<div id="readability-page-1"><div> The prospects for bullish cannabis reform are good in the two biggest markets: The U.S. and Europe.However, uncertainties remain. Reform could continue to drag out, and the sector faces ongoing challenges like persistent price compression.Thus, the best way to play potential progress in the space is to go with companies that have fortress balance sheets and strong brands that give them staying power. Two that stand out in this regard are Green Thumb Industries (GTBIF) for U.S. exposure and Cronos (CRON) for European exposure.<h2>U.S. Cannabis Sector Reform</h2>In the U.S., the 2026 midterms could be a big driver of reform. Conservatives keep losing the youth vote to candidates on the left and the far left, as recent elections confirmed. Many advisors to President Donald Trump believe he needs to follow through on his election campaign promise for key cannabis sector reform – rescheduling – to win back some of the youth vote.Underlying the logic behind this tactic are opinion polls which consistently show that around 90% of Americans support legalization of cannabis in some form, either for recreational or medical use.Rescheduling would not legalize cannabis. Instead, it means moving cannabis to Schedule III from Schedule I under the Controlled Substances Act. This would significantly boost cannabis company cash flow. It would do this by neutralizing an IRS rule that bars the deduction of operating expenses against revenue from the sale of Schedule I substances. The rule is called 280E. Rescheduling would also make medical research easier.Even if the federal government does not move on rescheduling, state-level reform momentum continues to build. No fewer than seven states are in the process of liberalizing laws on recreational or medical-use cannabis, including several conservative Southern states, which have traditionally resisted change. They include: Texas, Florida, Virginia, Kentucky, Pennsylvania, New York and Minnesota.<h3>Green Thumb (GTBIF)</h3>The safest way to play the positive trends in the U.S. is by owning Green Thumb. It has developed solid brands in Rythm, Dogwalkers and incredibles. The other main advantage for investors is the conservative nature of management, which maintains a fortress balance sheet.Green Thumb has been careful about steering clear of excessive debt. It has managed its balance sheet conservatively in other ways. For example, many cannabis companies have entered the grey zone of holding back on tax payments to the IRS with arguments that federal prohibitions of expense deductions are inappropriate. This is risky, because at some point the IRS might officially disagree, and demand the cash – with interest and penalties.In contrast, Green Thumb has always played it safe and avoided this gambit. Even without support from this tactic, Green Thumb has maintained decent operating cash flow ($74 million in the third quarter) and solid cash levels relative to debt. Third quarter cash was $226.2 million, against debt of $247.4 million. Green Thumb’s senior credit facility does not mature for four years.The upshot: Green Thumb is the only major cannabis company helping shareholders by doing regular share buybacks. It currently has a $50 million buyback plan in place. It also has the financial strength to continue to open new stores in emerging cannabis markets like Minnesota and Virginia.[text_ad]<h2>European Cannabis Reform</h2>In Europe, countries are increasingly opening up medical cannabis markets led by Germany, the U.K., Switzerland, Poland and Czechoslovakia. Consumers welcome the change. Sales growth has been robust, and this is likely to continue. The Netherlands is in the process of converting its officially “tolerated” illicit market into a legal recreational-use market in a program called Wietexperiment.<h3>Cronos (CRON)</h3>Many cannabis companies are jumping on the European bandwagon, but the safest way to get exposure, in my view, is to own Cronos. Its balance sheet strength is obvious. Look no further than the $750 million in net cash, against a market cap of $952 million.In other words, for an enterprise value of about $200 million, shareholders are paying about 1.5 times sales for a business that posted 9% sequential sales growth in the third quarter to $36.3 million. That was a gain of 6% compared to the year before.“Cronos has the financial strength and strategic flexibility to continue expanding globally, invest in innovation, and deliver sustained value to shareholders,” said CEO Mike Gorenstein in the third quarter earnings call.A Canadian company, Cronos has a lot of experience in building markets abroad. It is one of the main suppliers in Israel, where its PEACE NATURALS remains the number one cannabis brand. Cronos Israel has posted seven quarters of record revenue.Cronos recently made a fresh foray into the European market with the purchase of CanAdelaar B.V., the largest cannabis company in the Netherlands’ recreational-use cannabis market. The purchase gives Cronos the #1 market share in the largest recreational-use market in Europe.Cronos appears to be getting a good deal because it paid or 1.4 times sales for leading company in a market with growth potential. CanAdelaar is the biggest player in the Dutch recreational-use legalization program, called the Wietexperiment. Under the Wietexperiment, illicit cannabis shops are forced to buy from legal suppliers like CanAdelaar. The Wietexperiment has considerable room to grow because it currently covers only 72 of 562 cannabis shops in the Netherlands.Like Green Thumb, Cronos has managed to build brand strength. Its Spinach brand is the #2 brand in Canada. It holds a 4.5% overall market share driven by category leadership in edibles. In edibles, Spinach held the #1 position with 19.7% market share, and it led gummies with 22.8% share.Cronos recently completed the expansion of its Cronos GrowCo operation in Canada, unlocking additional flower capacity. “We’ve definitely been weighed down by not having enough flower. That’s one of the reasons it’s been so important to get GrowCo online,” said Gorenstein in the latest earnings call. “We are well-positioned for growth in 2026.”To learn more about the cannabis stocks that I’m recommending now, subscribe to Cabot Cannabis Investor today.[author_ad] </div></div>

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2026 could be pivotal for cannabis reform in the U.S. and Europe, with potential benefits for companies like Green Thumb Industries and Cronos. U.S. midterms may drive reform, with rescheduling boosting cash flow. Green Thumb is noted for its strong balance sheet and share buybacks. In Europe, Cronos is expanding, leveraging its financial strength and strategic flexibility. Both companies are positioned to capitalize on market changes.

2026 Could Be a Big Year for Cannabis Reform