Cannabis Stocks Surge. Trump May Reclassify Marijuana—but White House Says a Final Decision Hasn’t Been Made.

Shares of Tilray Brands and Canopy Growth surged on reports that President Donald Trump would reclassify marijuana as a Schedule III drug. (Lauren DeCicca/Getty Images)

Key Points

• Cannabis stocks Tilray Brands and Canopy Growth surge following reports of potential federal marijuana reclassification.
• President Donald Trump is reportedly considering reclassifying marijuana to a Schedule III drug from a Schedule I drug.
• The potential reclassification would move marijuana from a category with heroin to one including combination pain medications.

Cannabis stocks Tilray Brands and Canopy Growth surged following reports that President Donald Trump would loosen federal restrictions on marijuana. The reaction may be too enthusiastic.

A White House official told Barron’s that no final decision had been made regarding the rescheduling of the drug.

The president indicated as far back as August that he was weighing the positives and negatives of a policy change. “I’ve heard great things having to do with medical, and I’ve heard bad things having to do with just about everything else,” Trump said at the time, referring to the uses of the drug.

Created with Highcharts 9.0.1Source: FactSetAs of Dec. 12

Created with Highcharts 9.0.1Tilray BrandsCanopy Growth2025Dec.-80-60-40-20020406080%

Media reports this week suggest marijuana could be reclassified as a Schedule III drug from Schedule I sometime in early 2026. That would move marijuana out of a group of highly addictive substances with no accepted medical use, such as heroin, and place it among the ranks of substances like combination pain medications.

While it wouldn’t make marijuana legal for recreational use at the federal level, such a change would alter the tax requirements for cannabis companies.

Under a provision known as Section 280E of the Internal Revenue Code, companies dealing in Schedule I drugs are limited from deducting business expenses such as payroll and marketing costs when calculating their federal taxable income. Reclassification could do away with this burden.

The possibility of reclassification sent shares of cannabis companies through the roof. Tilray and Canopy, both of which also trade on the Toronto Stock Exchange, soared 44% and 54% in the U.S., respectively. Innovative Industrial Properties, a real estate investment trust for the cannabis industry, shot up 9.1%.

Exchange-traded funds were soaring, too. The Amplify Seymour Cannabis ETF, which trades under the ticker CNBS, jumped 51%. The AdvisorShares Pure US Cannabis ETF (MSOS) gained 54%, putting it on pace for the largest same-day percentage increase on record.

Marijuana stocks have been here before. Four months ago, Trump told reporters he planned to decide in the coming weeks whether to change the way marijuana was regulated.

Cannabis stocks had the same reaction at the time. Tilray leapt 41% on Aug. 11 following Trump’s remarks, while Canopy soared 26%.

Enacting change at the federal level has been slow. The Justice Department proposed making marijuana a Schedule III substance last year, and the Drug Enforcement Administration was still moving through the review process when Trump took office in January.

Both stocks have fallen sharply over the past three years. Tilray’s U.S.-listed stock has tumbled 8.7% in 2025 alone, while the S&P 500 has moved 16% higher. Canopy stock is down 37%.

History says it is unrealistic to expect a change soon. Friday’s outsize gains are a sign some investors remain hopeful.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com