Cannabis stocks saw a significant increase on Friday, reacting to reports from the Washington Post about President Donald Trump’s expected initiative to lighten federal regulations concerning marijuana.
Shares of Tilray Brands jumped by 35%, while other companies like SNDL and Canopy Growth experienced rises between 20% and 31% during early trading hours.
According to reports, President Trump intends to instruct federal agencies to reclassify marijuana as a Schedule III substance, which would reduce the level of regulation it currently faces, aligning it with certain common prescription medications.
Analyst Jarrett Seiburg from TD Cowen commented that this move could open doors for pharmaceutical firms to get approval for a wider range of cannabis products, treating them similarly to traditional prescription drugs.
The idea of reclassifying marijuana as a less dangerous substance could potentially reshape the industry landscape, easing criminal penalties, facilitating tax breaks, and improving funding access for businesses.
Financing, indeed, is one of the most pressing challenges for cannabis producers, largely due to federal regulations that push most banks and institutional investors away from the sector. This limitation often forces these businesses to rely on costly loans.
Aaron Gray, an analyst at Alliance Global Partners, pointed out that this shift could lead to several positive developments, such as more states opting to legalize cannabis, creating more robust banking frameworks, and possibly seeing cannabis stocks listed on major U.S. exchanges.
For context, marijuana is currently classified as a Schedule I drug under the Controlled Substances Act, which paints it as having a high potential for abuse and no recognized medical application.
Interestingly, the Biden administration last year prompted the Department of Health and Human Services to evaluate marijuana’s classification, resulting in a recommendation to downgrade it to Schedule III. Now, it’s up to the Drug Enforcement Administration to review and decide on this recommendation.
