Trump Marijuana Reclassification Spurs Cannabis Rally
Trump marijuana reclassification reports sent cannabis stocks higher and shifted trading flows into Tilray while traders waited on formal rulemaking.
KEY TAKEAWAYS
- Reports that Trump will seek to reclassify marijuana to Schedule III spurred a sector rally.
- Tilray led gains, rising about 28% on the headlines.
- Rescheduling would lift Section 280E limits and could improve after-tax margins and capital access.
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Reports that President Donald Trump plans to direct federal agencies to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act sent cannabis stocks higher on Dec. 12, 2025, refocusing investors on potential regulatory and tax changes for companies including Tilray Brands and Canopy Growth.
Proposed Rescheduling Mechanics
The Department of Health and Human Services recommended moving marijuana out of Schedule I in 2023, triggering a Drug Enforcement Administration rescheduling docket that remains paused by an administrative judge pending final review. No Federal Register notice, Department of Justice order, DEA final rule, or White House directive implementing the reclassification has been published as of Dec. 12, 2025. Current coverage reflects anticipated executive action rather than completed rulemaking.
The president cannot unilaterally reclassify marijuana but could instruct the Department of Justice to forgo a hearing and ask the DEA to issue a final rule in the pending proceeding. This approach could accelerate a decision but carries procedural and litigation risks tied to bypassing the usual administrative process.
A formal transfer to Schedule III would acknowledge marijuana’s accepted medical use and remove it from the list of substances governed by Internal Revenue Code Section 280E, which currently disallows ordinary federal income tax deductions for businesses dealing in Schedule I and II substances. This change could improve after-tax margins and attract new capital but would not legalize recreational marijuana nationwide. State laws, banking regulations, and Food and Drug Administration controls would continue to affect market access and product oversight.
Market Reaction and Company Context
Cannabis stocks surged in premarket trading on Dec. 12, 2025, after reports that the president would press federal agencies to reclassify marijuana, providing a short-term catalyst across U.S.-listed companies. Tilray Brands and Canopy Growth were among the largest gainers, with Tilray rising about 28% on the headlines.
Tilray’s rally followed a recent rebound, supported by a reverse stock split completed before the news and strengthening shares over the prior three trading days. Neither Tilray nor Canopy Growth has issued new guidance tied specifically to the reported policy development in SEC filings or press releases within the last 72 hours.
The reports suggested the rescheduling could occur early next year. Market commentary emphasized that any lasting benefit for cannabis companies depends on formal rulemaking and the timing of tax and regulatory changes rather than on the headlines alone.
