Cannabis M&A Is Back, But Not The Way Investors Expected

By Javier Hasse

Federal rescheduling changed the tax conversation. It did not suddenly flood cannabis with cheap capital, institutional banking, or clean acquisition currency.

After years of market-cap compression, price pressure and regulatory uncertainty, cannabis dealmaking is back on the table.

But not in the form many investors expected.

For years, the industry narrative around federal reform centered on a familiar idea: once rescheduling arrived, capital would flood in, public multistate operators would consolidate aggressively, and cannabis would finally behave like a normalized consumer industry.

That is not what 2026 looks like so far.

Instead, cannabis consolidation is increasingly happening through structured transactions, distressed credit, all-stock acquisitions, seller rollovers, asset sales, and private capital platforms operating away from the public spotlight.

In a January Forbes analysis, I argued that the real consolidation story was increasingly happening outside the public-company spotlight. The first half of 2026 has made that distinction even more important.

The next cannabis consolidation cycle is unlikely to be driven by massive cash acquisitions. It is increasingly being driven by structure, credit and selective opportunism.

Rescheduling Changed The Tax Math, Not The Entire Capital Stack

The biggest policy development of 2026 remains federal rescheduling.

In April, the Justice Department and Drug Enforcement Administration issued an order moving certain FDA-approved cannabis products and state-licensed medical marijuana from Schedule I to Schedule III. The DEA also scheduled a broader marijuana rescheduling hearing to begin June 29, 2026, with proceedings expected to run through mid-July.

The shift matters because of Section 280E, the federal tax rule that has historically prevented cannabis businesses from deducting most ordinary operating expenses. Schedule III treatment can materially improve after-tax cash flow for qualifying medical operators, making EBITDA more meaningful and helping investors underwrite businesses with fewer distortions.

But the limits are just as important as the headline. As Reuters noted in its analysis of the order, the immediate benefits are tied to medical cannabis, while adult-use cannabis remains outside that relief unless the broader process changes federal treatment more fully.

Rescheduling does not legalize adult-use cannabis federally. It does not create interstate commerce. It does not resolve custody issues, guarantee uplisting, or suddenly normalize access to institutional banking.

That distinction helps explain why the expected public-company deal frenzy has not materialized.

Public cannabis equities remain heavily discounted. Buyers are reluctant to spend limited cash or issue stock at low valuations, while sellers often hesitate to accept shares they believe are undervalued. As a result, cash represented less than 2% of disclosed cannabis deal value in 2025, according to Viridian Capital Advisors.

There is real upside in the tax change. In a recent Forbes piece on 280E, I covered estimates suggesting the order could unlock billions in tax relief for the industry. But that upside does not erase the need for IRS guidance, deal-level diligence or caution around retroactive claims.

In other words, the industry may be entering a consolidation phase without the kind of acquisition currency that traditionally powers large M&A cycles.

How Cannabis Consolidation Actually Happens In A Constrained Market

That does not mean consolidation stops.

In stressed or fragmented industries, consolidation often happens indirectly. Companies disappear through closures, distressed restructurings, receiverships, license transfers, debt purchases, and selective asset acquisitions long before a clean public merger becomes visible.

Mitchell Osak, a cannabis strategy consultant who has written extensively on industry structure and rationalization, argued earlier this year that investors may be misunderstanding what a cannabis M&A cycle actually looks like under constrained conditions.

His position was not that consolidation would fail to arrive. It was that the industry was unlikely to see a sudden wave of “grand slam” transactions capable of immediately reshaping market structure.

Instead, the market appears to be moving through a rationalization phase.

Price compression is part of that story. In a May Forbes analysis of a new global report from Whitney Economics and the Global Cannabis Network Collective, I wrote that falling cannabis prices were not an accident or a temporary glitch. They were a predictable part of legalization’s economic cycle.

For operators, price compression is a consolidation force. Lower prices expose weak cost structures, punish undisciplined expansion, and push distressed assets toward buyers with better balance sheets or stronger operating models.

Between 2022 and 2025, the number of active federal cannabis licences in Canada remained broadly stable, according to Health Canada data, even as the mix of active and inactive licences shifted materially. The active-to-inactive ratio compressed sharply as surrendered, revoked, and expired licences accumulated.

Consolidation still occurred. It simply happened through attrition, closures, and selective asset movement rather than headline mergers.

Vireo And The Rise Of ‘Credit-As-Control’

One of the clearest examples of this evolving consolidation model has been Vireo Growth.

Over the past year, Vireo raised approximately $75 million in equity and announced acquisitions totaling roughly $397 million in consideration, largely structured through stock and performance-based earnouts.

It later acquired senior secured convertible notes tied to Schwazze at a substantial discount to face value, a transaction investor and advisor Seth Yakatan described as “credit-as-control,” rather than traditional M&A.

Additional transactions followed.

Vireo acquired certain Colorado assets through a mix of shares and assumed liabilities, significantly expanding its retail footprint. On April 1, the company also completed its previously announced acquisition of cannabis delivery and retail platform Eaze, gaining retail operations, technology infrastructure, and cultivation capacity.

Then came another signal. On May 1, Vireo announced an all-stock deal to acquire FLUENT, adding a Florida-centered medical cannabis platform to its growing portfolio. That transaction fits the same broader pattern: equity consideration, platform expansion, and state-level positioning in a market where cash remains scarce.

Beyond single transactions, what matters is the trend. These are structured, opportunistic transactions designed to preserve cash, manage risk, and accumulate strategic positioning during a period of industry stress.

In cannabis, financing strategy is increasingly business strategy.

Why Private Capital May Move First

Public companies may not be the best positioned to lead this phase of consolidation.

Founder-led operators, private platforms, family offices and specialty credit funds often move faster under regulatory uncertainty because they are less dependent on public-market sentiment and quarterly optics.

Many also have cleaner governance structures, simpler capitalization tables, and greater flexibility around earnouts, rollovers, distressed opportunities, license transfers, operator succession, lender negotiations, and state-specific regulatory considerations.

The emerging winners of this cycle may be the operators quietly acquiring licenses, distressed assets, retail footprints, debt positions, and strategic infrastructure before broader institutional capital fully re-enters the sector.

What Investors And Operators Should Watch Next

If cannabis M&A accelerates in the second half of 2026, it is unlikely to resemble the speculative expansion cycle of the late 2010s.

The market still faces structural constraints: uneven state profitability, uncertain federal timing, tax overhangs, limited institutional participation, price compression, and fragile public valuations.

But those same conditions can create opportunities for disciplined buyers with operational sophistication.

For investors, the most important signals may be distressed debt purchases, strategic asset acquisitions, restructuring activity, and quiet regional expansion by well-capitalized operators.

For operators, the message is even more direct: financing strategy is increasingly business strategy.