Impact Analysis: Trump's Marijuana Reclassification Plan on Cannabis Industry

President Trump’s plan to reclassify marijuana from Schedule I to Schedule III represents the most significant federal cannabis policy shift since the Controlled Substances Act of 1970 [1]. This move would place cannabis in the same category as prescription medications like ketamine, testosterone, and certain painkillers with codeine, rather than alongside heroin and LSD [2].

The reclassification news triggered extraordinary gains across the cannabis sector:

• Tilray Brands (TLRY)
  : Jumped 44% to $14.94, though currently trading at $10.92 after some profit-taking [0]
• Canopy Growth (CGC)
  : Surged 52% to $2.07, currently at $1.66 [0]
• Amplify Seymour Cannabis ETF
  : Recorded its best day ever with a 54% rally [2]

The most significant financial benefit comes from potentially eliminating the punitive

. Currently, cannabis companies face an effective tax rate of approximately 60% of gross revenue because they cannot deduct normal business expenses [1]. Reclassification to Schedule III would:

• Allow standard business deductions (rent, payroll, marketing, etc.)
• Reduce effective tax rates from ~60% to 21-35%
• Free up billions in cash flow for reinvestment and expansion

While not directly addressed by rescheduling, the reduced federal stigma could:

• Encourage more banks to work with cannabis companies
• Improve access to traditional financing and credit lines
• Reduce reliance on high-cost alternative financing

Schedule III status would facilitate:

• Easier FDA approval processes for cannabis-based medicines
• Increased clinical trials and medical research
• Potential for pharmaceutical partnerships and IP development

[0]:

• Market Cap: $1.22B
• P/E Ratio: -0.39x (unprofitable)
• Net Profit Margin: -278.12%
• Strong liquidity: Current Ratio 2.62

[0]:

• Market Cap: $396.84M
• P/E Ratio: -0.83x (unprofitable)
• Net Profit Margin: -186.42%
• Better liquidity: Current Ratio 3.07

• TLRY: Potential 30-40% upside
• CGC: Potential 40-50% upside
• Based primarily on tax savings

• TLRY: Potential 60-80% upside
• CGC: Potential 70-90% upside
• Includes operational improvements

• TLRY: Potential 100-150% upside
• CGC: Potential 120-180% upside
• Assumes banking access and M&A activity

1. Institutional Investment
   : Major institutional investors currently avoid cannabis stocks due to federal illegality. Rescheduling could unlock significant institutional capital flows.

2. M&A Consolidation
   : Easier cross-border transactions and regulatory compliance could accelerate industry consolidation, with larger players acquiring smaller operators.

3. International Expansion
   : U.S. policy leadership may influence other countries to liberalize cannabis regulations, expanding total addressable markets.

1. Implementation Timeline
   : The reclassification process involves multiple agencies and could take 6-12 months to fully implement.

2. State vs. Federal Conflict
   : Rescheduling doesn’t resolve the fundamental conflict between state legalization and federal prohibition [1].

3. Regulatory Uncertainty
   : Some advocates worry that FDA medicalization could complicate recreational markets [2].

4. Fundamental Business Challenges
   : Many cannabis companies still struggle with profitability, supply chain inefficiencies, and competitive pressures.

• Cautiously Optimistic
  : Expect volatility as details emerge
• Focus on Quality
  : Companies with strong balance sheets and established brands
• Monitor Policy Implementation
  : DEA and HHS guidance crucial

• Sector Rotation
  : Anticipate institutional money flow into larger, liquid names
• M&A Opportunities
  : Consolidation plays could offer significant upside
• Ancillary Businesses
  : Banking, technology, and service providers may benefit most

• Market Maturation
  : Industry evolves from growth to value focus
• Competition Increases
  : As federal barriers fall, traditional pharma/tobacco may enter
• International Growth
  : U.S. policy change could spark global expansion

Trump’s marijuana reclassification plan represents a transformative moment for the cannabis industry, potentially unlocking billions in value through tax reform, improved banking access, and institutional investment. However, the market reaction has been swift and potentially over-enthusiastic in the short term.

Investors should distinguish between

and . The most significant value creation will likely accrue to companies that can combine the regulatory tailwinds with sound operational execution, strong balance sheets, and competitive positioning in their respective markets.

The sector remains high-risk but offers potentially asymmetric returns for investors who can navigate the complex interplay of policy, regulation, and business fundamentals in this evolving landscape.

[0] Ginlix API Data - Real-time quotes and company financials for TLRY and CGC
[1] Forbes - “White House Says President Trump Has Made ‘No Final Decisions’ Around Marijuana Rescheduling” (https://www.forbes.com/sites/willyakowicz/2025/12/11/white-house-says-president-trump-has-made-no-final-decisions-around-marijuana-rescheduling/)
[2] Washington Post - “What the reclassification of marijuana would mean for Americans” (https://www.washingtonpost.com/health/2025/12/12/cannabis-marijuana-rescheduling-trump-administration/)
[3] CNBC - “Cannabis stocks surge on reports Trump will reclassify marijuana; Tilray jumps 33%” (https://www.cnbc.com/2025/12/12/cannabis-stocks-trump-regulations.html)
[4] Yahoo Finance - “Cannabis stocks surge after reports of Trump planning to ease federal restrictions” (https://ca.finance.yahoo.com/news/cannabis-stocks-surge-reports-trump-164514309.html)