Cannabis stocks jumped Friday as the White House prepared to significantly ease federal restrictions on marijuana.
Weed producers Tilray Brands and Canopy Growth jumped more than 44% and 52%, respectively. Cannabis greenhouse operator Innovative Industrial Properties surged nearly 9%. The Amplify Seymour Cannabis ETF (CNBS) rallied more than 54% for its best day on record.
President Donald Trump is expected to issue an executive order as soon as Monday that would allow for reclassification of marijuana, a person familiar with the matter told CNBC. The person asked not to be named because they are not authorized to speak about the White House’s plans.
Such a move would allow cannabis companies to fall under different tax regulations and encourage investment.
Cannabis stocks took a leg up in Friday’s midday trading following CNBC’s report.
The Washington Post first reported Thursday that Trump was expected to use an executive order to instruct federal agencies to reclassify marijuana as a less-regulated Schedule III drug from a Schedule I. Axios reported that the potential reclassification of marijuana — out of a group that includes heroin and into a lower tier of less dangerous drugs, such as steroids and Tylenol with codeine — would take place early next year.
Trump floated a change in marijuana’s classification in August.
“Trump rescheduling marijuana was not an if, in our assessment, but a when,” Ed Groshans of Compass Point, a middle-market investment bank, wrote to clients in a Friday note.
More optimism
Groshans said the reported change would be “positive” for the cannabis industry, allowing banks to serve the sector.
He said he expects that if Trump orders cannabis to be rescheduled, the Drug Enforcement Administration would finalize a proposed rule for the reclassification by the summer.
Bill Kirk, senior research analyst at Roth, said he’s also monitoring whether the Supreme Court decides next week to hear a case on state regulations and federal prohibition of cannabis. A positive ruling for the industry in that case could speed up regulatory timelines.
The industry sees the latest moves as a sign of progress to normalize pot under national law.
“I’m a lot more optimistic than I ever have been,” Tilray CEO Irwin Simon told CNBC.
Shawn Hauser, partner at cannabis-focused law firm Vicente LLP, said a reclassification would mark only a “partial victory,” as the sector will need to continue fighting for legalization. However, she said the momentum can press Congress to create a regulatory framework that offers broader changes around safety, access and criminal justice reform than what a rescheduling provides.
“This [is] the beginning of a new era of public health policy,” Hauser said. “If implemented, it dismantles nearly a century of outdated drug policies that fly in the face of science and medicine.”
Pot stocks have struggled since a brief mania around public growers and dispensaries in the years before Covid, even as cannabis has received broader acceptance and some states have eased their classifications.
Tilray shares were recently trading at a little more than $10 after peaking at more than $2,140, adjusted for splits, in September 2018.
