Trump's Potential Cannabis Reclassification: A Game-Changer for the Weed Stock Sector

The U.S. cannabis sector is on the cusp of a seismic shift. With President Donald Trump's recent statements about reclassifying cannabis from Schedule I to Schedule III under the Controlled Substances Act, investors are recalibrating their strategies to capitalize on what could be the most transformative regulatory change in decades. This move, if enacted, would not only redefine federal drug policy but also unlock a flood of institutional capital into a sector long starved of mainstream financial access. For investors, the question is no longer if reclassification will happen, but how to position for the inevitable momentum.

The Regulatory Crossroads: From Nixon to Trump

Cannabis has been classified as a Schedule I drug since 1970, a relic of the Nixon-era War on Drugs. The Biden administration's 2023 finding that cannabis has “currently accepted medical use” set the stage for reclassification, but the process stalled under Trump's incoming administration. Now, with the president signaling openness to a Schedule III reclassification—a category that includes ketamine and anabolic steroids—the regulatory pendulum is swinging.

The implications are profound. A Schedule III designation would reduce cannabis's perceived risk profile, enabling research, easing state-level regulatory friction, and potentially removing the tax burden of Section 280E. For cannabis companies, this could mean hundreds of millions in tax savings and access to traditional banking services, which have been off-limits due to federal restrictions.

Undervalued Equities: The Pre-Game Opportunity

The sector's current valuation offers a compelling entry point. Despite recent rallies—such as the 28% surge in the AdvisorShares Pure U.S. Cannabis ETF (MSOS) following Trump's August 11 remarks—many cannabis stocks remain far below their 2021 highs. This undervaluation is a function of lingering regulatory uncertainty and the sector's cyclical nature. However, for investors with a medium-term horizon, the gap between current prices and intrinsic value is striking.

Consider Tilray Brands (TLRY), which trades at $0.44 despite a projected $0.93 price target from analysts. Its global expansion into beverages and edibles, coupled with a diversified portfolio, positions it to benefit from both medical and recreational markets. Similarly, Aurora Cannabis (ACB), trading at $5.50, has shown resilience with 37% revenue growth in Q3 2025 and a pivot toward medical cannabis, a segment less vulnerable to regulatory shifts.

Institutional Sentiment: A Mixed Bag of Optimism and Caution

Institutional analysts are split on the sector's trajectory. Roth MKM's Bill Kirk maintains a “Buy” rating on Canopy Growth (WEED), citing reclassification as a “game changer,” while ATB Capital Markets has downgraded its price target to C$1.60, reflecting skepticism about near-term profitability. The average 12-month price target for Canopy is C$3.87, a 114.90% upside from its current price of C$1.80.

This divergence underscores the sector's dual nature: high growth potential paired with regulatory risk. However, the key insight lies in timing. If reclassification occurs in the coming weeks, as Trump has hinted, the market could experience a liquidity surge akin to the 2021 rally. Investors who enter now—before the policy is finalized—stand to capture gains from both speculative momentum and fundamental improvements.

Strategic Entry Points: Balancing Risk and Reward

For strategic entry, focus on companies with strong balance sheets and diversified revenue streams. Organigram Holdings (OGI), for instance, has boosted revenue by 74% year-over-year through vape and infused pre-roll products, while its recent acquisition of the Collective Project signals global expansion. At $1.37, its valuation appears disconnected from its operational performance.

Another opportunity lies in ancillary players like Advanced Flower Capital (AFCG), a Florida-based REIT providing loans to cannabis operators. Priced at $4.72, AFCG offers indirect exposure to the sector with reduced volatility, making it an attractive option for risk-averse investors.

The Road Ahead: Policy, Politics, and Patience

While reclassification is a critical first step, it is not a panacea. Interstate commerce and full federal legalization will require additional legislative action, such as the SAFER Banking Act. Moreover, the Trump administration's political base remains divided on cannabis, with some factions viewing it as a cultural wedge issue.

Nevertheless, the momentum is undeniable. States like Florida and California continue to refine their regulatory frameworks, while international trends—Germany's psilocybin pilot and Slovenia's medical reforms—reinforce the global shift toward cannabis normalization. For investors, the key is to balance optimism with pragmatism.

Conclusion: Positioning for the Inevitable

The reclassification of cannabis under a Trump administration could be the catalyst that transforms the sector from a niche, high-risk market into a mainstream asset class. For those willing to navigate the regulatory fog, the current undervaluation of equities like Tilray, Aurora, and Organigram offers a rare opportunity. By entering now, investors can position themselves to ride the wave of institutional momentum that will follow once the DEA's decision is finalized.

As the clock ticks toward Trump's rumored “few weeks” timeline, the question is no longer whether to invest—but how to do so with precision and foresight.