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Wall Street JournalCannabis ETFs Eye A Breakout As Trump Weighs Major Marijuana Reclassification
Cannabis-focused ETFs, a segment that’s spent years in the market’s penalty box, are suddenly back on traders’ radar as President Donald Trump weighs a move to reclassify marijuana as a Schedule III drug.
The Washington Post reported Thursday that Trump is preparing an executive order directing federal agencies to loosen federal restrictions, a shift that could reshape the economics of U.S. cannabis companies and, by extension, the ETFs that track them.
ETFs That Were The First To Benefit
For now, funds like the AdvisorShares Pure U.S. Cannabis ETF (NYSE:MSOS) and Amplify Seymour Cannabis ETF (NYSE:CNBS) sit in the spotlight, with 35% and 34% rallies, respectively. MSOS, the largest U.S.-focused cannabis ETF, is packed with multi-state operators, or MSOs, that suffer the most under current tax codes.
A shift to Schedule III would let these companies deduct business expenses for the first time since Section 280E came into force, as explained by The Cannabis Times. ETF investors could capture this profitability boost early.
Meanwhile, AdvisorShares Pure Cannabis ETF (NYSE:YOLO) and the ETFMG Alternative Harvest ETF (NYSE:MJ), which blend U.S. operators with Canadian names, could also benefit from renewed interest, as evidenced by price movements on the day of the announcement. YOLO was up 24% and MJ had risen 29% on Friday at the time of publication.
For funds that have languished for years in stagnant trading and weak liquidity, a revival of investor confidence, greater institutional participation, and a broader investable universe could follow if regulatory barriers begin to fall.
There’s also renewed interest in a potential future uplisting for U.S. operators. While Schedule III alone may not open up the major exchanges, analysts say it could accelerate regulatory discussions. Meanwhile, ETFs remain the cleanest way for investors to get into the sector without having to deal with state-level nuances and OTC-listed stocks.
Also Read: Tilray Stock Surges as Trump Signals Major Shift in Federal Marijuana Policy
Inside Trump's Oval Office Call On Cannabis
The behind-the-scenes political drama of that renewed optimism centers on a phone call between Trump and House Speaker Mike Johnson on Wednesday. Johnson reportedly pushed back, citing research and data opposing the reclassification. But marijuana industry executives, who were gathered with Trump in the Oval Office, countered Johnson’s points directly when Trump handed them the phone, according to the Washington Post.
Trump, who said in August he was “looking at reclassification,” appeared open to advancing the plan, though aides stressed nothing is finalized. A White House official reiterated that no decision has been made.
What Schedule III Would Actually Change
The drug is currently classified as Schedule I, lumped in with heroin and LSD as medications deemed to have a high potential for abuse, yet no accepted medical value. Placing it in Schedule III would put it among medications such as Tylenol with codeine and some hormone replacement therapies. Such a switch would not legalize cannabis, but it would reduce federal restrictions on it substantially.
The largest near-term effect would be financial: finally, businesses could deduct ordinary expenses, which have weighed on margins for decades. Rescheduling could also spur medical research, loosen banking restrictions, and reignite long-stalled momentum within the industry.
Cannabis ETFs have survived numerous “false dawns” as reform headlines have often faded before any material policy shift became a reality. But if Trump follows through this time, the sector could see its most consequential regulatory change in years-and ETFs may be the first corner of the market to feel the lift.
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