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What Is Going On With Cannabis Stocks? US Reclassification Causes Shockwaves

Analyst Team trader
Updated 2 May 2024

The investment landscape for cannabis companies experienced a seismic shift as stock prices surged in response to the Biden administration's proposal to reclassify cannabis as a Schedule III substance, marking a substantial change in federal drug policy. This move aims to relax overarching restrictions on the recreational drug, heralding a new age for the industry.

For over half a century, cannabis has been embroiled in the tightest legal restrictions in the United States, listed as a Schedule I substance alongside potent drugs such as methamphetamine and heroin. This categorisation denotes a high potential for abuse and no accepted medical use, putting cannabis in an investment quagmire replete with barriers and risks for businesses and investors alike.

The proposed reclassification to Schedule III is not merely a symbolic gesture; it represents a seismic shift in federal drug policy. This new category is home to drugs like Tylenol with codeine and anabolic steroids, representing a regulatory softening that acknowledges the substance's therapeutic potential and lower potential for abuse compared to its previous classification.


Market reactions were swift and stratospheric. Canopy Growth Corp (TSE:WEED) saw its stock price catapult by 80% in Toronto trading, settling at an impressive $20.45 per share on April 30. Similarly, shares of Tilray Brands (NASDAQ:TLRY) surged by staggering 42% to close at $3.42 that same day, a clear indicator of the enthusiastic investor reception to these developments. In spite of the crazy price hikes on the 30th of April, both Canopy Growth and Tilray Brands have experienced a slight pull back from the initial excitement with both company's share prices settling at 15.76 and 2.02 respectively.

The ripple effect extended beyond individual companies to broader market indices. The AdvisorShares Pure US Cannabis ETF (MSOS) shot up by 25% in the wake of the reclassification news, emblematic of the sweeping optimism pervading the sector. Additionally, other cannabis-focused exchange-traded funds (ETFs) observed ascensions of 20% or more, underscoring the bullish outlook investors harbor for the future of recreational cannabis.

This regulatory pivot could be the harbinger of decriminalisation at the federal level, a milestone cannabis advocates and industry players have long awaited. The financial implications are vast, as the potential decriminalisation could unlock the doors to mainstream financing, interstate commerce, and a tideway of institutional investments. It is a momentous inflection point that has set the stage for exponential growth potential in the recreational drug market in the United States.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.