Big Money's Cannabis Play: Are Institutional Investors Betting on Legalization?

The cannabis sector has become an unexpected battlefield for Wall Street’s biggest players. While Canopy Growth, Canada’s largest publicly traded pot producer, grapples with persistent unprofitability and U.S. market restrictions, something curious happened during the third quarter of 2025: major institutional investors started quietly accumulating its shares. But are these seasoned players signaling confidence, or simply capitalizing on temporary weakness?

The regulatory landscape shifted last December when President Donald Trump issued an executive order calling for cannabis rescheduling to Schedule III—a move that sparked temporary euphoria across the sector. Yet since that initial rally, marijuana stocks retreated sharply. The burning question now is whether the smart money that accumulated shares during Q3 are holding firm or quietly heading for the exits.

Why Cannabis Stocks Caught Wall Street’s Attention in Q3

According to the latest SEC 13-F filings, the largest buyers of Canopy Growth shares during the third quarter weren’t traditional asset managers running mutual funds or ETFs. Instead, quantitative trading powerhouses and hedge funds led the charge. Susquehanna International Group expanded its position by approximately 2.75 million shares. Behind them, other quantitative traders like Citadel, Millennium Management, and D.E. Shaw each purchased 2.7 million, 2.1 million, and 1.9 million shares respectively.

This synchronized accumulation by multiple heavyweight firms suggests a calculated thesis rather than random portfolio shuffling. These institutions are typically early movers, positioning themselves ahead of anticipated catalysts. For the cannabis sector, that catalyst was supposed to be federal legalization progress.

The Legalization Catalyst and Its Mixed Results

December’s executive order represented meaningful progress toward U.S. federal cannabis legalization, even if Schedule III rescheduling falls short of full legalization. The announcement initially ignited market enthusiasm, sending cannabis stocks higher. However, the rally proved short-lived. Shares retreated as market participants wrestled with competing narratives: optimism about regulatory reform versus concerns about Canopy’s ability to turn profitable in a competitive landscape.

This price action created an interpretive puzzle. Did institutional buyers panic during the selloff and abandon their Q3 positions? Or did they view the weakness as a buying opportunity, doubling down on their legalization thesis? The answer remains elusive until the next round of 13-F filings reveals their moves.

Decoding the Institutional Move: Buy Now or Wait?

For retail investors considering a position in cannabis stocks, the institutional playbook offers limited clarity. The silence between quarterly filings creates a void of uncertainty. Major players accumulated shares ahead of a catalyst, but that catalyst’s market impact remains ambiguous. The retreat in share price could signal either a temporary pullback or the beginning of a deeper correction.

One certainty stands out: traditional valuation metrics offer little comfort. Canopy Growth’s persistent losses and exclusion from the lucrative U.S. market remain structural headwinds. Any cannabis investment thesis must ultimately rest on the timing and terms of federal legalization—a process that remains more political theater than guaranteed outcome.

For now, the smartest move might be patience. Once the next quarterly institutional filings become public, investors will gain fresh insight into whether Wall Street’s biggest minds are staying invested or taking profits. Until then, cannabis stock investors are essentially making a binary bet on legalization timing with incomplete information about where the real money stands.