Trump’s executive order lowers marijuana's regulatory classification; investors "sell the news," marijuana stocks fall broadly.

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On Thursday, U.S. President Trump downgraded marijuana from the strictest category of controlled substances, easing restrictions but not fully legalizing it.

According to the executive order, marijuana will be downgraded from a Schedule I controlled substance to Schedule III, placing it in the same category as ketamine. However, senior U.S. government officials stated that this move will not change the way law enforcement handles marijuana-related arrests. Trump stated:

The marijuana order is not a law, and under no circumstances does this order legalize marijuana in any form.

At the same time, the order also authorizes the launch of a pilot program allowing U.S. federal health insurance to reimburse CBD (cannabidiol, a non-psychoactive marijuana compound) products for patients with cancer and other illnesses. This healthcare plan is expected to be launched next year.

Trump’s decision has sparked division within the Republican Party. Eighteen Republican senators and twenty-six Republican House members recently wrote to the President to oppose the reclassification, and the conservative nonprofit organization CatholicVote also voiced opposition.

Cannabis stocks broadly fell, with ETF CNBS falling nearly 16%, MSOS down 15.77%, and MJ dropping over 10%. Gains for VFF narrowed to 3.71%.Despite the sell-off, related stocks still saw sharp gains prior to the signing of the executive order.Analysts believe this may be a case of “buy the rumor, sell the news,” with investors cashing out after profiting.

(Cannabis stocks fell broadly on Thursday)

Policy Adjustment Acknowledges Medical Value of Marijuana

This executive order lowering marijuana from Schedule I to Schedule III means the U.S. federal government officially recognizes that marijuana has certain medical value and a lower potential for abuse.

On Monday, Trump said this move would promote marijuana research. Trump said:

Many people want to see marijuana reclassified because it will bring about a lot of research opportunities that cannot be done unless it is reclassified.

Dr. Kevin Hill, Professor of Psychiatry at Harvard Medical School, stated:

Reclassifying marijuana will remove some key obstacles, making marijuana research easier.

But he pointed out that the main barrier to research is not the Schedule I status, but the lack of available research funding. Dr. Hill said:

Reclassification should drive larger-scale research, but the key is that stakeholders currently profiting from marijuana sales—state governments and businesses—must be more proactive in funding research than they have been in the past.

Another key part of the executive order is authorizing the U.S. Centers for Medicare & Medicaid Services to launch a pilot project next year, reimbursing CBD treatment costs for Medicare beneficiaries, including cancer patients.

This Medicare proposal is pushed by billionaire financier and long-time Trump ally Howard Kessler. The leukemia survivor and founder of The Commonwealth Project stated in a release:

President Trump’s executive order has brought about a seismic change in health care—one of the boldest breakthroughs in generations.

While the marijuana reclassification will grab headlines, his revolutionary Medicare pilot project will bring immediate, life-changing relief and access to cannabinoid therapy to millions of seniors suffering from chronic pain and debilitating illnesses.

Opposition Emerges Within the Party

Trump’s decision has sparked controversy within the Republican Party. In a letter to the President, 18 Republican senators wrote:

Given marijuana’s documented dangers, promoting the growth of the marijuana industry would run counter to developing the economy and encouraging Americans to lead healthy lifestyles. We urge you to continue your strong leadership over the nation and economy, and abandon the reclassification of marijuana.

Despite internal party resistance, the Trump administration proceeded with this policy change, which also continues the efforts of the Biden administration.

In October 2022, then-President Biden ordered the U.S. Department of Health and Human Services and the DEA to review marijuana’s controlled substance classification.

Nearly a year later, based on scientific assessment, Health and Human Services recommended moving marijuana to Schedule III, believing it has potential medical benefits and belongs in the same category as testosterone and ketamine.

Since then, the formal reclassification process has been advancing through the DEA’s rulemaking procedures.

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