MJ and MSOS ETFs Signal High Upside on U.S. Legalization Outlook

LOS ANGELES- Investment in cannabis-focused ETFs such as Amplify’s MJ and AdvisorShares’ MSOS reflects growing investor anticipation of federal legalization-driven expansion, even amid pronounced volatility and structural headwinds. Analysts argue that rescheduling cannabis from Schedule I to Schedule III, expected following the U.S. Department of Health and Human Services recommendation, would ease tax burdens under IRS Section 280E and unlock institutional capital—potentially delivering outsized upside if implemented.

However, these funds remain susceptible to multiple risks. MSOS, which employs leveraged exposure to U.S. cannabis firms and derivatives, saw its 1‑year return drop 70% to $291 million in assets amid redemptions and persistent federal uncertainty. Even after a recent spike following Schedule III reclassification talk, overall inflows into cannabis ETFs remain subdued, with investor caution dampening enthusiasm.

Retail commentary reinforces this bifurcated outlook: while some users on forums describe MSOS’s decline as a long-term buying opportunity, others caution against overreliance on speculative catalysts and warning that cannabis equities remain tied to convoluted regulatory timing.

Despite setbacks—including failed ballot initiatives and a stalled GOP-controlled Congress—many investors continue to view federal reform as inevitable and transformative for the sector. Rescheduling would eliminate the 70% effective tax rate, reduce banking constraints, and potentially trigger institutional inflows—though no federal change is assured and the timeline may extend into 2026.