Cannabis Stocks Explode: Trump's Marijuana Rescheduling Plan Sends Tilray Up 33%

Cannabis stocks erupted Friday morning after The Washington Post reported that President Trump is preparing an executive order to reclassify marijuana from Schedule I to Schedule III. The move would represent the most significant shift in federal cannabis policy in decades.

Tilray Brands surged 33% in premarket trading. Canopy Growth jumped 23%. Aurora Cannabis rose 15%. The Amplify Seymour Cannabis ETF (CNBS) rallied 19% as the entire sector caught fire.

What Schedule III Means

Currently, marijuana sits on Schedule I of the Controlled Substances Act—the same category as heroin and LSD. This classification designates it as having "no currently accepted medical use" and a "high potential for abuse."

Schedule III drugs, by contrast, have "moderate to low potential for physical and psychological dependence." This category includes ketamine, anabolic steroids, and testosterone—substances that are controlled but legally prescribed.

Rescheduling to Schedule III would not make marijuana federally legal for recreational use. But it would:

• Ease tax burdens: Currently, cannabis companies can't deduct normal business expenses under IRS Section 280E. Rescheduling would eliminate this penalty, dramatically improving profitability.
• Enable interstate commerce: Legal cannabis businesses could potentially transport products across state lines, creating efficiency gains.
• Unlock banking access: Financial institutions remain hesitant to serve cannabis companies due to federal illegality. Rescheduling would reduce compliance concerns.
• Accelerate research: Schedule I restrictions make medical research difficult. Schedule III classification would ease barriers to clinical studies.

The Tax Angle Is Massive

For investors, the Section 280E elimination is the most immediate catalyst.

Under current law, cannabis companies cannot deduct rent, payroll, marketing, or most other ordinary business expenses from federal taxes. They pay taxes on gross profit rather than net income—a crippling disadvantage compared to any other industry.

Consider a hypothetical cannabis company with:

• Revenue: $100 million
• Cost of goods sold: $40 million
• Operating expenses: $45 million
• Net income: $15 million

Under current rules, that company pays federal taxes on $60 million (revenue minus COGS), not $15 million. At a 21% corporate rate, that's $12.6 million in taxes on a business earning $15 million—an effective rate of 84%.

With rescheduling, the same company would pay taxes on actual net income: $3.15 million. The difference is existential for an industry that has struggled to achieve profitability.

The Political Calculus

Trump discussed the rescheduling plan on a December 10 call with House Speaker Mike Johnson, cannabis industry executives, Health Secretary Robert F. Kennedy Jr., and CMS administrator Mehmet Oz.

The timing isn't coincidental. Public support for marijuana legalization has reached historic highs—62% of Americans favor legal recreational use, according to recent polling. Rescheduling allows Trump to deliver a policy win to libertarian-leaning voters without the political complexity of full federal legalization.

The involvement of Kennedy and Oz—both known for unconventional health positions—suggests the administration may frame rescheduling as a medical access issue rather than a recreational drug question.

What Could Go Wrong

Before loading up on cannabis stocks, investors should understand the risks:

No final decision: A White House official emphasized that "no final decisions have been made." Trump "could still change his mind," according to sources. Cannabis stocks have rallied on rescheduling hopes before, only to be disappointed.

Implementation timeline: Even if Trump signs an executive order in January, the Drug Enforcement Administration must finalize rulemaking. Analysts expect that process to extend into summer 2026. There's no immediate operational change.

Congressional opposition: Some Republicans oppose any loosening of marijuana restrictions. If rescheduling becomes politically contentious, the administration might pull back.

It's not legalization: Schedule III still means marijuana is a controlled substance. Interstate commerce would be regulated, not free. Many of the structural challenges facing cannabis companies would persist.

Which Stocks Benefit Most

If rescheduling proceeds, the primary beneficiaries would be:

Multi-state operators (MSOs): Companies like Curaleaf, Trulieve, and Green Thumb operate licensed dispensaries across multiple states. They'd benefit most from 280E relief and potential interstate commerce.

Canadian producers with U.S. exposure: Tilray and Canopy Growth have been positioning for U.S. market access. Rescheduling would accelerate their entry strategies.

Cannabis REITs: Innovative Industrial Properties, which owns cultivation facilities leased to cannabis operators, would benefit from healthier tenant finances.

Ancillary businesses: Companies providing services to cannabis operators—packaging, testing, software—would see improved customer health.

The Valuation Question

Cannabis stocks have been decimated over the past three years. Many trade at fractions of their 2021 peaks. Today's rally—while dramatic in percentage terms—merely recovers a small portion of lost ground.

The question: is rescheduling already priced into these battered stocks?

Arguments for upside: Most cannabis companies trade below book value. Profitability under Schedule III would be transformative. The sector has been left for dead by institutional investors.

Arguments for caution: Rescheduling has been "imminent" before. Execution risk remains high. Many cannabis companies have significant debt burdens that won't disappear with tax relief.

How to Play It

For investors interested in cannabis exposure:

High conviction, high risk: Individual MSOs like Curaleaf (CURLF) or Trulieve (TCNNF) offer maximum upside if rescheduling proceeds—and maximum downside if it doesn't.

Diversified exposure: Cannabis ETFs like MSOS or CNBS spread risk across multiple operators. You'll capture sector moves without single-stock concentration.

Wait for confirmation: The executive order hasn't been signed. Risk-averse investors might wait for concrete action before committing capital.

The Bottom Line

Trump's reported marijuana rescheduling plan sent cannabis stocks soaring Friday. The policy change—if implemented—would represent the most significant federal cannabis reform in decades, with immediate benefits for industry profitability.

But investors should temper enthusiasm with realism. No final decision has been made. Implementation would take months. And even Schedule III leaves marijuana as a controlled substance with significant regulatory burden.

Cannabis stocks are a speculative bet on political action. For those with conviction that rescheduling will proceed, today's prices may look cheap in hindsight. For the risk-averse, waiting for the executive order's actual signature would be prudent.

The cannabis industry has been waiting years for this moment. Whether it finally arrives remains uncertain.