Cannabis stocks and ETFs launched a blistering rally last week after President Donald Trump confirmed that his administration is considering a historic reclassification of marijuana to a less restrictive drug category.
Tilray is up around 35% in the past 2 days. Check its live prices here.
Trump announced a ruling on moving cannabis from Schedule I, where it is grouped with heroin and cocaine, to Schedule III would be made “in the coming weeks.” The change would ease federal regulations, lower punitive taxes, improve banking access, and drive medical study, potentially altering the industry’s growth pattern.
The policy signal set cannabis stocks ablaze on Monday: Trulieve Cannabis (OTCQX:TCNNF) increased 35%, Tilray Brands Inc (NASDAQ:TLRY) jumped 32%, Curaleaf Holdings Inc (OTCQX:CURLF) rose 29%, and Canopy Growth Corp (NASDAQ:CGC) rose 24%. The rally bled over to ETFs, with several of them posting double-digit gains:
Roundhill Cannabis ETF (BATS:WEED) — up 29.4% on Monday.
Provides focused exposure to top U.S. multi-state operators (MSOs). Has the five largest MSOs, $6.4 million in assets, and a 0.41% expense ratio.
Amplify Seymour Cannabis ETF (NYSE:CNBS) — up 27.8%
Actively managed U.S. cannabis ecosystem fund with 32 holdings; MSOs represent 35.3% of portfolio. $76.2 million AUM, 0.76% expense ratio.
Amplify Alternative Harvest ETF (NYSE:MJ) — up 27.0%
First ETF to specialize in the global cannabis industry, tracking the Prime Alternative Harvest Index. Has 10 securities, $128.5 million AUM, 0.76% fee.
Why Reclassification Matters
A reclassification to Schedule III would open the door to dramatic expansion of the $30 billion U.S. pot market. Companies would be able to take regular tax deductions, gain more favorable access to capital, and tap new investors. It would also indicate a lessening of federal crackdowns, possibly encouraging other states to pursue legalization.
Such a transition could introduce more uniform product standards and support the legitimacy of the medical cannabis segment. For MSO- and ancillary cannabis company-heavy ETFs, the shift would translate into a continued growth of market opportunities.
As the policy decision hangs in the balance and the fundamentals of the industry could change, cannabis ETFs are likely to remain in focus among traders and long-term investors.
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