Cannabis ETFs soared after U.S. President Donald Trump announced that he is mulling an executive order regarding the reclassification of marijuana as a less dangerous substance. Such a move is likely to transform the industry by providing access to funding.
“We are looking at that very strongly,” said Trump on Monday, referring to reports that marijuana could be moved to Schedule III from Schedule I under the Controlled Substances Act. While no final decision has been made and the Drug Enforcement Administration must still approve any change, markets wasted little time reacting.
Cannabis ETFs Rise On Policy Momentum
The Roundhill Cannabis ETF (BATS:WEED) reached a 52-week high on Tuesday, surging over 226% from its 52-week low, illustrating how quickly regulatory news can propagate within cannabis ETFs. The WEED ETF provides investors with broad exposure to cannabis-related operations and related firms, making it a popular option in this category.
Other cannabis ETFs also performed well, including the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS), Amplify Seymour Cannabis ETF (NYSE:CNBS), Amplify Alternative Harvest ETF (NYSE:MJ), and AdvisorShares Pure Cannabis ETF (NYSE:YOLO).
Importance Of Reclassification In ETF Investing
For ETF investors, a transition to Schedule III could represent more than just another trade; it could be a structural break. Historically, federal restrictions have made lending difficult for cannabis companies, causing them to resort to high-rate financing.
Reclassification may relax these requirements and potentially reduce taxes, enhance margins, and allowing more institutional investors to participate—developments that would directly benefit ETF portfolios holding plant-touching operators.
ETFs can serve as the first institutional entry point for emerging or formerly restricted industries, providing diversified exposure to a volatile, fragmented market.
Still A High-Risk, High-Volatility
Despite the rally, cannabis ETFs remain highly sensitive to policy timelines and regulatory follow-through. A White House official said last week that no final decision has been reached, and previous cannabis rallies have faded when reforms stalled.
For now, cannabis ETFs are once again behaving like high-octane policy trades. But if Schedule III becomes reality, investors may finally see the sector move from a regulatory gray zone to a more durable, investable theme.
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