses this issue by utilizing total return swaps, which are derivative contracts designed to exchange the value flows of one asset for another. This mechanism provides the fund with crucial exposure to the leading MSOs that generate the majority of US market revenue.

The top positions in MSOS holdings include swaps for industry giants such as Green Thumb Industries, Curaleaf Holdings, Trulieve Cannabis, Cresco Labs, and Verano Holdings.

A closer examination of the fund’s internal sector breakdown reveals a more nuanced strategy than just retail sales. The holdings are categorized heavily into Real Estate (48.09%) and Industrials (31.06%), alongside Consumer Cyclical (18.24%). This composition demonstrates that MSOS is a comprehensive bet on the entire US cannabis ecosystem, investing heavily in the underlying physical infrastructure and operational technology (real estate, cultivation facilities, processing equipment) that MSOs require to expand, rather than solely direct plant sales.

Performance and Volatility

MSOS’s performance metrics starkly illustrate its high-risk, high-reward profile. Driven by the burden of 280E and market volatility, MSOS has suffered dramatic long-term underperformance. As of late 2025, the fund showed severe negative returns: approximately -36.34% over one year and -36.31% over three years. This historical underperformance is precisely why the fund offers immense upside should the regulatory catalysts materialize quickly. MSOS is characterized as the ultimate high-beta regulatory play—its performance is acutely sensitive to federal news, making it appropriate for active investors seeking maximum exposure to policy changes.

3.2 Global Diversifiers and Active Strategies

In contrast to the focused U.S. pure-play strategy, other prominent ETFs offer broader geographic exposure, often focusing on Canadian Licensed Producers (LPs) and European medical markets.

Amplify Alternative Harvest ETF (MJ)

The Amplify Alternative Harvest ETF (MJ) is the second-largest fund in the space with $209.9 million in AUM. MJ is a global index fund providing exposure to the “alternative harvest” sector, which includes companies involved in the production, distribution, and research of cannabis, as well as those with significant exposure in the alcohol and tobacco industries.

MJ’s portfolio is concentrated in Canadian LPs that can list on major exchanges, such as Tilray Brands (19.67% portfolio weight), Cronos Group (8.19%), and SNDL (6.90%). The fund’s performance trajectory has been notably different from MSOS. As of late 2025, MJ reported YTD returns of 20.57% (Closing Price) and less severe 1-year losses of -12.78% (Closing Price).

This superior recent performance highlights an important market dynamic: international cannabis companies, which are not subject to the 280E tax barrier, are benefiting from rapid growth in external markets, particularly Europe. Demand in the German medical market, for instance, drove a 400% year-over-year increase in imports during the first half of 2025. MJ thus acts as a valuable hedge against continued political stagnation or delays in US federal reform.

AdvisorShares Pure Cannabis ETF (YOLO)

The AdvisorShares Pure Cannabis ETF (YOLO) is an actively managed fund (1.12% net expense ratio) that employs a hybrid strategy. While actively seeking global growth opportunities, its regional exposure remains heavily tilted toward North America (96.61% of holdings).

YOLO’s structure is complex; it includes a significant “fund-of-funds” element, with nearly 42% of its assets invested in MSOS. This gives YOLO investors diluted, yet managed, exposure to the US regulatory play while maintaining direct holdings in global LPs and fulfilling a mandated health care sector tilt, concentrating at least 25% of its assets in pharmaceuticals, biotechnology, and life sciences. YOLO’s active management proved successful during recent volatility, showing impressive YTD Market Price returns of 45.45% and positive 1-year Market Price returns of 7.98% as of recent reports.

Low-Cost Alternatives: TOKE and WEED

For investors prioritizing low overhead, the Cambria Cannabis ETF (TOKE) stands out with an exceptionally competitive net expense ratio of 0.43% for an actively managed fund. Similarly, the newer Roundhill Cannabis ETF (WEED) offers a net expense ratio of 0.00% through contractual fee waivers valid until at least May 2026. While these funds hold smaller AUMs, their focus on minimizing costs is crucial for long-term investors in a sector notorious for volatility and high fees.

Table 3: Recent Performance Metrics of Top Cannabis ETFs (As of Late 2025)

ETF (Ticker)	AUM (Approx.)	YTD Return (Approx.)	1-Year Return (Approx.)	3-Year Return (Approx.)
MSOS	$1.0 Billion	-20.47%	-36.34%	-36.31%
MJ	$209.9 Million	20.57% (CP)	-12.78% (CP)	-14.86%
YOLO	$47.7 Million	45.45% (MP)	7.98% (MP)	-4.86% (MP)
TOKE	$18.1 Million	N/A	N/A	-8.31%
WEED	$7.02 Million	N/A	-31.77%	-18.75%

(Note: CP = Closing Price Return; MP = Market Price Return. Data varies depending on the reporting date and methodology.)

IV. THE DANGERS: MAJOR RISKS AND MARKET HEADWINDS

Despite the immense potential, investing in cannabis ETFs is a highly speculative endeavor that carries significant and complex risks. Cannabis stocks have routinely produced negative alphas over extended periods, consistently underperforming market expectations even when accounting for market volatility and growth potential.

4.1 The Oversupply Trap and Margin Compression

The single most significant operational headwind for the US cannabis market is the structural problem of oversupply, which experts identify as the “biggest issue” facing cannabis companies.

Structural Market Imbalance

The oversupply phenomenon is rooted in basic supply and demand economics unique to the sector. For growers, once initial fixed costs (land, irrigation, staff) are covered, the marginal cost of scaling up production is extremely low, incentivizing maximum yield maximization. Simultaneously, acquiring licenses and opening retail locations is a slow, multi-year process. This results in a market where far more cannabis is produced than retailers are permitted or able to sell.

This oversaturation forces massive price declines and acute margin compression for producers and retailers. Operators are responding by aggressively adopting cost-cutting technologies and shifting their product mix toward higher-margin items like edibles and extracts to sustain profitability.

Federal Uncertainty and Black Market Competition

The volatility is further complicated by the persistent existence of a black market. While federal uncertainty increases the regulatory compliance costs and tax burdens for legal cannabis—especially due to the historical 280E tax—it raises the price floor for legal products. This pricing disparity makes it difficult for legal businesses to compete effectively with the untaxed black market, adding another layer of instability to investor confidence and pricing.

4.2 Legal, Regulatory, and Career Risks

The lack of consistent, uniform legality is a core risk. The legality of cannabis, hemp, and CBD products remains non-uniform across the 50 US states and various international territories. This constantly shifting environment exposes companies to compliance challenges and regulatory uncertainty.

Even with increasing state legalization, federal enforcement risk persists. In late 2025, the U.S. Attorney for Wyoming issued a public statement announcing heightened enforcement of the federal ban on national park lands, reinforcing that federal law still takes precedence and poses risks to simple possession or operation on federal territory.

A more discrete but crucial risk for certain investors is professional exposure. Individuals holding government jobs or positions requiring security clearance should be aware that investing in marijuana stocks or ETFs could potentially lead to the revocation of their security clearance, demanding thorough due diligence before investment.

4.3 High Costs and Historical Underperformance

The combination of high operational risk and historically poor returns is exacerbated by high fund fees. Many actively managed cannabis ETFs carry elevated net expense ratios (e.g., YOLO at 1.12%, Global X Marijuana Life Sciences Index ETF at 1.00%) compared to broad-market index funds. These higher fees act as a continuous drag, making it harder for the funds to generate positive alpha.

Empirical analysis indicates that cannabis stocks routinely show a strong positive exposure to the market factor (Mkt-RF), implying they move more aggressively than the wider market—a sign of high risk and volatility. Moreover, their portfolio characteristics often show negative exposure to profitability and momentum components. This indicates that cannabis equities are characterized by low profitability and weak momentum, which is why they have failed to give investors value over recent years, despite high growth narratives.

V. INVESTMENT STRATEGIES FOR THE CANNABIS SECTOR

5.1 Maximizing the Regulatory Bet: Timing and Selection

The cannabis sector requires highly targeted investment strategies focused on anticipating and capitalizing on policy shifts.

The Binary U.S. Opportunity

The AdvisorShares Pure U.S. Cannabis ETF (MSOS) represents the primary vehicle for investors who believe the removal of 280E and the passage of SAFER banking are imminent. This strategy is a concentrated, binary bet that seeks explosive returns once the regulatory catalyst forces the immediate valuation reset of U.S. MSOs.

The Diversification Hedge

For investors seeking exposure to the global growth trend ($444 billion by 2030) but wishing to mitigate the specific political risk of U.S. federal delays, global diversifiers like the Amplify Alternative Harvest ETF (MJ) and AdvisorShares Pure Cannabis ETF (YOLO) offer a strategic hedge. MJ’s exposure to Canadian LPs benefiting from rapidly expanding European medical markets provides stability independent of Washington politics.

Justifying Active Management

In a rapidly evolving market defined by sudden regulatory shifts, supply chain disruptions (like recent delays in the Portugal supply chain ), and M&A activity, actively managed funds may warrant their higher expense ratios. Funds like YOLO explicitly state that their active strategy allows them to adjust the portfolio quicker than passive, index-based strategies—a crucial attribute for navigating sudden changes like the DEA rescheduling proposal or shifting international GACP standards.

5.2 Optimizing Tax Efficiency and Portfolio Placement

Tax planning is critical when dealing with volatile assets prone to large capital gains. ETFs offer an inherent tax efficiency advantage over traditional mutual funds. This is because ETFs manage investment flows by creating or redeeming “creation units” (baskets of assets) rather than constantly selling underlying securities to meet redemptions. This structure minimizes the number of taxable events (capital gains distributions) passed on to the investor.

Given the expectation of significant short-term capital appreciation resulting from the regulatory shift, investors should prioritize holding cannabis ETFs in tax-advantaged accounts, such as a Roth IRA or 401(k), whenever possible. This strategy allows the investor to shelter potential profits from short-term capital gains tax rates, which are equivalent to ordinary income tax rates, thereby maximizing the ultimate net return from the lucrative legalization bet.

VI. FREQUENTLY ASKED QUESTIONS (FAQ)

Q: What are the main risks associated with cannabis ETFs?

A: Cannabis ETFs carry “considerable risk” and are highly volatile due to the sector’s relative newness and constant legal challenges. Key risks include the ongoing conflict between federal prohibition and state legalization, the high expense ratios typical of niche ETFs, severe market oversupply leading to price declines and margin compression, and potential regulatory actions that could negatively impact state-legal operations.

Q: How does federal rescheduling to Schedule III affect cannabis companies’ profits?

A: Rescheduling cannabis from Schedule I to Schedule III under the CSA would remove the major financial burden of Section 280E. This allows state-legal companies to deduct ordinary business expenses on federal tax filings, leading to a massive boost in net profitability, improved borrowing capacity, and higher cash flow conversion rates.

Q: Why do many cannabis ETFs have poor historical returns?

A: The poor long-term returns, exemplified by consistent negative alpha, stem primarily from systemic market and regulatory pressures. Historically, U.S. companies have been crippled by the high effective tax rates imposed by Section 280E. Furthermore, structural issues like market oversupply, weak profitability, and a high susceptibility to market swings have caused cannabis funds to fall behind major global equity markets.

Q: What are Multi-State Operators (MSOs) and why do MSOS ETFs use swaps?

A: MSOs are U.S.-based cannabis companies that operate legally across multiple state jurisdictions. Because cannabis remains federally illegal, MSO shares cannot be listed on major U.S. stock exchanges. To provide investors with access to these highly influential companies, U.S.-focused ETFs like MSOS utilize total return swaps (derivative contracts) to track the financial performance of the underlying MSO stocks.

Q: Does the SAFER Banking Act federally legalize cannabis?

A: No, the SAFER Banking Act is focused purely on financial protection. It provides “safe harbor” provisions that shield financial institutions from federal prosecution or regulatory penalties for serving cannabis businesses operating legally under state laws. It does not change the federal classification of cannabis or institute federal legalization.

Q: What factors should investors consider when selecting a cannabis ETF?

A: Investors should consider several key factors beyond past performance, including the fund’s net expense ratio, the concentration and type of holdings (U.S. MSO focus vs. global diversification), average trading volume, liquidity, and the fund’s regulatory compliance strategy. The choice should align with the investor’s risk tolerance and their conviction in U.S. regulatory reform.