WARNING! Spoilers for The Craft: Legacy ahead
Fairuza Balk's Nancy Downs was last seen at the end of The Craft in a mental institution. Since then, The Craft: Legacy revealed that she became a mother to a girl named Lilith, primarily known as Lily (Cailee Spaeny), but several details from Zoe Lister-Jones's movie reveal a lot more happened to her since 1996. Here's everything that happened to Nancy Downs, according to canon.
Andrew Fleming's The Craft follows the story of Sarah Bailey (Robin Tunney) after she moves to a new town and attends a brand new school. When Nancy Downs (Balk), Rochelle Zimmerman (Rachel True), and Bonnie Harper (Neve Campbell) discover that she may be the fourth person they need to complete their coven, the dangers of practicing magic for selfish and harmful reasons unfolds. Nancy operates as the leader of the coven and channels the pagan deity Manon in order to gain stronger powers than her peers. Her magic is uncontrollable due to her volatile personality. When Sarah binds her from performing any forms of magic, she is committed to a mental institution, never to be heard from again until 2020.
The Craft: Legacy teased that Nancy Downs would be involved in the soft sequel in some way with a trailer cameo. Lister-Jones's movie focuses on Lily, who is the new girl in town and essentially takes on Sarah's role. While there is no Nancy equivalent in her coven, it's later revealed that she is actually the daughter of the same witch who once caused sharks to wash up on shore, and filled Sarah's house with snakes. The Craft: Legacy reveals important information about the character's past and, in doing so, answers questions about what happened to Nancy in the years after The Craft.
According to The Craft: Legacy, Nancy Downs is still in the mental institution that she's been in since 1996. Lily is approximately sixteen years old, which means that Nancy likely got pregnant with her in 2004. Lister-Jones's movie does not reveal what happened between 1996 and 2004, but it's likely that a possible The Craft 3 could offer a resolution to this large chunk of missing information. Helen (Michelle Monaghan) is Lily's adoptive mother, but she was also Nancy's nurse at the hospital.
When Lily discovers the truth, Helen explains that her birth mother went through such severe trauma that she was assigned to her at the local crisis center. It's alluded that this specific moment of trauma may have been when she conceived Lily. Due to the fact that her father remains unknown by the end of the movie, there are several theories that it may be Manon or even Lily's stepfather. Nancy asked Helen to adopt Lily and keep her a secret. Nancy did this in order to protect her from the truth of her past, as well as from the potential dangers of her powers.
While she uses her powers for good, it's possible that the discovery of her birth mother's source of power, Manon, could trigger something inside of her that could lead her to the dark side. While there are still questions about the other three members of Nancy's coven in The Craft, the sequel revealed concrete answers about her fate; a future The Craft 3 could do the same with the remaining witches in her coven, if the franchise continues.