Shares of cannabis companies surged Friday amid reports that President Donald Trump plans to sign an executive order as early as Monday directing federal regulators to reclassify marijuana from Schedule I to Schedule III, a move that could unlock tax relief and banking access for the industry. The AdvisorShares Pure US Cannabis ETF jumped 15% in midday trading, while Curaleaf Holdings climbed 12% and Green Thumb Industries rose 10%, according to market data. This development marks a potential turning point after years of regulatory limbo.

The CNBC report, citing people familiar with the matter, detailed Trump’s intention to instruct the Department of Health and Human Services and the Drug Enforcement Administration to shift cannabis’s classification, easing restrictions that have long hampered operators. Reclassification would remove marijuana from the same category as heroin and LSD, allowing for medical research and potentially ending Section 280E tax rules that prevent deductions for business expenses.

Historical Context of Federal Stalemate

Marijuana’s Schedule I status since 1970 has created a paradox: 38 states permit medical use and 24 allow recreational sales, generating over $30 billion annually, yet federal law treats it as having no accepted medical value. Trump’s order would not legalize recreational use but could generate billions in cash flow for multi-state operators through tax savings. "This would be one of the biggest shifts in US policy toward cannabis in decades," noted people briefed on the discussions, per a Bloomberg account.

Industry executives have lobbied intensely for this change. Curaleaf CEO Matt Darin highlighted in recent earnings calls how 280E compliance drains profitability, with the company posting $204 million in trailing 12-month EBITDA despite $2.09 billion market cap, as shared in posts on X. Rescheduling could add hundreds of millions in free cash flow, transforming balance sheets overnight.

Market Mechanics and ETF Flows

The MSOS ETF, tracking U.S. multi-state operators, faced $20 million in redemptions last week per New Cannabis Ventures, but Friday’s news reversed sentiment. "Cannabis stocks surged on reports that President Donald Trump is considering an executive order to reschedule marijuana," Proactive Investors reported, with Tilray Brands up 18% and Canopy Growth leaping 22%.

Canadian firms like Aurora Cannabis and SNDL also rallied double digits on U.S. spillover effects. Posts on X from traders like @HanfTicker emphasized frustration over past delays: "We were promised cannabis rescheduling years ago, but politicians never kept their promises!" Trump’s August comments on reclassification had already sparked rallies, per CNBC.

Operational Impacts on Key Players

Curaleaf, the MSOS top holding, operates in 19 states with strong cash flow positioning it for growth. Green Thumb Industries, with $369 million EBITDA, stands to benefit most from tax relief. "Marijuana reclassification to Schedule III drug status under President Donald Trump could reshape the cannabis industry and ease banking restrictions," Fox Business analyzed.

Banking remains a choke point; most operators rely on cash due to federal illegality, risking theft and limiting expansion. Schedule III status would enable normal banking relations, per Axios reporting on Trump’s signals. Interstate commerce, blocked by federal rules, could open if rescheduling paves the way.

Policy Hurdles and Timeline Risks

While the executive order directs agencies, final DEA approval requires rulemaking, potentially taking months. Trump previously promised action "in a few weeks" post-election, fueling impatience seen in X discussions. "Donald Trump needs to follow through with rescheduling weed. The chances are extremely high," one post urged.

Opposition lingers from conservative lawmakers wary of perceived leniency. Yet Trump’s pivot aligns with his pro-business stance, echoing 2024 campaign nods to state rights. Reuters noted: "Shares of cannabis companies jumped on Friday after the Washington Post reported U.S. President Donald Trump is expected to push the government to dramatically loosen federal restrictions on marijuana."

Financial Projections Post-Reclassification

Analysts project 280E relief could boost industry EBITDA by 30-50%. For Cresco Labs ($2.89 billion market cap, $111 million EBITDA), this means reinvestment in vertical integration. Green Thumb’s scale positions it as a consolidator. "If reclassified, pot would no longer be in the same category as heroin," Fast Company observed, with shares like Aurora jumping double digits.

Hemp loophole closures expected in November 2025 will funnel revenue to licensed operators, amplifying rescheduling tailwinds. X sentiment from @MosleyTribes: "Stocks are not yet close to reflecting the cannabis newsflow… Rescheduling / 280e tax elimination means hundreds of millions in free cash."

Competitive Dynamics and M&A Surge

Tax parity could trigger a merger wave, with cash-rich firms acquiring distressed peers. Trulieve ($1.28 billion cap) eyes Florida ballot wins. "Weed stocks light up after Trump comment," Mario Nawfal posted on X, citing lighter taxes and research boosts for the $80 billion sector.

Longer-term, Schedule III enables FDA pathways for pharmaceuticals, pitting multi-state operators against Big Pharma. Investors eye MSOS holdings like Curaleaf for leadership. As Reuters reported, the surge reflects pent-up optimism after years of false starts.

Global Ripples and Investor Positioning

Canadian producers with U.S. exposure like Tilray benefit from cross-border momentum. U.S. News highlighted top picks including MSOS in its 2025 marijuana ETF guide. Trump’s move could harmonize with state expansions, projecting $50 billion industry by 2030.

For insiders, the play is clear: position in high-EBITDA names ahead of DEA docket. While risks persist, Friday’s action signals validation. "Cannabis get good news," Proactive Investors quipped, as Dow records extended amid Nasdaq wobbles.