The AdvisorShares Pure US Cannabis ETF has spent the last month on a rollercoaster. After climbing to $6.45 in mid-December 2025, shares dropped 26% to around $4.80 by mid-January. The decline came despite President Trump signing an executive order easing cannabis access in late December 2025, according to Polymarket prediction market data. Yet marijuana remains a Schedule I controlled substance, as federal rescheduling did not occur in 2025.

This whipsaw illustrates the tension MSOS investors face. The fund holds $921 million in assets with a 0.78% expense ratio, providing exposure to US multi-state operators like Curaleaf, TerrAscend, and Trulieve through direct equity and swap contracts. But the regulatory environment remains the primary performance driver, and the path forward is murky.

The Federal Policy Question That Won’t Go Away

Cannabis investors have been waiting for federal rescheduling or broader legalization for years. The December executive order moved the needle, but without full descheduling or rescheduling, core challenges persist. Multi-state operators still cannot access traditional banking services under federal law, face punitive tax treatment under IRS Section 280E (which disallows standard business deductions), and operate in a fragmented state-by-state system.

What to watch: Congressional movement on the SAFE Banking Act, which would allow cannabis businesses to access banking services without federal penalties. Also monitor DEA announcements regarding potential rescheduling from Schedule I to Schedule III, which would ease 280E tax burdens significantly. These developments don’t follow a predictable calendar but tend to surface during budget negotiations or when key committee chairs signal support. Federal Register filings and Congressional committee schedules are your best monitoring tools.

The Swap Structure and What It Means for You

MSOS uses total return swaps to gain exposure to Canadian-listed US operators, a workaround since many companies trade over-the-counter and face listing restrictions. Roughly 9.6% of the portfolio sits in cash equivalents, suggesting defensive positioning. The swap structure introduces counterparty risk and can create tracking differences versus direct equity ownership.

Check the fund’s monthly fact sheet and holdings file on the AdvisorShares website to monitor changes in swap exposure versus direct holdings. If the fund shifts more capital into swaps, it may signal liquidity constraints or regulatory concerns. Increased direct equity positions could indicate improving market access.

Consider YOLO Instead

The AdvisorShares Pure Cannabis ETF (YOLO) offers a similar strategy with a longer track record (launched April 2019 versus MSOS in September 2020) and slightly higher AUM at $940 million. YOLO’s 0.75% expense ratio is marginally lower, and its portfolio includes international exposure alongside US operators, providing geographic diversification that MSOS lacks.

Bottom line: Federal rescheduling progress and the fund’s swap-to-equity ratio are the two signals that will most influence MSOS performance over the next year.