AdvisorShares Highlights the Pending Historic Reforms in US Cannabis Market

Rhea-AI Summary

AdvisorShares, managing over $1 billion in cannabis ETFs, highlights pending historic reforms in the US cannabis market. Key catalysts include:

• Federal cannabis rescheduling from Schedule I to Schedule III, potentially removing tax burdens for multi-state operators (MSOs)
• Upcoming state ballot initiatives in North Dakota, Nebraska, and Florida for cannabis legalization
• Bipartisan support for cannabis reform from major presidential candidates

AdvisorShares offers three ETFs for cannabis investment: MSOS (largest cannabis ETF focused on US MSOs), MSOX (leveraged cannabis exposure), and YOLO (global equity cannabis ETF). The company remains optimistic about significant progress toward cannabis reform but acknowledges potential delays in implementation.

Positive

• AdvisorShares manages over $1 billion in cannabis ETFs
• Potential reclassification of cannabis from Schedule I to Schedule III, which could remove tax burdens for MSOs
• 92.45% of public comments favor cannabis rescheduling
• Florida's cannabis market projected to grow from $2 billion to $4.9-$6.1 billion with adult-use legalization
• Both major presidential candidates express support for cannabis reform

Negative

• Potential delays and extended timelines in the implementation of cannabis reforms

Insights

Financial Analyst

The pending regulatory changes in the U.S. cannabis market could significantly impact multi-state operators (MSOs) and related ETFs. The potential rescheduling of cannabis from Schedule I to Schedule III is particularly noteworthy, as it could alleviate tax burdens under IRS Code Section 280E, potentially improving MSOs' profitability and cash flow.

State-level ballot initiatives in North Dakota, Nebraska and Florida could expand the legal cannabis market substantially. Florida's potential adult-use legalization is especially impactful, with projections suggesting a $4.9 billion to $6.1 billion market in the first year. This expansion could drive significant growth for MSOs operating in these states.

However, investors should remain cautious. While reforms appear likely, implementation timelines are uncertain and delays are possible. The industry still faces regulatory challenges and operational risks. AdvisorShares' ETFs (MSOS, MSOX, YOLO) offer exposure to this potential growth, but carry their own risks, particularly the leveraged MSOX fund designed for experienced traders.

Legal Expert

The potential rescheduling of cannabis from Schedule I to Schedule III represents a significant legal shift with far-reaching implications for the industry. This change would acknowledge cannabis' medical value and lower potential for abuse, potentially easing federal restrictions on research and banking.

The high level of public support (92.45% of DEA public comments favoring rescheduling) suggests strong momentum for reform. However, the rescheduling process involves multiple federal agencies and could face legal challenges, potentially extending the timeline for implementation.

State-level ballot initiatives continue to reshape the legal landscape. As more states legalize medical or adult-use cannabis, it creates a complex patchwork of regulations that businesses must navigate. This evolving legal environment presents both opportunities and compliance challenges for multi-state operators.

Investors should monitor these legal developments closely, as they will significantly impact the operational and financial landscape for cannabis companies.

With cannabis approaching a pivotal juncture, AdvisorShares provides key investment exposure to multi-state operators through its industry-leading ETF suite

BETHESDA, Md., Oct. 21, 2024 /PRNewswire/ -- The U.S. cannabis market is approaching historic regulatory reforms, which AdvisorShares is monitoring closely as an investment leader in this specialized sector. Managing over $1 billion in cannabis ETFs, AdvisorShares provides investors with direct exposure to U.S. multi-state operators (MSOs):

• MSOS – Largest cannabis ETF with the majority of its investment exposure in U.S. multi-state operators
• MSOX – Designed for experienced traders only, leveraged cannabis exposure
• YOLO – Global equity cannabis ETF, including U.S. multi-state operators

"As 2024 draws to a close, the cannabis industry stands at a pivotal moment, with evolving public perception and legislative and regulatory progress both in the U.S. and abroad," said Dan Ahrens, managing director at AdvisorShares and portfolio manager of MSOS, MSOX and YOLO. "Cannabis continues to gain mainstream acceptance, and we believe elections and anticipated reforms are setting the stage for new avenues of growth and expanding opportunities for investors across the sector."

Key Catalysts Pivoting into Year-End:

Federal Cannabis Rescheduling

Current Status: Cannabis is in the process of being reclassified from a Schedule I substance, which is the most highly controlled level for substances with no accepted medical use and a high potential for abuse, to Schedule III, which recognizes medical value and lower potential for dependence.

Impact: This reclassification holds substantial benefits for U.S. cannabis companies, particularly multi-state operators (MSOs). One of the most significant advantages would be the removal of tax burdens enforced under IRS Code Section 280E, allowing companies to retain more capital on their balance sheets.

Public Support: As part of the rescheduling process, the DEA held a public comment period where 92.45% of comments of the record-breaking 43,000 comments submitted favor the change for rescheduling according to Headset analysis.

Cannabis on the Ballot – Billions at Stake

Current Status: A growing number of states continue to adopt medical or adult-use cannabis programs. As of now, a significant portion of the U.S. population resides in states with such programs, and this number is expected to increase following the upcoming November 5th ballot initiatives. These initiatives include potential milestones for several states, further driving momentum in the cannabis market.

States with Key Ballot Initiatives:

• North Dakota and Nebraska: Voters will decide on Initiated Measure 5, which seeks to legalize recreational marijuana. The state already allows medical marijuana use. Nebraska is one of the few states still waiting on medical cannabis access. In November, voters will weigh in on Initiative 437, which would legalize medical marijuana.
  
  
• Florida: Florida's cannabis market is on the brink of significant expansion, with a vote scheduled for November 2024 to legalize adult-use marijuana. Currently, Florida has over 871,000 registered medical marijuana patients and generates $2 billion in annual sales. Projections indicate that adult-use legalization could propel the market to between $4.9 billion and $6.1 billion in sales within the first year of implementation*. Former President Donald Trump has publicly voiced support for the measure, signaling widespread political and public backing.

These legislative and regulatory changes are anticipated to accelerate growth in the cannabis sector and expand market opportunities. The industry's trajectory points towards a promising future as normalization and reform continue to unfold at both the state and federal levels.

For the first time, both major presidential candidates have publicly expressed support for cannabis reform, marking a significant shift in the national conversation on marijuana policy.

Pot Becomes a Popular Political Issue

For the first time, both major presidential candidates have publicly expressed support for cannabis reform, marking a significant shift in the national conversation on marijuana policy.

HARRIS:	TRUMP:
"I just feel strongly, people should not be going to jail for smoking weed," "Second, I just think we have come to a point where we have to understand that we need to legalize it and stop criminalizing this behavior,"	"As I have previously stated, I believe it is time to end needless arrests and incarcerations of adults for small amounts of marijuana for personal use," "As a Floridian, I will be voting YES on Amendment 3 this November."

AdvisorShares remains optimistic about the potential for significant progress toward cannabis reform and believe we are on the path to achieving historic changes. While we acknowledge these reforms are long overdue, we are mindful that delays and extended timelines may still arise in the process of implementation. Stay informed on timely developments within the industry and the companies driving these changes, follow us on social media and tune in to our daily #AlphaNooner for expert insights and updates.

About AdvisorShares

AdvisorShares is a leading provider of active ETFs. For financial professionals and investors requesting more information, call 1-877-843-3831 or visit advisorshares.com. Follow @AdvisorShares on X and on Facebook, YouTube, LinkedIn and Twitch for more insights.

AdvisorShares oversees the largest portfolio of publicly traded cannabis stocks through its three NYSE-listed ETFs:

AdvisorShares Pure US Cannabis ETF (Ticker: MSOS) - U.S. Cannabis Companies

MSOS is the largest cannabis ETF focused exclusively on U.S. cannabis companies and as the largest cannabis market in the world, the U.S. offers what we believe to be the greatest growth potential in the industry.

AdvisorShares Pure Cannabis ETF (Ticker: YOLO) - Global Cannabis Companies

YOLO became the first ETF with US cannabis exposure that blends the opportunities of the American cannabis market with a selective global approach. YOLO is the top-performing cannabis ETF in 2024 as of 9/30/2024.

AdvisorShares MSOS Leveraged Daily ETF (Ticker: MSOX) - Leveraged Exposure for Active Traders

Effective November 1, 2024, MSOX's name is changing to "MSOS Daily Leveraged ETF" from "AdvisorShares MSOS 2X Daily ETF".

MSOX has a daily leveraged investment objective and is designed for experienced and sophisticated active day trading investors only. While the investment object is still designed to target two times the exposure the Fund will typically be in range above or below the two times leverage target. This ETF was built to provide more liquidity to these companies in this growing industry, but it's important for investors to remember this ETF is designed only for experienced and sophisticated active day trading investors. Please read the MSOX prospectus for all the risks associated with this ETF.

Before investing you should carefully consider the Fund's investment objectives, risks, charges and expenses. This and other information are in the prospectus, a copy of which may be obtained by visiting the Fund's website at www.advisorshares.com. Please read the prospectus and summary prospectus carefully before you invest.

Foreside Fund Services, LLC, distributor.

The Fund is not suitable for all investors. The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking daily 2x investment results, understand the risks associated with the use of leverage, and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. An investor could lose the full principal value of their investment within a single day.

The Fund is an actively managed ETF that seeks to provide investment results that are approximately two times (2x) the daily total return, before fees and expenses, of the US Cannabis ETF, an affiliated ETF, by entering into one or more swap agreements on the US Cannabis ETF. The Fund does not seek to achieve its stated investment objective for a period of time different than a single day. A single day is measured from the time the Fund calculates its net asset value ("NAV") to the time of the Fund's next NAV calculation.

The Fund will enter into one or more swap agreements intended to produce economically-leveraged investment results relative to the returns of the US Cannabis ETF. The Fund may use a combination of swaps on the US Cannabis ETF and swaps on various investment vehicles that are designed to track the performance of the US Cannabis ETF. The Fund expects that cash balances in connection with the use of such financial instruments ("Collateral") will typically be held in money market instruments or other cash equivalents.

Cannabis-Related Company Risk. Cannabis-related companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may (i) significantly affect a cannabis-related company's ability to secure financing, (ii) impact the market for marijuana industry sales and services, and (iii) set limitations on marijuana use, production, transportation, and storage. Cannabis-related companies may also be required to secure permits and authorizations from government agencies to cultivate or research marijuana. In addition, cannabis-related companies are subject to the risks associated with the greater agricultural industry, including changes to or trends that affect commodity prices, labor costs, weather conditions, and laws and regulations related to environmental protection, health and safety. Cannabis-related companies may also be subject to risks associated with the biotechnology and pharmaceutical industries. These risks include increased government regulation, the use and enforcement of intellectual property rights and patents, technological change and obsolescence, product liability lawsuits, and the risk that research and development may not necessarily lead to commercially successful products.

Shares are bought and sold at market price not net asset value (NAV) and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined) and do not represent the return you would receive if you traded at other times.

An Option is a privilege, sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

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SOURCE AdvisorShares

FAQ

What are the key catalysts for the US cannabis market according to AdvisorShares?

AdvisorShares highlights federal cannabis rescheduling from Schedule I to Schedule III, upcoming state ballot initiatives in North Dakota, Nebraska, and Florida for cannabis legalization, and bipartisan support for cannabis reform from major presidential candidates as key catalysts for the US cannabis market.

How many cannabis ETFs does AdvisorShares offer and what are their ticker symbols?

AdvisorShares offers three cannabis ETFs: MSOS (largest cannabis ETF focused on US multi-state operators), MSOX (leveraged cannabis exposure), and YOLO (global equity cannabis ETF).

What is the projected market size for Florida's cannabis industry if adult-use is legalized?

According to projections, Florida's cannabis market could grow from its current $2 billion in annual sales to between $4.9 billion and $6.1 billion in sales within the first year of implementing adult-use legalization.

What percentage of public comments favor cannabis rescheduling according to the press release?

According to Headset analysis mentioned in the press release, 92.45% of the record-breaking 43,000 comments submitted during the DEA's public comment period favor the change for cannabis rescheduling.