Cannabis Stocks Rally as Trump Considers Marijuana Reform

Major cannabis stocks and ETFs surged after reports surfaced that President Trump is considering reclassifying marijuana from Schedule I (the strictest category, alongside heroin) to Schedule III, which would make it a less dangerous drug in the eyes of federal law. This shift could dramatically loosen federal restrictions, allow industry players to deduct standard business expenses, and open the door to expanded medical research.

What's Driving the Rally?

Regulatory Catalyst: Trump’s remarks at a $1 million-per-plate fundraiser in New Jersey sparked renewed optimism across the sector. Executives present—including Trulieve CEO Kim Rivers—urged the president to prioritize rescheduling and research, underscoring the industry’s deep investment in influencing policy change.

Market Reaction: Canadian cannabis stocks like Tilray, Cronos Group, Canopy Growth, and SNDL—all of which currently lack direct U.S. sales—jumped sharply on the news. For example, Tilray popped nearly 18%, Cronos surged 14%, and Canopy Growth rallied by more than 18%. Even U.S.-focused names such as Trulieve (TCNNF) saw a lift.

ETF Performance: The AdvisorShares Pure US Cannabis ETF (MSOS) and Amplify Alternative Harvest ETF (MJ) both rallied as regulatory hopes returned. MSOS, which tracks U.S.-listed cannabis companies barred from major exchanges, was up over 7% in premarket trading, while MJ followed suit.

ETF angle: MJ vs. MSOS

MSOS (AdvisorShares Pure US Cannabis ETF): Focuses on U.S. multi-state operators (MSOs)—the group most directly helped by 280E relief. If rescheduling advances, MSOS should have higher earnings sensitivity. Liquidity is thinner and volatility higher.

MJ (Amplify Alternative Harvest ETF): Tracks a broader, global cannabis index with significant Canada/ancillary exposure. Less direct 280E benefit but typically more liquid; may lag MSOS on fundamentals while still riding sentiment.

Key Takeaways for Investors

Regulatory-driven volatility: News and rumors on U.S. drug policy are the primary drivers of sharp, short-lived rallies—even for Canadian companies without U.S. operations. Gains can reverse quickly if hopes fade or political priorities shift

Business challenges: Until reform takes place, U.S. cannabis operators face major hurdles: limited banking access, punitive IRS rules on deductions, high debt loads, and a lack of bankruptcy protections. Political momentum also remains uncertain, as Trump’s administration weighs moral and legal risks, and the process lags behind industry hopes.

Risks to Watch

Political Uncertainty: Neither party appears to make cannabis reform a top priority, and regulatory change is slow. A Schedule III move would not legalize marijuana federally—it would simply ease some barriers.

Stock Volatility: Rallies fueled by regulatory optimism have often been followed by sharp reversals. The sector remains deeply depressed, with persistent losses over the last several years.

Execution Risk: Even with rescheduling, companies must navigate tough competition, high taxes, and operational risks. Only well-run firms with access to capital and markets stand to benefit fully.

For those considering marijuana ETFs like MSOS or MJ, expect significant volatility and political dependence. Investing in both ETFs can provide diversification—MSOS for direct U.S. exposure, MJ for a broader industry basket—but these are tactical trades, not long-term buy-and-hold positions in the absence of clear regulatory breakthrough.

Quickly compare MSOS and MJ side-by-side with our ETF Compare Tool