The U.S. government appears to be moving towards loosening strict marijuana regulations, but it’s still uncertain if this will lead to its normalization akin to alcohol or tobacco.
The Justice Department is finalizing President Trump’s executive order from December 18, which aims to reclassify marijuana, relieving it from the “Schedule 1” category that includes harsher drugs like heroin, into a less restrictive and potentially more profitable classification, according to top cannabis executives.
If this happens, U.S. Attorney General Pam Bondi is set to elevate marijuana to a “Schedule 3” status, similar to medications like Tylenol with codeine that can be prescribed by doctors.
Some investors are optimistic this change could open funding avenues for cannabis companies.
However, many cannabis leaders recognize that there’s still a lot of work ahead for both the White House and the Justice Department. Reports suggest the administration is close to issuing a final rule in the Federal Register that would officially change marijuana’s status to Schedule 3.
Progress is being made by the Department of Justice.
A source familiar with the Justice Department’s handling of this issue noted that there isn’t a time constraint on Bondi’s actions, which are complicated and the attorneys involved are taking a careful approach.
“This could happen fairly soon,” the source remarked, speaking on the condition of anonymity. “It’s a process still under discussion.”
The manner in which Bondi’s final statement is articulated could hold major consequences for Potts, a $70 billion company aiming for expansion. Although many states, like New York, have decriminalized cannabis, the scent of marijuana pervades New York City, causing mixed reactions among parents as dispensaries multiply.
There’s a lingering concern among investors that without full federal backing, cannabis businesses may not reach their utmost potential. Currently, major banks (like JPMorgan and Bank of America) are hesitant to loan to cannabis-related businesses due to restrictive language in Trump’s executive order, which impacts credit card companies as well. U.S. stock exchanges typically shy away from listing domestic cannabis firms that have any connection to the plant, forcing many to seek listings in Canada instead.
While a parallel banking system for cannabis exists, it isn’t robust enough to match the growth potential in medical applications, such as easing chemotherapy-related pain for cancer patients.
Moreover, there seems to be a cautious attitude in the administration regarding marijuana. President Trump, who abstains from alcohol, might be wary of stronger cannabis products and their broader societal impacts. This could explain the focus on medical marijuana over recreational use, which could foster a more expansive industry.
There’s a sense of motivation.
Nonetheless, many cannabis investors remain hopeful about impending legalization, as they believe the Trump administration is generally supportive. They point to Trump’s forthcoming actions regarding Bondi and supportive comments from Dr. Mehmet Oz of the White House’s Centers for Medicare and Medicaid Services, who has expressed interest in initiating a medical marijuana pilot program.
Mark Cohodes, a former hedge fund manager and current investor in the cannabis sector, thinks Trump may lean toward legalization similar to how he deregulated cryptocurrencies, potentially as a strategy to win Republican support in the upcoming midterm elections.
“The timing feels imminent. Dr. Oz has mentioned that CBD for Medicare will be available around April 15th, and that date is approaching,” Cohodes noted.
Doug Kass, another hedge fund investor, has also started investing in marijuana stocks. “All the major cannabis companies have recently managed to refinance their debts, suggesting that we are moving closer to legalization,” he commented.
Despite this optimism, I remain somewhat skeptical. Even with Bondi’s changes, political divisions in Washington appear to be deepening. Trump has ongoing challenges with international conflicts and domestic economic issues, meaning it could take years for banking legislation to pass. Market sentiment reflects this uncertainty; the AdvisorShares Pure US Cannabis ETF, which tracks cannabis stocks, has surged about 30% since the executive order, but it has also seen significant drops from its highest points amid the developments in Bondi’s office.
