Cannabis shares rose on Friday as the White House geared up to greatly loosen federal limits on marijuana.
Weed manufacturers Tilray Brands and Canopy Growth surged over 44% and 52%, respectively. Cannabis greenhouse operator Innovative Industrial Properties jumped nearly 9%. The Amplify Seymour Cannabis ETF (CNBS) increased by over 54% for its highest day on record.
President Donald Trump is anticipated to sign an executive order as early as Monday that would permit the reclassification of marijuana, a source familiar with the situation informed CNBC. The individual requested anonymity as they are not authorized to disclose details about the White House’s intentions.
This action would allow cannabis firms to come under different tax laws and stimulate investment.
Cannabis shares rose during Friday’s midday trading following CNBC’s announcement.
The Washington Post first revealed on Thursday that Trump was expected to use an executive order to direct federal entities to reclassify marijuana as a less-restricted Schedule III substance from a Schedule I. Axios reported that the potential reclassification of marijuana — transferring it from a category that includes heroin to a less hazardous group of drugs, such as steroids and Tylenol with codeine — would take effect early next year.
Trump suggested a modification in marijuana’s classification in August.
“Trump’s rescheduling of marijuana was never a question of if, but rather of when,” Ed Groshans of Compass Point, a middle-market investment bank, wrote in a note to clients on Friday.
Increased optimism
Groshans stated that the proposed alteration would be “favorable” for the cannabis sector, enabling banks to engage with the industry.
He expressed that if Trump mandates the rescheduling of cannabis, the Drug Enforcement Administration would finalize a proposed regulation for the reclassification by summer.
Bill Kirk, a senior research analyst at Roth, mentioned he is also watching to see if the Supreme Court decides next week to hear a case regarding state laws and federal cannabis prohibition. A favorable outcome for the industry in that case could accelerate regulatory timelines.
The industry views the latest developments as a step towards normalizing cannabis under federal law.
“I’m significantly more optimistic than I’ve ever been,” Tilray CEO Irwin Simon told CNBC.
Shawn Hauser, a partner at cannabis-focused law firm Vicente LLP, indicated that a reclassification would represent only a “partial victory,” as the industry must continue advocating for full legalization. Nonetheless, she stated that this momentum could urge Congress to establish a regulatory framework that includes broader changes concerning safety, accessibility, and criminal justice reform beyond what a rescheduling could offer.
“This [is] the dawn of a new phase in public health policy,” Hauser remarked. “If carried out, it dismantles almost a century of antiquated drug policies that contradict scientific understanding and medicine.”
Pot stocks have faced challenges since a brief surge surrounding public cultivators and dispensaries in the years leading up to Covid, despite cannabis gaining wider acceptance and some states easing their regulations.
Tilray shares were recently trading at slightly over $10 after soaring to more than $2,140, adjusted for splits, in September 2018.
