The Impending Marijuana Reclassification: A Strategic Play for Cannabis Equity Investors

The potential reclassification of marijuana from Schedule I to Schedule III under the Trump administration has ignited a seismic shift in the cannabis investment landscape. With reports suggesting an executive order could materialize as early as December 2025 or January 2026, investors are recalibrating their strategies to capitalize on the regulatory and economic ripple effects. This analysis explores how sector-specific ETFs like the AdvisorShares Pure U.S. Cannabis ETF (MSOS) and the Amplify Seymour Cannabis ETF (CNBS) are positioning themselves-and how investors can time their entries to maximize returns in this evolving market.

The Policy Catalyst: From Schedule I to Schedule III

Reclassifying marijuana to Schedule III would align it with substances like ketamine and anabolic steroids, acknowledging its medical utility while reducing federal restrictions. This move, first floated in August 2025 by the Trump administration, could eliminate the punitive Section 280E tax provision, which has barred cannabis businesses from deducting ordinary expenses. For investors, this policy shift signals a potential unlocking of profitability for cannabis operators and a broader opening for institutional capital.

The timeline remains fluid, but the administration's urgency is evident. President Trump reportedly indicated a decision would come "within weeks" during a mid-August briefing, and December 2025 has emerged as a focal point for an executive order. While legal challenges and administrative delays persist, the bipartisan momentum-evidenced by mixed reactions from lawmakers-suggests the reclassification is more likely than not.

ETF Positioning: MSOS and CNBS in Q3 2025

Cannabis ETFs have already begun adjusting their portfolios in anticipation of regulatory clarity. The AdvisorShares Pure U.S. Cannabis ETF (MSOS), which focuses on large-cap multi-state operators (MSOs), reduced its exposure to Curaleaf Holdings and Trulieve Cannabis by 3.4% each in Q3 2025. These adjustments reflect a strategic rebalancing to manage redemptions and align with expected sector consolidation. Meanwhile, the Amplify Seymour Cannabis ETF (CNBS) maintained a concentrated portfolio, with Trulieve Cannabis (16.07%), Green Thumb Industries (14.06%), and Curaleaf Holdings (12.31%) as its top holdings.

Both ETFs have prioritized vertically integrated operators with strong state-level market positions, such as Virginia and Minnesota, where adult-use legalization is gaining traction. This focus on compliance and scalability positions them to benefit from both federal rescheduling and state-level growth.

Expert Timing Recommendations: Capitalizing on the Window

Timing is critical. According to a report by Bloomberg, cannabis ETFs surged 34-35% in response to reclassification rumors, with MSOS and CNBS leading the charge. Analysts recommend entering positions ahead of the December 2025 decision window, as the market is likely to react sharply to official announcements. For instance, MSOS saw a 28% single-day gain following Trump's August comments, underscoring the sector's volatility and the importance of proactive positioning.

However, caution is warranted. The reclassification would not fully legalize cannabis, and structural challenges like pricing pressure and limited capital access persist. Investors should consider a phased approach, allocating capital to ETFs with diversified holdings and strong cash flow potential while hedging against regulatory uncertainty.

The Road Ahead: Policy, Profit, and Portfolio Strategy

The Trump administration's reclassification timeline hinges on administrative efficiency and political will. With key figures like RFK Jr. and Pam Bondi in leadership roles, the pace of reform could vary. Nevertheless, the economic argument for rescheduling is compelling: removing tax barriers and easing banking restrictions could catalyze a wave of innovation and investment.

For ETF investors, the path forward involves monitoring three key indicators:
1. Executive Actions: A December 2025 executive order would accelerate market optimism.
2. Legislative Developments: The SAFE Banking Act's progress could further reduce regulatory friction.
3. State-Level Momentum: States like Virginia and Minnesota offer near-term growth opportunities.

Conclusion

The impending marijuana reclassification represents a pivotal inflection point for cannabis equity investors. By aligning with ETFs like MSOS and CNBS-whose portfolios are already primed for regulatory and market shifts-investors can position themselves to capitalize on the sector's next phase of growth. As the Trump administration edges closer to a decision, the window for strategic entry is narrowing. Those who act decisively, with a clear understanding of both the risks and rewards, stand to reap significant returns in what could be the most transformative year for cannabis policy in decades.