Pot stocks jump as Trump signals possible reclassification

A cannabis plant approaching maturity is photographed at the CannTrust Niagara Greenhouse Facility during the grand opening event in Fenwick, Ont., on Tuesday, June 26, 2018. THE CANADIAN PRESS/ Tijana Martin

Shares of pot companies jumped on Monday after U.S. President Donald Trump said his administration is looking at reclassifying marijuana as a less dangerous drug, potentially easing criminal penalties and reshaping the industry’s federal standing.

Tilray Brands’ shares gained nearly 24 per cent, while the U.S.-listed shares of SNDL and Cronos Group were up 15.5 per cent and 13.2 per cent, respectively.

Toronto-listed shares of Canopy Growth and Trulieve Cannabis jumped 30 per cent and 27 per cent, respectively.

ETF AdvisorShares Pure US Cannabis was up 18.5 per cent.

Even mere speculation of federal-level reclassification can catalyze outsized moves in cannabis stocks, as shifting marijuana from its current Schedule I classification could unlock banking access, attract institutional investors and spur mergers and acquisitions.

Reclassification would also remove the tax burden under Section 280E, which denies standard business deductions to cannabis companies. Resolution of this tax barrier could pave the way for cannabis companies to list on U.S. stock exchanges, further unlocking capital–market access.

Under the Controlled Substances Act, marijuana is listed as a Schedule I substance, meaning it has a high potential for abuse and no current accepted medical use.

The Biden administration had directed the U.S. Department of Health and Human Services to review marijuana’s status, leading the agency to recommend moving it to Schedule III, a category for drugs with moderate to low potential for dependence.

That review is now in the hands of the Drug Enforcement Administration, which will determine if rescheduling happens.

(Reporting by Mrinalika Roy in Bengaluru; Editing by Alan Barona)