Marijuana stocks sell off as Trump signs executive order to reclassify cannabis

By Bill Peters and Victor Reklaitis

Pot stocks had been surging ahead of the signing, then some traders likely took profits

President Donald Trump signed off on a move that could reschedule cannabis in the U.S.

President Donald Trump on Thursday signed an executive order asking the U.S. government to reschedule cannabis, a move that marks the most significant federal reform on the substance in decades, although shares of U.S. and Canadian pot producers sold off on the news.

The move, which does not legalize marijuana and does not carry a specific timeline, is intended to open up research into potential medical uses, according to Trump administration officials.

Industry executives, meanwhile, said the reclassification - which would put cannabis in the same drug category as things like Tylenol with codeine - would ease tax burdens that have squeezed profits.

Trump also said he is asking Congress to reconsider the classification of hemp-derived CBD to enable access by seniors. Dr. Mehmet Oz, who heads the Centers for Medicare & Medicaid Services, also said he would let the agency approve Medicare patients to get CBD "as early as April of next year, and at no charge if their doctors recommend."

"This action has been requested by American patients suffering from extreme pain, incurable diseases, aggressive cancers, seizure disorders, neurological problems and more, including numerous veterans with service-related injuries and older Americans who live with chronic medical problems that severely degrade their quality of life," Trump said during a White House event for the signing of the order.

The executive order would direct the attorney general to hasten the process of rescheduling cannabis to a Schedule III drug from its Schedule I status alongside drugs like heroin and LSD. The order said the attorney general should make those changes "in the most expeditious manner in accordance with federal law."

"It is critical to close the gap between current medical marijuana and CBD use and medical knowledge of risks and benefits, including for specific populations and conditions," the order said.

Cannabis stocks sank on Thursday following the news, as investors likely moved to take profits following earlier excitement over Trump's executive order.

The AdvisorShares Pure U.S. Cannabis exchange-traded fund MSOS finished 26.8% lower on Thursday. Shares of Curaleaf Holdings (CURLF), a cannabis producer that operates in multiple U.S. states, tumbled 33.4%, while rival Trulieve Cannabis (CA:TRUL) fell 21.2%.

Among Canadian names, Tilray Brands (TLRY) fell 4.2%. Shares of Canopy Growth (CGC) (CA:WEED) lost 12%.

Stocks in the sector had surged last week on preliminary news that Trump was working to reclassify marijuana. The stocks gained further on Tuesday, a day after Trump said he was "very strongly" weighing rescheduling.

Senior Trump administration officials told reporters on Thursday that Trump's primary goal with his rescheduling order is to boost research into medical marijuana and cannabidiol products so that patients and doctors are better informed. Cannabidiol, or CBD, is a compound found in the cannabis plant.

The president had heard from many people who talked up the potential benefits of medical marijuana and CBD use, according to the officials, who added that the administration's moves were not condoning the use of cannabis by adolescents or as a recreational drug. There was no specific timeline for rescheduling given in the order, but it's meant to be done as soon as possible, according to the officials.

During the 2024 White House race, Trump announced his support for a Florida ballot initiative, which ended up failing, that would have allowed for adult recreational use of cannabis in his home state, and he promised to focus on rescheduling the drug as president.

When asked on Thursday if Trump would push for full legalization of marijuana for recreational use, administration officials said they wouldn't speculate on what the president may be considering next.

When Trump was asked about his fellow Republicans' objections to rescheduling, he pointed to favorable polling on the issue. He also said people going "through this horrible ordeal of cancer or other things" have realized that "this is something that makes them feel better."

Still, 22 Republican senators sent a letter to the president on Wednesday opposing rescheduling. Twenty-six House Republicans sent a similar letter on Thursday.

"Reclassifying marijuana as a Schedule III drug will send the wrong message to America's children, enable drug cartels, and make our roads more dangerous," the House lawmakers said in their letter. The senators wrote that "facilitating the growth of the marijuana industry is at odds with growing our economy and encouraging healthy lifestyles for Americans."

However, people in the cannabis industry expressed praise for Thursday's announcement.

"By removing those barriers, it's really going to enable scientists and health care providers to further explore the therapeutic potential of medical marijuana - both on the benefit side, but also on the risk side, which is critical if we're going to advance this industry in a meaningful way," said Kim Rivers, the chief executive of Trulieve.

Rivers, who said she has discussed rescheduling with Trump and was present at the order's signing, said that, for instance, the company hoped to work more deeply with its research partners on a time-release product that could be used by patients once the reclassification was final.

"We have not had a way to be able to do blood tests, for example, to be able to prove efficacy of that product," she said.

Over the years, the cannabis industry - both in the U.S. and Canada - has struggled to turn a steady profit due to overexpansion or regulations. In Canada, where recreational pot use has been legal since 2018, some big producers are still trying to get out from under losses.

However, analysts have said that in the U.S., rescheduling could ease burdens related to the 280E tax, which effectively taxes profits without allowing businesses to deduct some expenses.

A report from industry tracker Headset, analyzing retail data from 24 states, said that Trump's order to reclassify cannabis had arrived during "the most margin-compressed period the legal cannabis industry has ever seen." Since 2021, that report found, U.S. cannabis gross margins were down around 10 percentage points.

"Because of Section 280E, cannabis businesses have faced effective tax rates of roughly 70 to 90 percent," Charles Alovisetti, a partner at the law firm Vicente, said in an email. "Rescheduling eliminates that burden, bringing tax rates closer to the roughly 20 percent range seen in other industries."

-Bill Peters -Victor Reklaitis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

12-18-25 1939ET

Copyright (c) 2025 Dow Jones & Company, Inc.