On Thursday, President Donald Trump issued an executive order directing federal agencies reclassify cannabis from Schedule I into Schedule III.
As a result of the move, US cannabis stock prices have soared on hopes for fewer regulations and more medical research.
This order represents one of the biggest shifts in federal marijuana policy over recent years. However, a reclassification would require rulemaking by agencies and may face legal challenges.
Cannabis investors see the decision as a possible turning point in an industry which has been subjected to federal prohibition, despite legalisation at state level across many states.
Trump’s marijuana order: policy and legal mechanics
Trump’s Executive Order directs that the Department of Justice and Drug Enforcement Administration begin a formal reclassification.
This order moves marijuana, which is currently classified as a substance with no medically accepted uses but high abuse potential to Schedule III. Schedule III includes substances that have accepted medical applications and lower abuse potential.
This change does not automatically legalise or remove DEA supervision.
It would be a sign that the federal government is acknowledging marijuana’s therapeutic potential and would relax restrictions for federally-funded research.
Cannabis industry is subject to significant regulatory implications if it receives Schedule III.
The federal government would immediately grant research institutions the authority to carry out clinical trials that examine marijuana’s efficacy and safety for chronic pain, epilepsy and multiple sclerosis.
Reclassification would also make it easier for banks to serve cannabis businesses, since they will face fewer regulatory obstacles.
This move could potentially open up capital previously unavailable to operators in grey zones.
The legal timeline is still uncertain.
Before finalizing any reclassification, the DEA will need to conduct formal rulemaking, invite public comments, and assess evidence.
Legal experts warn that opponents such as law enforcement groups or conservative legislators could contest the decision in court, or try to block its implementation through Congress.
Biden’s administration recommended reclassification back in August 2023 and the DEA in May 2024. However, progress stalled due to scheduling and legal conflicts.
Reactions to the market and their implications for industry
The announcement of the ban on cannabis led to a sharp increase in stocks.
Tilray Brands rose approximately 8% intraday while Canopy Growth gained roughly 7% during the trading session on Thursday.
This rally was preceded by an even more explosive event on Friday, when Trump had first announced his intent to sign the executive order.
Investors saw reclassifications as the removal of a significant regulatory burden that had depressed values and restricted institutional capital flow into this sector.
Nevertheless, market watchers warned that execution risks remain substantial.
Legal challenges by opponents may delay the implementation of cannabis policies for many months or even years.
Investors who purchased on news of reclassification could suffer sharp losses if the reclassification is delayed or Congress pushes back.
The post Trump signs an executive order on cannabis reclassification may change as new information is released.
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