May 2026 Newsletter

For years, the cannabis industry rewarded aggressive expansion, massive footprints, and growth at all costs. That era is ending.

Today, many of the operators outperforming the market are not the largest MSOs; they’re leaner, more disciplined businesses built around operational efficiency, local market strength, and sustainable economics.

As debt pressures rise, margins tighten, and investors become more selective, the industry is undergoing a major reset. Capital is increasingly flowing toward operators with strong cash flow, disciplined growth strategies, and defensible market positions rather than companies chasing scale without profitability.

In our latest blog, we break down:

• why smaller operators are gaining ground
• how markets like Missouri and Michigan illustrate the industry divide
• why investors are prioritizing operational quality over footprint size
• and what this shift means for cannabis valuations, M&A activity, and future investment opportunities

Read the blog to understand where cannabis capital is flowing next, and why the industry’s next winners may look very different from the last cycle.

U.S. Cannabis License Decline Signals Industry Consolidation Is Accelerating

The U.S. cannabis industry is quietly entering a major consolidation phase.

According to recent industry data, active cannabis licenses have now declined for seven consecutive quarters, with the total number of operators falling approximately 9% over the past two years to roughly 36,000 active licenses nationwide as of Q1 2026. Mature markets including California, Michigan, Oklahoma, and New Mexico continue driving much of the contraction as operators face ongoing pricing pressure, oversupply, elevated operating costs, and tighter access to capital.

Cultivation licenses have experienced the sharpest pullback, declining roughly 24% since Q3 2023 as wholesale pricing continues compressing across many mature markets. Oklahoma alone has reportedly seen nearly half of its operators exit the market over the last two years, while Michigan recorded another 8% decline in active licenses during Q1 2026.

At the same time, emerging markets continue telling a different story. While total license growth has slowed nationally, pre-licensing activity and application volume remain elevated in newer states like New York and Texas, signaling that capital is becoming far more selective about where it wants exposure.

Importantly, this trend does not necessarily reflect industry weakness; it reflects maturation. Investors are increasingly prioritizing profitability, operational discipline, and sustainable cash flow over aggressive expansion. At CannaMLS, we believe this environment could ultimately strengthen the value of efficient, well-positioned operators while creating compelling acquisition opportunities for strategic buyers.

New Mexico’s Cannabis Boom Highlights Both the Opportunity and Risk of Border-State Markets

New Mexico’s cannabis market continues generating impressive top-line growth, surpassing $628 million in total cannabis sales during 2025 and pushing cumulative market sales beyond $2 billion since legalization launched in 2022.

What makes New Mexico particularly interesting is how heavily the state benefits from out-of-state demand. State data suggests approximately 38% of cannabis purchases are coming from non-residents, with border counties near Texas continuing to produce some of the strongest sales volumes in the state. Doña Ana County alone has become one of the most important cannabis retail corridors in the Southwest as Texas consumers cross state lines to access legal products.

But rapid growth has also intensified competition.

New Mexico now has more than 1,000 licensed dispensaries statewide, contributing to significant price compression across nearly every product category. Average flower pricing has reportedly fallen nearly 62% since adult-use sales launched, dropping to approximately $4 per gram by late 2025.

The result is a market increasingly divided between highly strategic operators with strong positioning and operators struggling to maintain margins in oversaturated regions. Border-town exposure, disciplined expansion, and strong local market positioning are becoming increasingly important drivers of long-term performance as the market matures.

Minnesota Merges Cannabis Markets, Introduces New Licenses

Minnesota continues taking a relatively pragmatic and business-friendly approach to cannabis market development.

This month, lawmakers approved legislation merging the state’s medical and adult-use cannabis supply chains, a move expected to simplify compliance, improve operational efficiency, and reduce costs for operators entering the market. The legislation also introduces new “macrobusiness” and “microbusiness” license categories beginning in 2027, including a macrobusiness cultivation cap of approximately 38,000 square feet indoors.

Importantly, the bill also creates a pathway for existing hemp businesses to transition into the regulated cannabis market, significantly expanding the pool of potential operators. Additional provisions expand social equity eligibility, permit outside investment into social equity businesses, and allow on-site consumption of THC beverages and edibles at licensed retailers.

Taken together, these changes suggest Minnesota is focused on building a more scalable and commercially viable cannabis market rather than creating unnecessary operational friction. For investors and operators monitoring emerging Midwest opportunities, Minnesota continues positioning itself as one of the more interesting long-term markets to watch.

Medical Market Expansion: Georgia and Texas See Major Growth

While much of the industry remains focused on adult-use expansion, some of the most meaningful growth opportunities continue developing quietly within medical-only states:

Georgia

• Expanded Access: Georgia's "Putting Georgia's Patients First Act" removes the 5% THC cap, allowing patients to possess up to 12,000mg total THC.
• New Product Formats: The legislation legalizes vaporizable medical cannabis products for patients 21 and older, expected to be available by January 1, 2027. This is anticipated to significantly boost revenue for licensed operators.
• Broader Eligibility: The law adds inflammatory bowel disease and lupus to the list of qualifying conditions and eases requirements for several existing conditions.

Texas

• Patient Growth: Texas's medical cannabis program (TCUP) saw a significant increase of 22,000 new patients between September 2025 and April 2026, bringing the total to nearly 150,000.
• Expanded Conditions & Products: This surge follows the inclusion of chronic pain as a qualifying condition and an increase in allowable THC concentration (1 gram per package, 10mg per dosing unit). The program also diversified product options to include inhalers, lotions, and vaporizers.
• Increased Licensing: The number of licensed dispensing organizations expanded from three to fifteen, with new conditional licenses issued and existing operators opening multiple satellite pickup locations across the state, signaling growing market opportunities despite ongoing regulatory challenges.

While both markets remain highly regulated, the continued expansion of patient access and operator infrastructure highlights the long-term potential many investors still see in limited-license medical cannabis states.