Consumers Keep Hitting Buy on THC Despite Federal Restrictions

Consumers Keep Hitting Buy on THC Despite Federal Restrictions

Jeremy Berke

Wed, August 5, 2026 at 4:03 PM GMT+3 3 min read

• RYM -0.16%

THE GIST

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Cannabis is having a moment. Americans now reach for weed daily more often than they reach for a drink, and THC seltzers sit on shelves at Total Wine and Target like they belong there. RYTHM, the Nasdaq-listed holding company behind a stack of those brands, just had a very nice quarter on the bet that the shelf space is permanent. Congress has other ideas.

WHAT HAPPENED

RYTHM surged 23% Tuesday after a strong second-quarter print and a possible federal reprieve on the hemp-derived THC ban set to take effect in November. The company posted $1.2 million in net income on $23 million in revenue, up 73% from the prior quarter. The stock is up about 56% over the last 6 months.

The consumer has spoken, and the consumer wants easy access to THC. Daily cannabis use now outpaces daily drinking, per new federal survey data. Many lawmakers, especially Republicans, think they know better.

Let's do some clarity: THC is the main psychoactive ingredient in cannabis, which remains federally illegal in the U.S., though the DEA just wrapped hearings weighing whether to move recreational cannabis from the most restrictive Schedule I to the far less restrictive Schedule III of the Controlled Substances Act. The 2018 Farm Bill legalized THC derived from "hemp," a category Congress invented in statute with no grounding in chemistry. That let products like THC seltzers and gummies flourish in bodegas and grocery stores near you. It's effectively the same product as state-legal dispensary weed with a different retail channel.

D.C. lawmakers (led by the very much alive Sen. Mitch McConnell) who wrote the original Farm Bill, slipped language into last year's spending bill shutting that market down, re-criminalizing hemp-derived THC and fixing his own mistake. It takes effect November 12, creating an existential crisis for the companies selling these products, along with the inventory sitting on consumer store shelves.

U.S. cannabis policy has never been coherent, so lawmakers added language to the Senate's upcoming continuing resolution delaying enforcement by 1 month, buying time to negotiate comprehensive regulation. Versions of that, like Rep. Andy Barr's Lawful Hemp Protection Act, are already floating around Congress.

WHY IT MATTERS

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Of course, it would be easier to simply follow Canada's lead and legalize weed full stop, but we digress.

RYTHM functions as a sort-of holding company for the consumer THC brands of Green Thumb Industries (GTI), an OTC-listed company that cultivates and sells regulated cannabis in states where it's legal. The esoteric corporate structure is Green Thumb's push to give both retail and institutional investors greater access to the cannabis narrative by taking over the Nasdaq-listed Agrify, which last year bought Green Thumb's portfolio of cannabis brands for an up-front $50 million, licensing them back to Green Thumb for a fixed $70 million a year.

RYTHM, for its part, separates its hemp-derived THC products from its regulated ones, though it all trades under the same ticker. It skirts federal restrictions through the aforementioned licensing deal, with Ben Kovler serving as the CEO and Chairman of both companies. Green Thumb also owns over a third of RYTHM's total shares.

That complexity is just a roundabout compliance method.

If the ban takes effect, it triggers Green Thumb's right to repurchase the brand IP, meaning the November deadline threatens not just RYTHM's brand portfolio but the licensing structure the whole company is built on.

WHAT'S NEXT

A slew of cannabis companies report earnings this week. The test will be to see whether demand continues to increase, and how cannabis execs are thinking about federal reclassification and hemp policy. There's a long way to go: The AdvisorShares Pure Cannabis ETF (MSOS), which tracks a basket of U.S. cannabis stocks, peaked in February 2021 and has since lost 92% of its value.