Cannabis Stocks Surge 20% on Trump Reform Hopes

The cannabis industry’s journey from Wall Street darling to market pariah has been brutal for investors. Following Canada’s 2018 recreational legalization and accelerating U.S. state reforms, companies like Canopy Growth (NASDAQ:CGC), Tilray Brands (NASDAQ:TLRY), Aurora Cannabis (NASDAQ:ACB), and Cronos Group (NASDAQ:CRON) achieved staggering multi-billion dollar valuations—CGC topped $10 billion while TLRY approached $20 billion at its peak. Investors poured billions into the sector envisioning a booming green economy, with 40 U.S. states now allowing medical marijuana and 24 permitting recreational use, covering nearly 55-60% of Americans.

Today, these former high-flyers trade as shadows of their former selves, often dipping into penny stock territory. CGC trades at just $1.34 per share, TLRY at $1.15, while ACB and CRON hover at $4.86 and $2.63 respectively. The sector collapse resulted from a perfect storm of oversupply, regulatory delays, fierce competition, and the persistent federal prohibition that prevents companies from accessing traditional banking services and subjects them to punishing tax treatment under IRS Section 280E.

The morning’s dramatic surge—with CRON up 13%, ACB climbing 14%, and CGC and TLRY rocketing over 20% each—stems directly from former President Trump’s amplified pro-cannabis messaging. On Truth Social, Trump shared a video from The Commonwealth Project, a Massachusetts group advocating medical cannabis for seniors. The nearly three-minute clip details cannabis benefits for age-related conditions including pain, arthritis, Alzheimer’s symptoms, and cancer side effects, while highlighting the endocannabinoid system as the body’s natural regulator of mood, sleep, and inflammation.

The video calls for full Medicare coverage of CBD, labeling it the ‘most important senior health initiative of the century’ and notes that 20% of Americans 65 and older already use CBD—outpacing other age groups. A Forbes Health survey last year found an astounding 90% of those 77 or older used CBD. Trump’s post, timed amid White House rescheduling discussions, represents his strongest cannabis endorsement yet and signals potential policy movement that investors interpret as pro-reform positioning from the top.

Rescheduling marijuana from Schedule I to Schedule III under the Controlled Substances Act would fundamentally transform the cannabis industry’s operational landscape. Currently classified alongside heroin and LSD, marijuana’s Schedule I status creates massive barriers for legitimate businesses. Cannabis companies cannot access traditional banking services due to Bank Secrecy Act concerns, forcing many operators into cash-only mode and creating security risks through ‘crash-and-grab’ robberies that plague dispensaries holding millions in cash.

More significantly, IRS Section 280E denies standard business deductions for ‘trafficking’ in controlled substances, creating effective tax rates that can exceed 70% for cannabis companies. Rescheduling would eliminate this punitive tax treatment, potentially boosting stock multiples 2-3x through immediate tax savings. It would also grant companies access to banking services, credit lines, and insurance, while enabling interstate commerce that could double revenues for global players like Canopy Growth and Tilray Brands seeking U.S. market expansion.

The focus on medical applications in Trump’s shared video highlights which companies stand to benefit most from reform momentum. Aurora Cannabis derives 66% of its revenue from medical channels, positioning it as the primary beneficiary of medical cannabis reform. Tilray and Canopy Growth derive approximately 35% of revenue from medical sources, including EU exports and U.S. CBD operations, while Cronos Group maintains a more recreational sales tilt.

This medical focus aligns with strong existing demand—U.S. medical cannabis sales reached $10 billion in 2024, representing a substantial market that could expand significantly with federal recognition and potential Medicare coverage. Companies with established medical operations and international medical exports would see immediate benefits from rescheduling, as medical cannabis typically faces fewer regulatory hurdles than recreational products in global markets.

While the morning’s surge reflects genuine excitement, investors should temper enthusiasm with regulatory reality. Rescheduling requires Drug Enforcement Administration (DEA) finalization, potential court battles, and congressional buy-in—a process likely taking months rather than weeks. The Trump administration has indicated it will prioritize economic and border issues first, meaning cannabis reform may not receive immediate attention despite the positive signaling.

Additionally, the industry continues facing significant challenges including black market competition, where illicit marijuana often undercuts legal products due to regulatory costs, particularly in mature markets like Canada. Volatility remains inherent to cannabis investing, as demonstrated by previous reform hopes that ultimately disappointed investors. For long-term believers, buying on dips with limited allocation represents a prudent strategy, recognizing that while this may represent the best shot at meaningful reform yet, the path forward remains uncertain and complex.