By Shariq Khan

(Reuters) – Three people who are familiar with the matter stated Tuesday that Cresco Labs, a U.S. marijuana producer, is currently in talks to purchase Columbia Care (OTC) Inc for approximately $2 billion.

The deal would become the largest ever in U.S. cannabis. Even though the industry is still young, it continues to function in an environment that has a variety of laws across states.

According to sources, a deal could be announced by Wednesday. The exact terms of the agreement could not yet be revealed.

They warned that negotiations could fall apart. The individuals also pointed out that there are overlaps between the two companies in several states including the New York key market. This could lead to significant divestitures, which could be a hindrance in reaching an agreement.

Sources requested anonymity because the discussions were confidential.

Columbia Care and Cresco Laboratories did not respond to several requests for comment.

The United States has seen a boom in cannabis sales and is expected to surpass $46 billion by 2026 according to BDSA (an industry research company). This comes as New York and New Jersey are opening up to the market.

However, margins are still thin. Analysts and investors call for consolidation in order to increase profitability and find scale savings.

AdvisorShares Pure U.S. Cannabis Exchange-Traded Fund has seen a 19% drop in value this year.

Columbia Care shares have risen by about 9% in 2018, but are down nearly 70% from when it began trading in 2019. Cresco Labs shares are down 63%, compared to a peak of 2021.

The companies listed in Canada can trade in the United States over-the-counter as marijuana is still illegal. Therefore, the U.S. Stock Exchanges have banned companies from growing or selling the plants.

Cresco will report fourth quarter financial results on Wednesday. Columbia Care, however, has postponed their earnings for the past week to Thursday.