Why the AdvisorShares Pure US Cannabis ETF (MSOS) is the Strategic Play for Cannabis Investors in 2025

The U.S. cannabis industry is entering a pivotal phase of growth, driven by regulatory momentum, sector consolidation, and evolving investor demand. For those seeking to capitalize on this transformation, the AdvisorShares Pure US Cannabis ETF (MSOS) stands out as a uniquely positioned vehicle. By aligning with federal rescheduling efforts, leveraging state-level legalization trends, and employing active management strategies, MSOS offers a compelling case for investors navigating the sector's next chapter.

Regulatory Momentum: A Catalyst for Sector Normalization

The federal rescheduling of cannabis from Schedule I to Schedule III remains a cornerstone of the industry's long-term viability. While the DEA's rulemaking process faces delays due to a pending appeal, the groundwork laid by the HHS in 2023 and the proposed rule in 2024 signals a clear trajectory. Rescheduling would unlock critical benefits: reduced barriers to banking, tax deductions under Section 280E, and expanded research opportunities. These changes could catalyze a shift from a cash-heavy, fragmented market to a more institutionalized, scalable industry.

State-level developments further reinforce this momentum. California's product safety recalls, Florida's 2026 legalization initiative, and Ohio's $702.5 million in recreational sales highlight the sector's maturation. Even in conservative states like Texas, debates over hemp-derived products underscore growing acceptance. For MSOS, which focuses exclusively on U.S. operators, these regulatory tailwinds create a fertile environment for its portfolio companies to scale.

Sector Consolidation: Strategic Positioning for Long-Term Growth

The cannabis sector is undergoing a wave of consolidation as companies exit unprofitable markets and double down on high-potential regions. Cresco Labs' exit from California and TerrAscend's $79 million financing highlight this trend. MSOS's active management strategy, led by Dan Ahrens, enables rapid reallocation of capital to firms optimizing their geographic footprints. For example, Trulieve Cannabis's expansion into Florida and The Cannabist Company's entry into Delaware reflect a focus on markets with strong consumer demand and regulatory clarity.

This consolidation is not just about survival—it's about creating durable competitive advantages. Top operators are leveraging economies of scale, refining supply chains, and investing in innovation (e.g., single-serving units and infused products). MSOS's concentrated portfolio—anchored by holdings like Curaleaf (22.63%) and Green Thumb Industries (21.61%)—positions it to benefit from these strategic shifts.

Active Management and Liquidity: Navigating Volatility with Precision

MSOS's active management model is its most distinctive feature. Unlike passive ETFs, which track broad indices, MSOS adjusts its holdings daily to reflect market dynamics. This agility is critical in a sector where regulatory news, state ballot outcomes, and operational pivots can drive sharp price swings. For instance, the ETF's 35.96% year-to-date return in 2025 (as of August 2025) contrasts with its -26.42% 52-week return, illustrating the volatility inherent in the space.

Liquidity metrics further underscore MSOS's appeal. With a 128% surge in trading volume in August 2025 and a 30-day median bid-ask spread of 0.228050, the ETF offers investors flexibility to enter or exit positions with minimal friction. Its options eligibility adds another layer of strategic utility, enabling hedging or leveraged plays. The fund's net asset value (NAV) of $5.26, with a 1-day change of $0.29, also reflects strong alignment between market price and intrinsic value.

Investment Thesis: A Strategic Play for 2025 and Beyond

For investors, MSOS represents a balanced approach to cannabis exposure. It mitigates the risks of individual stock picking while capitalizing on the sector's macro trends. The ETF's focus on U.S. operators insulates it from international regulatory uncertainties, and its active management ensures adaptability in a rapidly evolving landscape.

However, caution is warranted. The 52-week return highlights the sector's volatility, and federal rescheduling remains contingent on resolving the pending appeal. Investors should consider MSOS as part of a diversified portfolio, ideally with a medium-term horizon to ride out short-term fluctuations.

Conclusion

The AdvisorShares Pure US Cannabis ETF (MSOS) is more than a basket of stocks—it's a strategic lever for capturing the cannabis industry's next phase of growth. By aligning with regulatory progress, sector consolidation, and active management, MSOS offers a liquid, transparent, and dynamic vehicle for investors. As the U.S. moves closer to federal normalization and state-level expansion accelerates, MSOS is poised to deliver outsized returns for those willing to navigate the sector's inherent volatility.

For now, the key is to stay informed, monitor regulatory developments, and position capital where momentum and management converge. In 2025, that intersection is where MSOS shines.