Can Trump's Cannabis Rescheduling Order Catalyze a Comeback for Devastated Cannabis Stocks?

The cannabis industry, long battered by regulatory uncertainty and operational headwinds, has been thrust into a new phase of speculation following President Donald Trump's December 2025 executive order to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act. This move, framed as a step toward legitimizing cannabis as a medical treatment and easing federal restrictions, has sparked a mix of optimism and skepticism among investors. While the rescheduling could unlock tax relief and banking access for cannabis firms, the sector's entrenched challenges-ranging from market saturation to lingering federal prohibitions-raise critical questions about whether this policy shift can truly catalyze a recovery for battered stocks.

Regulatory Tailwinds: A Step Forward, But Not a Panacea

The executive order, titled Increasing Medical Marijuana and Cannabidiol Research, directs the Department of Justice to expedite the rulemaking process to reclassify marijuana as a Schedule III substance, acknowledging its "accepted medical use" and lower risk profile compared to Schedule I drugs. This reclassification would remove the tax burden imposed by , which currently bars cannabis businesses from deducting ordinary business expenses. For firms like Green Thumb Industries and Canopy Growth, this could translate into improved profitability and cash flow, as highlighted by analysts.

The order also addresses hemp-derived cannabinoids, particularly , by calling for updated regulatory frameworks to preserve access to full-spectrum products while curbing unsafe variants. This aligns with the Department of Health and Human Services' 2023 recommendation to reclassify marijuana, underscoring a growing federal recognition of cannabis's therapeutic potential. However, the rescheduling does not legalize recreational use or resolve the federal-state conflict, leaving critical gaps in areas like interstate commerce and banking.

Operational Realities: Debt, Saturation, and Banking Barriers

Despite these regulatory tailwinds, cannabis firms face persistent operational challenges. Market saturation has driven down wholesale prices, with U.S. , according to a report by Forbes. This oversupply has eroded profit margins, particularly for companies in mature markets like California and Colorado. Meanwhile, the sector's financial health remains precarious, with many firms burdened by heavy debt and constrained by 280E's punitive tax treatment.

Banking restrictions persist as a major hurdle. Even if marijuana is rescheduled to Schedule III, major financial institutions remain hesitant to serve cannabis businesses due to the drug's continued classification as a controlled substance. This forces operators to rely on smaller banks or alternative lenders, often at higher interest rates. A Reuters analysis notes that the Trump order's impact on banking access will depend on how quickly institutions adapt to the new regulatory landscape.

Insurance markets also reflect the sector's instability. While some relief has emerged in premium rates, claims costs-particularly for product liability-remain elevated due to contamination risks and health-related incidents. This volatility underscores the sector's struggle to attract institutional investment, with cannabis-linked equities now largely classified as micro-cap stocks.

Investor Sentiment: A Fragile Optimism

The market's reaction to the rescheduling order has been mixed. Initially, shares of major cannabis firms surged, with in the month following the announcement. However, this optimism quickly waned as investors grappled with the reality that the order does not pave the way for federal legalization of recreational use-a key driver of long-term revenue growth. By late 2025, many stocks had given up gains, with companies like Trulieve Cannabis and Tilray Brands posting double-digit declines.

Analysts attribute this volatility to lingering uncertainties around federal policy and the sector's structural challenges. A November 2025 CRB Monitor report highlights that cannabis stocks remain in a prolonged slump, with traditional institutions largely avoiding the space due to regulatory risks. While the rescheduling could improve access to capital and enhance research opportunities, its near-term impact on earnings is expected to be gradual.

Balancing the Scales: A Path Forward?

For cannabis stocks to rebound meaningfully, the industry must navigate a delicate balance between regulatory progress and operational realities. The rescheduling of marijuana to Schedule III is a significant milestone, but its benefits will only materialize if paired with complementary reforms-such as the passage of the or state-level initiatives to streamline regulations. Companies that prioritize financial discipline, diversification, and high-margin product lines-like Sun Theory and Bud & Mary's-may be better positioned to capitalize on the evolving landscape.

However, the path to recovery remains fraught. As long as cannabis remains a controlled substance under federal law, challenges like interstate commerce restrictions and banking hesitancy will persist. For investors, the key will be discerning which firms can adapt to these constraints while leveraging the incremental benefits of rescheduling.

Conclusion

President Trump's rescheduling order represents a pivotal shift in federal cannabis policy, offering a glimmer of hope for an industry in distress. Yet, the road to recovery is far from straightforward. While the removal of 280E and the potential for improved banking access are positive developments, they must be weighed against the sector's entrenched operational challenges. For cannabis stocks to stage a meaningful comeback, regulatory tailwinds must be matched by operational resilience-and the market's patience will be tested in the process.