Pot stocks soar as Axios reports imminent U.S. reclassification of cannabis

Cannabis stocks surged after Axios reported that the U.S. Department of Justice could soon move marijuana into a less restrictive classification. An unnamed administration official told the outlet that the shift could come as soon as Wednesday. MarketWatch described the expected decision as the most significant federal reform in the space in decades.

Shares of Canada-based Canopy Growth and Tilray Brands jumped 21% and 15%, respectively, on the Nasdaq. Trading volume in Tilray reached 22.5 million shares, compared with a 30-day average of 2.8 million, according to MarketWatch. In the over-the-counter market, shares of Curaleaf soared 26%, Trulieve Cannabis climbed nearly 17%, and Green Thumb Industries gained 10%.

The largest ETF tracking the sector, AdvisorShares Pure US Cannabis, rose 22%.

The move would not legalize marijuana but would lower barriers to research into its potential uses, Axios wrote. The initiative would shift cannabis from Schedule I, a category reserved for highly addictive substances with no accepted medical use, to Schedule III, which includes medications like Tylenol with codeine, explains Barron's.

Reclassification could make it easier for marijuana-related businesses to access financing and conduct research, CNBC writes. It would also reduce their tax burden: companies dealing with Schedule I substances are barred from certain deductions. At the same time, Tilray, Canopy, and other Canadian-licensed producers have lost billions of dollars over the past decade, largely due to overexpansion following the legalization of recreational cannabis in the country in 2018, MarketWatch noted.

A White House official told Barron’s that the administration is working to implement a December executive order by Trump directing regulators to reclassify marijuana “in the most expeditious manner.” The Justice Department did not immediately respond to the outlet’s request for comment.