Cannabis stocks took a hit following the announcement that federal regulators have scheduled a December hearing to review a proposal for reclassifying marijuana. This move pushes a final ruling on the matter past this fall’s general election. AdvisorShares Pure US Cannabis, an ETF tracking marijuana stocks, dropped 8.4% to $6.45 in early trading, while major U.S. cannabis companies such as Curaleaf Holdings and Green Thumb Industries fell 11% and 7%, respectively. Other significant players like Tilray Brands, Verano Holdings, and Trulieve Cannabis saw declines ranging from 4% to 10%.
The Drug Enforcement Administration (DEA) plans to hold a hearing on December 2 to consider moving cannabis from a Schedule I classification, which includes heroin and LSD, to a less restrictive Schedule III. This proposal, supported by the Department of Health and Human Services, aims to reduce restrictions on cannabis, which remains illegal federally despite being legal in some form in 38 states.
Cannabis companies had hoped for a decision before the election to avoid potential disruption from a new president. Alliance Global Partners analyst Aaron Grey noted that the delay increases election-related risks but added that rescheduling might still proceed regardless of the election outcome. Kamala Harris is viewed as more supportive of the reform effort compared to other potential presidential candidates.
The proposed rescheduling follows a review initiated by President Biden in October 2022, which also included pardoning thousands of individuals with federal convictions for simple cannabis possession. The Department of Health and Human Services’ review, completed in January 2024, concluded that marijuana meets the criteria for a less strict classification due to its legitimate medical uses. Following this, the DEA proposed the rule change in April 2024.
The DEA’s decision to hold a hearing came after a 60-day public comment period, which ended in July with 43,000 comments—significantly higher than usual. Analysis revealed that 92.45% of these comments supported rescheduling marijuana, with many advocating for complete de-scheduling rather than a Schedule III classification. The scheduled hearing on December 2 means that a final decision will likely be deferred until after the new president takes office on January 25, 2025.
Industry reactions to the delay have been largely negative. Many see it as a setback, especially given the potential financial impact of maintaining current tax regulations under IRS code 280E. Cannabis industry leaders, including Lauren Fontein of The Artist Tree and George Sadler of Gelato Canna Co., expressed frustration with the delay, citing financial strain and ongoing regulatory challenges. Ian Rice of Envirocann and Elmar Mair of Neatleaf also criticized the postponement, highlighting the significant societal and economic impacts of rescheduling cannabis and the urgent need for timely reform.
