A survey of 17 institutional investors by ATB Cormark Capital Markets puts the odds of the federal hemp ban taking effect at 58%. The firm’s analyst argues the market is missing how much licensed operators stand to gain, though in many states hemp buyers have no dispensary to move to.
When ATB Cormark Capital Markets asked institutional cannabis investors in late September how likely a federal ban on intoxicating hemp was to take effect, respondents put the odds at 58%.
The ban is already law. Section 781 of Public Law 119-37, signed in November 2025, redefines hemp and caps finished products at 0.4 milligrams of total THC per container, a threshold that pushes most THC drinks, gummies, vapes and hemp flower sold today outside the federal definition. A stopgap funding law, Public Law 119-103, signed September 2, delayed most of those changes to December 11, after passing the Senate 90-6 and the House 370-48. Products containing cannabinoids that cannot be naturally produced by the cannabis plant still lose hemp status on November 12. The White House backed the one-month delay, Axios reported, citing work on a broader framework for medicinal THC products, but its congressional liaison told Senate Republicans in August there would be no further delays.
Frederico Gomes, director of institutional equity research at ATB Cormark Capital Markets, thinks investors have the size of that event wrong.
“We believe investors are underestimating the federal hemp ban because many are only now grasping the scale of the intoxicating hemp market and its direct drag on regulated cannabis,” Gomes said in written responses to questions. “In our conversations, institutional investors are consistently surprised to learn that intoxicating hemp could be generating over $30bn in annual sales, matching or exceeding the entire state-licensed cannabis market.”
A separate industry estimate lands in the same broad range, though it measures something different. Whitney Economicsestimated in a September report that stricter state and federal restrictions could reduce hemp retail revenues by $28.3 billion, a figure that includes non-intoxicating CBD products. Beau Whitney, the firm’s founder and chief economist, said the report was sponsored by a group of hemp operators and advocacy groups and reviewed by outside academics, and that his firm takes work from marijuana, hemp, government and investor clients alike.
Over the past three years, Gomes argues, state-regulated cannabis growth flattened as hemp spread into “not just beverages and gummies, but core form factors like flower, pre-rolls, and vapes.”
Whitney disputes that. He attributes the slowdown to supply-induced price compression, blaming state regulators for letting production outpace demand and drive prices down, squeezing margins and profitability and pushing out small businesses. New market openings masked that oversupply for years, he said, until consumer conversion to legal markets slowed. “Nothing to do with hemp,” Whitney said in a text message.
The survey shows the ban ranks well behind rescheduling and uplisting as a reason to commit more capital. Asked what would increase their willingness to allocate more money to multistate operators, 81.3% of respondents ranked full rescheduling in their top two factors and 37.5% named uplistings to major U.S. exchanges. The hemp ban made the top two for 25%.
“We believe the 58% probability reflects ingrained investor skepticism built over years of federal regulatory delays and false starts in the cannabis sector,” Gomes said. Investors, he said, are weighing the chance that Congress extends the deadline again while it negotiates a regulatory framework, carves out specific product categories or enforces the ban weakly enough that illicit hemp sales persist. “In a nutshell, we think investors remain hesitant to price in this catalyst until the ban actually becomes a reality.”
Deals Over Growth
The same survey shows a shift in what investors want operators to do with their money. M&A ranked among the top two capital priorities for 56.3% of respondents, up from 24% in ATB’s spring survey. Share buybacks rose to 50% from 16%. Organic growth fell to 31.3% from 68%. Debt repayment held the top spot, tied with M&A. Investing in new verticals, a category ATB defines to include hemp-derived THC beverages, fell to last place at 6.3%, down from 28%.
On paper, that looks like a contradiction. Investors are told the ban will accelerate growth, and they want less spent on growing. Gomes says the two fit.
“Initially, the federal hemp ban would be a windfall for MSOs’ [multistate cannabis operators’] organic growth, requiring little to no capex,” he said. Operators could absorb redirected demand “using their existing retail footprints, cultivation assets, and supply chains without committing heavy fresh capital to organic expansion.”
Acquisitions, in his view, are how operators get ahead of the shift. “M&A allows well-capitalized MSOs to more aggressively pull forward growth, capture market share, and build scale ahead of an expanding regulated addressable market,” he said.
Where It Would Show Up
Gomes’s conservative case has organic revenue growth for multistate operators returning to 5% to 10% as hemp volume migrates to licensed dispensaries. With rapid federal enforcement, he sees a one-time acceleration to 15% to 20% across 2027 and 2028 before growth settles back to single digits.
He points to Ohio as a preview. Ohio law has barred most intoxicating hemp products since March 20, though litigation has created exceptions for some businesses. Ohio’s September cannabis sales reached $116.83 million, up 33.2% from a year earlier, according to Headset data, the largest gain among the adult-use states Headset tracks. “We believe that ban was an important contributor to the growth,” Gomes said. Green Thumb Industries made a similar case in its second-quarter results in August, describing Ohio as an early example of intoxicating hemp products leaving retail as consumers move into the licensed channel.
Ohio’s growth has other drivers. A federal judge granted ten hemp businesses a preliminary injunction in July allowing them to keep selling, and the Sixth Circuit later narrowed that order without lifting it entirely. The same state law also limited lawful possession to marijuana purchased from an Ohio-licensed dispensary or grown at home, while Ohio prices run well above neighboring Michigan’s. The adult-use market is also young, with recreational sales beginning in August 2024. How much of the increase belongs to the hemp ban is not settled.
The larger prize, in Gomes’s estimate, is Florida, where he puts intoxicating hemp sales at about $4 billion. Trulieve, the state’s largest operator, “could be a significant beneficiary if a meaningful portion of that demand migrates into the regulated channel,” he said. Florida’s medical market has been flat: BDSA estimated February sales at $126.1 million, down 0.4% from a year earlier, after 2025 growth of 2.9%, and analysts project Trulieve’s 2026 revenue to decline 1%, according to New Cannabis Ventures.
The Catch
The thesis depends on hemp customers having a licensed retail option to turn to. In much of the country, they don’t. Texas and Tennessee have no adult-use cannabis market. Florida, Gomes’s biggest example, is medical-only, so a hemp buyer who wants a Trulieve product needs a qualifying condition, a physician’s certification and a state ID card. The state counted about 940,000 qualified patients with active cards in late August.