Cannabis stocks came into 2026 with momentum—then quickly ran into the same problem that’s defined the sector for years: policy optimism moves faster than policy reality. After a December surge tied to U.S. federal headlines, many cannabis names reversed hard in January as investors reassessed timelines, tax relief, and what the latest executive actions do (and don’t) change.

The January reality check: cannabis indexes slid

One of the cleanest ways to see the “bad start” is through sector benchmarks. New Cannabis Ventures’ Global Cannabis Stock Index fell 10.6% in January, while its American Cannabis Operator Index dropped 12.5%. Even the widely watched AdvisorShares Pure US Cannabis ETF (MSOS) finished January down 14.6%. 

On the Canadian LP side, the drawdown was milder—but still negative: the Canadian Cannabis LP Index fell 4.9% in January, and Tilray was cited as the weakest name in that group for the month (down 18.0%). 

What changed from December to January?

1) The market “priced in” rescheduling—then realized it wasn’t immediate

Much of the December move was driven by expectations around U.S. federal action on cannabis scheduling. Reuters reported that cannabis stocks jumped on December 12 after reports that the Trump administration was expected to push agencies toward easing restrictions and potential Schedule III reclassification. But when the executive order arrived, it didn’t deliver the instant regulatory shift some traders hoped for.

On December 18, Reuters noted cannabis names gave up gains and ended lower after the order, at least partly because investors were expecting banking-related changes to be included and they weren’t. Reuters also highlighted that the order directed the Attorney General to move the process forward, rather than “immediately” rescheduling cannabis on the spot. 

2) 280E tax relief is still a “timing” story—and timing matters

Schedule III is often framed as a potential game-changer because it can remove the 280E tax penalty that limits normal business deductions for cannabis operators. But investors are now laser-focused on when any relief actually hits financial statements.

A Goodwin law analysis of the December 18 executive order described a process that still involves rulemaking steps (including a comment period) before changes are finalized, and emphasized the significance of 280E in operator profitability. :contentReference[oaicite:4]{index=4} Meanwhile, Pillsbury flagged a key risk: depending on how the IRS applies timing rules, some calendar-year taxpayers might not see 280E relief until the 2027 tax year.

3) Financing pressure and “survival mechanics” are still front-and-center

Even with better headlines, many cannabis companies remain in repair mode—refinancing, recapitalizing, cutting costs, and trying to extend runways. For example, Canopy Growth announced January 8 transactions aimed at extending debt maturities (to as early as January 2031) and improving liquidity, projecting approximately C$425 million in cash on hand after the transactions.

In parallel, reverse splits—often seen as a “stock-market triage” move—have also shaped sentiment. Investopedia detailed Tilray’s 1-for-10 reverse split (effective after market close on Dec. 1, 2025) and noted the stock fell sharply ahead of the split, reflecting how such actions can be interpreted by the market.

4) Policy whiplash hit the sector’s most popular ETF

The sector’s volatility shows up clearly in MSOS. A January 18 report noted MSOS fell about 26% from mid-December highs to around mid-January levels, underscoring how quickly cannabis trades can flip when “catalysts” turn into “process.” 

What could improve sentiment later in 2026?

If cannabis stocks are going to stabilize—or rally again—investors are generally watching three buckets:

• Concrete scheduling progress: clear DEA/DOJ milestones and an understood effective date (not just headlines). 
• Banking reform momentum: Industry observers continue to argue that banking access is the missing piece for broader institutional participation. 
• Fundamentals: earnings quality, cash burn trends, and balance-sheet improvements that reduce dilution risk (especially for companies refinancing or extending maturities). 

Bottom line

Cannabis stocks began 2026 badly because the sector ran into a familiar wall: policy “direction” is not the same thing as policy “delivery.” January’s declines reflected delayed timelines, uncertainty around when 280E relief actually arrives, ongoing financing constraints, and headline-driven volatility. The next big moves—up or down—will likely hinge on whether 2026 brings measurable regulatory follow-through and improved access to capital, not just another wave of speculation.

Note: This article is for informational purposes only and is not investment advice.