New York, NY--In response to the U.S. Department of Health and Human Services' (HHS) recommendation to reclassify cannabis from Schedule I to Schedule III, pot stocks have seen significant growth for two consecutive days.
[Image by Richard T via Unsplash]
Key market reactions, as per an MSN report, include:
- The AdviserShares Pure U.S. Cannabis ETF surged by 7%.
- The ETFMG Alternative Harvest ETF increased by 5.4%.
- The Global X Cannabis ETF climbed by 2.3%.
Individual cannabis stocks, such as Verano Holdings, Ayr Wellness, and Columbia Care, experienced gains ranging from 4.5% to 27%.
The DEA's Role in Cannabis Rescheduling
Although HHS has made its recommendation, the final decision on cannabis scheduling lies with the Drug Enforcement Administration (DEA). The DEA will consider HHS's scientific and medical evaluations during a rule-making process, including a public comment period.
Per the MSN report, analysts, including Pablo Zuanic of Zuanic & Associates, express concerns over the unpredictable nature of the rescheduling process, anticipating its continuation until mid-2024.
Zuanic, among others, is also questioning the potential implications of the move, such as the role of the FDA in cannabis regulation and the possibility of interstate trade.
Federal Sentiment on Cannabis Evolves
Attorney General Merrick Garland's previous comments, as per Marijuana Movement, have been brought to the forefront due to the DEA’s review. During a Senate hearing in March, Garland alluded to a position on cannabis that aligns closely with the Cole memorandum's stance from 2013, which limited federal law enforcement's involvement with cannabis.
Analysts believe that the reclassification of cannabis could pave the way for increased institutional ownership of cannabis stocks, as the current Schedule I classification prevents their listing on major exchanges like the Nasdaq and NYSE.
Jefferies analyst Owen Bennett highlighted the potential for research benefits, noting that researchers might no longer need DEA registration for cannabis studies. Additionally, cannabis companies could see tax relief as they would no longer be subjected to the federal government’s 280E tax exemption.
Public Opinion and the Role of HHS
HHS Secretary Xavier Becerra has played a pivotal role in the ongoing cannabis scheduling review, emphasizing the influence of changing perceptions of cannabis among Americans since the 1990s.
Notably, while no states had legalized marijuana until 1996, today, 37 states have medical cannabis programs, and 21 have legalized it for adult use. Per the other report in the Marijuana Movement, polling data reveals that nearly 70% of Americans now support full cannabis legalization, a drastic increase from the 20-30% in the early 1990s.
Becerra's recent comments suggest that HHS is considering these shifts in public opinion as part of its review. However, he also reiterated that the DEA will decide on marijuana scheduling.
An Uncertain Road Ahead
The recommendation by HHS to reschedule cannabis has undeniably stirred excitement in the industry and among investors.
Nevertheless, the myriad of questions and potential regulatory changes that arise with the move keep the future of federal cannabis policy in flux.