Shares of major cannabis companies rallied sharply on Wednesday after reports suggested the Trump Administration could soon move to reclassify marijuana, a long-awaited step that investors believe could ease regulatory pressures on the sector.
The gains were led by Curaleaf Holdings, which surged more than 27%.
Tilray rose 11%, while Canopy Growth climbed over 18%. Aurora Cannabis also advanced, gaining 7.6%.
The rally extended beyond producers, with Innovative Industrial Properties, a real estate investment trust focused on the industry, rising 5.6%.
Cannabis-focused exchange-traded funds also saw strong inflows, reflecting broader investor optimism.
Why are reclassification hopes driving positive sentiment?
According to an Axios report, the administration is expected to shift cannabis from Schedule I to Schedule III under federal drug laws.
Under the US Controlled Substances Act, marijuana is currently classified as a Schedule I drug—placing it alongside substances like heroin—indicating a high risk of abuse and no recognised medical use.
In 2025, the Biden administration directed the Department of Health and Human Services to reassess this classification.
The agency subsequently recommended reclassifying marijuana as a Schedule III substance, a category that includes drugs with a lower risk of dependence, such as certain steroids.
The move would place marijuana in a category alongside medications with accepted medical uses, rather than alongside substances deemed to have no medical value.
While the change would not legalise marijuana at the federal level, it is seen as a significant milestone for the industry.
One of the biggest immediate impacts would be on taxation.
Businesses dealing in Schedule I substances are currently restricted from deducting many expenses, a burden that has weighed heavily on profitability.
A reclassification could therefore improve financial conditions for operators, even without broader legalisation.
Regulatory path remains complex
Despite the market enthusiasm, analysts caution that the policy shift would not resolve all regulatory challenges.
Cannabis would remain subject to a patchwork of state-level laws, and federal legalisation would still be required to fully normalise the industry.
The process of changing marijuana’s classification has been lengthy.
The US Department of Justice first proposed revisiting its status in 2024, with the Drug Enforcement Administration continuing its review into 2025.
President Donald Trump had earlier indicated he was weighing policy options before issuing a directive to accelerate the process.
However, he clarified at the time that any reclassification would not equate to endorsing recreational use.
Recent policy signals support rally
The latest developments follow a series of regulatory signals that have buoyed the sector.
Earlier this month, the Food and Drug Administration moved to relax enforcement around certain cannabidiol products.
FDA Commissioner Marty Makary said the agency would not enforce some provisions related to hemp-derived oral products solely due to their CBD content, providing a modest boost to industry confidence.
Additionally, broader discussions around easing restrictions on emerging therapies, including psychedelics and peptides, have reinforced expectations of a more flexible regulatory stance.
Market reaction reflects pent-up optimism
Cannabis stocks have experienced volatility in recent years, with previous policy announcements often failing to sustain rallies.
However, Wednesday’s surge suggests investors are increasingly confident that meaningful regulatory change may finally materialise.
Still, uncertainties remain around the timing and scope of any reclassification.
Until formal action is taken, the sector is likely to remain sensitive to policy headlines and political developments.
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