Cannabis investors breathed a collective sigh of relief yesterday as former President Donald Trump signaled potential support for marijuana reclassification during a campaign rally in Michigan. The unexpected announcement sent pot stocks soaring, with many Canadian and U.S. cannabis companies seeing double-digit percentage gains in a single trading session.
“We’re going to look at marijuana very seriously,” Trump told the crowd. “A lot of people are benefiting from it medically, and the states have spoken. Maybe it’s time we rethink how the federal government views this issue.”
The comments mark a significant shift for Trump, who maintained a largely hands-off approach to cannabis policy during his first administration while allowing his Justice Department to occasionally take more restrictive positions. Cannabis remains classified as a Schedule I substance under U.S. federal law, alongside drugs like heroin and LSD, despite being legal for medical use in 38 states and recreational use in 23 states.
Market reaction was swift and dramatic. Canopy Growth, one of Canada’s largest producers, saw shares jump 28% on the Toronto Stock Exchange. U.S. multi-state operators weren’t far behind, with Green Thumb Industries and Curaleaf both climbing over 20% on Canadian exchanges where they’re listed due to ongoing U.S. federal prohibition.
“This is potentially the catalyst the industry has been waiting for,” explains Emily Santos, cannabis sector analyst at BMO Capital Markets. “Rescheduling could resolve banking issues, tax problems, and open doors for institutional investors who’ve remained on the sidelines due to compliance concerns.”
The excitement isn’t just speculative. Reclassifying cannabis to a Schedule III substance or lower would trigger several concrete business advantages. Most immediately, it would eliminate Section 280E of the tax code, which currently prevents cannabis companies from deducting normal business expenses, effectively taxing them on gross rather than net profit.
For perspective, many U.S. cannabis operators pay effective tax rates between 50-70% compared to the 21% corporate rate most American businesses face. That change alone could double earnings overnight for profitable operators, according to industry estimates from the National Cannabis Industry Association.
Banking reform would likely follow. Currently, most federally regulated financial institutions avoid serving cannabis businesses due to money laundering concerns. This forces many operators to function as cash-only enterprises, creating security challenges and operational inefficiencies.
“We’ve been waiting years for this kind of momentum,” says Miguel Rodriguez, CEO of GreenLeaf Dispensaries, which operates in Illinois and Michigan. “We pay armed guards to transport cash to specialized banking facilities. We can’t get normal business loans. We can’t even use standard payment processors that every other retail business takes for granted.”
While the stock surge reflects genuine excitement, industry veterans remain cautious. Trump’s comments, while promising, lack specific policy commitments or timelines. Additionally, any meaningful change would require either executive action or congressional approval, neither of which is guaranteed.
Mark Thornton, cannabis policy researcher at the Cato Institute, offers a sobering assessment: “We’ve seen this movie before. Politicians make cannabis promises during campaign season that don’t materialize once elected. The devil will be in the details of any actual proposal.”
The Canadian cannabis sector, which experienced a similar euphoric surge when legalization was announced there in 2017-2018, offers a cautionary tale. Initial stock valuations proved wildly optimistic, with many major players losing over 90% of their market value in subsequent years despite operating in a fully legal environment.
“U.S. investors should study what happened north of the border,” warns Sandra Miller, portfolio manager at Harvest Funds. “Legalization solves certain problems but creates others – regulatory compliance costs increase, taxes rise, and competition intensifies. Not every company survives that transition.”
Despite these concerns, the fundamentals for U.S. cannabis look stronger than their Canadian counterparts did at a similar stage. Many U.S. multi-state operators are already profitable despite punishing tax treatment and regulatory handicaps. The U.S. market is also significantly larger, with estimated annual sales of $30 billion compared to Canada’s $4 billion.
Federal rescheduling could also accelerate consolidation in the fragmented U.S. market. Major pharmaceutical and consumer packaged goods companies have circled the industry for years, with many establishing partnerships or making small investments while waiting for regulatory clarity.
“The day after rescheduling, expect phone lines at cannabis companies to light up with calls from Pfizer, Constellation Brands, and similar players,” predicts Jason Wilson, cannabis banking expert at ETFMG Alternative Harvest ETF. “They’ve been developing products and strategies behind the scenes, waiting for the legal green light.”
For investors considering entry points, analysts suggest focusing on companies with strong balance sheets and existing profitability rather than speculative plays. The likely winners will be businesses that have already demonstrated operational discipline despite the industry’s punishing regulatory environment.
The political calculus appears increasingly favorable regardless of the election outcome. Recent polling from Gallup shows 70% of Americans support cannabis legalization, including majorities of both Republicans and Democrats. The issue has evolved from controversial to mainstream in just a decade.
Whether Trump’s comments represent genuine policy intention or campaign positioning remains to be seen. But with the cannabis industry poised to generate over $100 billion annually and create hundreds of thousands of jobs by decade’s end, the economic incentives for reform grow more compelling by the day.
For now, investors and industry participants alike are enjoying the renewed attention and capital flows. The question remains whether this rally has staying power or will fade like previous cannabis stock surges. The answer may ultimately depend less on campaign promises and more on the legislative details that follow.
