FUBAR or Not FUBAR?

That is the question.

Daily Recap

We’re publishing today given the continued confusion around the recent intoxicating hemp ban and the readthrough for the industry writ large.

Cannabis stocks have been trading as if the recent news was proof positive that the GOP hates weed and Prohibition 3.0 is upon us. I get it, of course, particularly after Mitch McConnell did Mitch McConnell-type things on his way out to pasture.

It’s true that bad actors ruined it for everyone, with crime rings and cartel growing on federal land (likely why the recent enforcement was announced) and moving product in plain sight given the uneven federal landscape and legal gray zone.

There is pesticide-infected weed sold at gas stations and convenience stores.

Cannabis is being shipped throughout the country and relabeled as hemp.

Chemical-infused gummies are being marketed to children.

I can tell you from my conversations with Derek Maltz Sr., the former acting head of the DEA and a man I’m fortunate to call a friend, the CCP is poisoning our children in plain sight using the obfuscation between hemp and cannabis to hide in the open.

So yes, we needed to tear policy down to the studs and start over—but that’s not as bad as it sounds and it might be a lot better than most people currently think.

Lemme ‘Splain, Lucy

It may not feel like it, but the hemp ban might be the best thing that’s ever happened to the cannabis industry. Average, ordinary, everyday citizens are SUPER-PISSED and rightfully so. The regulated space is angry too but we’re used that. Sorta.

I still believe we’ll see S3 (even more so, now), the hemp ban will evolve into a positive (regulation of the molecule) and history will finger the hemp loophole as the ungating event for U.S. cannabis because you can’t put the cannabinoid genie back in the bottle.

Intoxicating hemp was a puppy dog sale for cannabis and that dog is now 5-years old. Try taking a five-year old dog away from any family and see what happens.

With the entire country having now been exposed to cannabinoid wellness, we have a unique opportunity to reset the table, which should begin with POTUS delivering on his campaign pledge and with STATES 2.0 as a likely vehicle to reconcile outstanding issues and differences.

^ tested and regulated 10 mg. cap for hemp-derived bevs/ gummies with all other cannabinoids in licensed operators? There’s a Grand Bargain out there somewhere…

^ yes, we should deschedule the plant, but that’s not on the board right now.

We’ve discussed the halo effect S3 would have, from Pennsylvania to Virginia to D.C. and back, but now, given the sudden outrage surrounding the hemp ban, the push for commonsense regulations has already turned the Hatfields and McCoys into BFFs.

^ Team Hemp is now super-duper-motivated for reform, two days into a journey that the regulated space has been suffering through for a decade.

Double your pleasure pain, double your fun? Maybe not linearly, but the unintended consequence of returning the farm bill language ‘back to its original legislative intent’ will include existential motivation to solve for the industry segments that are solvable.

But Wait, There’s More

Meanwhile, only a week ago, TDR hosted Curaleaf CEO Boris Jordan, seemingly shared the quiet part out loud:

“There was a lot of pressure put on early on.”

“We got reassurances that this was gonna happen.”

“We’re taking the administration’s word for it.”

“They said they were gonna do this.”

“This is one politician that I feel I can take his word.”

Dykstra’d

Pennsylvania lawmakers passed a budget this week that missed the opportunity to help solve the state’s budget woes: adult-use cannabis legalization.

The Commonwealth has one of the strongest MMJ-only markets in the country, with annual sales over $2B. Adult-use would have supercharges that and this latest whiff means missing out on $420M in annual tax revenues and billions in economic activity.

Rep. Emily Kinkead (D) said she wasn’t surprised that legalization didn’t make it in the budget. That train seemed to leave the station months ago, she said, and said she and others are working on “pivoting to trying to target passage in 2026.”

Stocks & Stuff

It was a volatile day on Wall Street as stocks opened in the hole but rallied to finish mixed. Cannabis stocks also opened in the hole but other than Village Farms, stayed on their heels throughout the session before getting pummeled in the last hour.

U.S. cannabis ETF MSOS finished the session -16% (-20% WTD; -12% YTD) due to a combination of factors that we’ll discuss below.

We’ll top-line today, explore both sides of this critical juncture, talk through the story arc in search of the next chapter, and let the math math on valuations.

All that and more, just scroll down. ETF Notional: $89M

note: there will be no Canna Confidential on Monday as I’ll be in D.C for the Ignite (né Benzinga) Cannabis & Capital Policy Summit. Please use this link for a 25% discount if you would like to join Charlie, George, Boris, Kim, and others on the Beltway. 👇

Top Stories

Congressional hemp restrictions threaten $28B industry; companies scrambling

Trump’s ‘hemp ban’ shut down backdoor legal weed and pot industry is howling

Industry Stakeholders React to Trump-Signed Federal Hemp Product Ban

Rand Paul: The gov’t is open, but a hemp industry shutdown has just begun

Pennsylvania misses $420 million cannabis revenue opportunity

A house divided: Why Canada’s cannabis industry must speak with one voice

Massive Cannabis Seizure at Montreal Port as Smuggling Skyrockets

The Audacity of Survival: A Veteran’s War Beyond the Battlefield 🫡

N.J. Senate president seeks to revamp cannabis law

How marijuana really affects your athletic performance

Industry Headlines

The Circular Firing Squad - Kevin McKernan

Cannabis packaging companies scrutinized over mold claims

TDR: Rubicon Organics CEO Margaret Brodie

AlphaNooner: Village Farms COO Ann Gillen Lefever

Pregame (written in real-time at 7:30 AM ET)

It’s less-is-more Friday as we tie up the first bit of Mercury Retrograde; it’s fun, right?

You see what I see in terms of the broader market slippage and the degradation in our space; I wrote yesterday about a level I didn’t wanna mention for fear of upsetting the trading G-ds during Mercury Retro and ofc we closed precisely on it to end Thursday.

The 50% retracement of the bull move off the summer lows arrives into a cluster of support zones and moving averages, but that won’t stop the bears from continuing to press until it stops working—or a red headline provides a proper equity enema.

In a normalized market with real players, one would expect the potential for such a headline to trigger short covering into the weekend, even if Polymarket odds are 10% and conventional wisdom is that THC is dead in the GOP.

I strenuously object that such a thing is fait accompli…

…and while we don’t know profess to know when that’ll prove true, we believe that the Trump Card will be played and POTUS will deliver a dub in dramatic fashion.

^ we sense we would have seen it already if it weren’t for the shutdown (as there were other things in play) but dk if/how the shutdown shifted that timeline.

^ I do know the industry has done everything asked by the administration and there’s been movement behind the scenes for some time.

^ we also know the admin is aware of how critical the calendar year is as it pertains to 280E and the timing, unlike Congress, is at the sole discretion of a single man.

The volume of this national conversation has never been higher—there have been over 8,000 news stories on the ban—and we’d be wise to remember this is an 80-20 issue, POTUS needs the youth vote, evidently “assurances have been made,” and the government is now open for business; as always, we’ll see.

Random Thoughts

Hemp lobbies seemed focused on introducing new legislation in short order with a focus on a ‘low-dose levels’ for things like gummies and beverages (vs. carving out categories) that they’ll attempt to attach to another piece of legislation.

Let’s get S3 and the Bondi Memo and then focus as an industry on states 2.0, where low dose hemp will have a seat at the table and we can clarify policies that reward the good actors while providing law enforcement with a line-of-sight on the others.

Chart Check: MSOS

The ETF entered the day sitting on the 50% retracement of the rally off the all-time lows this summer and was unable to lift w the broader market snapback, indicating looming supply in what was, until then, another thin session.

In the last hour, once the ETF broke $3.80 (the WSJ gap and previous support going back to the end of August), sell-stop orders triggered, 🤖🤖 pressed and sentiment self-fulfilled. There was some chatter of a redemption but I don’t know from that.

What I do know, and what any biotech trader will tell you that charts matter until a binary event occurs, and while we’re not waiting on Phase III results, we are waiting on Schedule III results and if/ when that happens, the real price discovery will begin.

Chart Check: Village Farms

The runaway 2025 performance 🥇 (+386% YTD) broke out of a textbook bull flag on the heels of strong earnings, has consolidated—in a shit market—right at August highs, has the fundamental underpinnings to keep going and for my money, the best soup-to-nuts management team led by a leader of people in Mike D. 🫡

Viridian on U.S. cannabis valuations

The table below shows valuation metrics for the eleven U.S. MSOs with market caps over $100M. The median EV/2026 EBITDA ratio is 5.1x…

Uncertainty regarding regulatory/legislative outcomes is weighing on the cannabis equity and capital markets. Canna equities enjoyed an early week pop on news that hemp was being outlawed and expectations that revenues lost to hemp would flow back into MSO coffers. The one-year delay and doubt about how much hemp revenue would be recaptured hit the stocks midweek.

Despite the volatility, we expect ‘26 to be a strong year for plant-touching valuations. Revenue growth is expected to rebound as several new states are getting closer to passing recreational cannabis laws, and S3 still has the potential to produce a 50-100% pop in cannabis stocks

Stems & Seeds

A study of autistic children provided “preliminary evidence CBD-rich cannabis treatment may reduce parental distress, improve family routines and well-being.”

Have a safe journey, please enjoy responsibly.

If you’d like to help Mission [Green] change federal cannabis policies, please click here.

CB1 has positions in/ advises some of the companies mentioned and nothing contained herein should be considered advice.