April 17, 2026
The U.S. Cannabis Market – Q1 2026 Update
If there is a single theme defining this moment in cannabis, it is convergence. Profitable operators are converging on distressed assets. Federal and state enforcement are converging on hemp. And the regulatory framework that will define the next decade of this industry is taking shape, even as Washington remains largely quiet.
That quiet suits us well. Asset prices remain attractive for operators who do not need a regulatory catalyst to grow. We consider regulatory benefits a question of when, not if, and we are happy to underwrite the downside and build while others sit on the sideline waiting for clarity.
THE HEMP LOOPHOLE: CLOSING WITH CONVICTION
The November 12, 2026 deadline for the federal ban on intoxicating hemp products is now less than eight months away, and the hemp industry’s confidence that Congress will intervene is eroding.1 The House Agriculture Committee advanced the 2026 Farm Bill in March without any delay provision.2 Efforts to introduce a two-year postponement through standalone legislation have gained limited traction. The writing is on the wall: intoxicating cannabinoids are moving inside regulated cannabis frameworks.
States are not waiting. Missouri is leading the charge. Attorney General Catherine Hanaway issued cease-and-desist orders to 33 unlicensed retailers, and the legislature passed the Intoxicating Cannabinoid Control Act with bipartisan support, reclassifying most hemp-derived cannabinoid products as marijuana and restricting their sale to licensed dispensaries.3 The bill now sits on the governor’s desk.
This is the pattern we expect nationwide: licensed operators pressing state governments to close competitive gaps ahead of federal action. Compliance once again functions as a moat. Every step toward competitive normalization strengthens the credit quality of the operators we back.
CONSOLIDATION: DISTINGUISHING REAL OPERATORS FROM SPECULATIVE LICENSE HOLDERS
The consolidation cycle is accelerating, and the math has become compelling. Quality assets in mature markets are trading at two to four times EBITDA. Operators who simply won licenses but lacked the capability to build sustainable businesses are waving the white flag and selling to the best operators—the ones with the infrastructure, management teams, and capital relationships positioned to extract real value. The industry is strengthening fundamentally as operational excellence, not license ownership, becomes the primary determinant of long-term success.
One Q1 transaction illustrates this clearly. Wyld, North America’s most widely distributed cannabis gummy brand announced the acquisition of Grön, a pioneering women-led edibles company.4 Grön is a world-class operator in its own right, and the combined entity now spans gummies, chocolates, and solventless hash rosin offerings across approximately 12,000 retail locations, creating a dominant edible operator in the category.
More assets are available than most operators can absorb. For private credit, this is ideal: consolidation-driven capital needs are structural, collateral is tangible, and the operators executing these strategies are precisely the borrowers whose credit profiles we know best.
FEDERAL POLICY: PATIENCE AS A STRATEGY
President Trump’s December 2025 executive order directing the Attorney General to expedite marijuana rescheduling from Schedule I to Schedule III remains the most significant federal policy signal the industry has received.5 But the administrative process has been deliberate, and the recent transition at the Department of Justice—with Acting Attorney General Todd Blanche replacing Pam Bondi—has added another variable. Reports suggest the administration wants Blanche to finalize the rescheduling rule, though the timeline remains uncertain.
We have long considered Schedule III a matter of when, not if. When it arrives, the elimination of Section 280E alone is expected to reset after-tax cash flow profiles across the industry. But we do not need that catalyst to pursue strong risk-adjusted returns today. The quiet from Washington has kept many capital providers on the sideline. Major banks have remained uninvolved. Pricing discipline has held. And the operators we finance have continued to grow profitably without a regulatory tailwind.
OUR POSITIONING
We do not see hemp enforcement, industry consolidation, and the eventual completion of federal rescheduling as risks to our portfolio. We see them as tailwinds that reinforce the value of what we have already built: a credit book anchored in compliant, operationally excellent businesses positioned on what we believe the right side of the structural shifts underway in this industry.
We appreciate your continued trust and partnership and look forward to updating you as we expect these developments translate into fundamentals.
Important Information: Chicago Atlantic makes no guarantee of future outcomes. Cannabis rescheduling may not occur, may be delayed, and, even if implemented, its ultimate impact on portfolio valuations is uncertain and it may not prove to be accretive to investors. All investments involve risk, including the risk of loss. Prospective investors in Chicago Atlantic products should review the applicable definitive offering memorandum before deciding to invest.