President Donald Trump‘s recent executive order urging the Department of Justice to reschedule cannabis to Schedule 3 is being hailed as the “most consequential federal cannabis policy shift” in over 50 years.
Dan Ahrens, portfolio manager of the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS), says the move could finally dismantle the crippling tax regime that has stifled American cannabis operators for decades.
The End Of ‘Narcotics Trafficker’ Status
Ahrens told Yahoo Finance that the immediate financial catalyst of the executive order is the potential elimination of Section 280E of the Internal Revenue Code.
Under the current Schedule 1 classification—which groups cannabis alongside heroin—legal state operators are taxed under a federal designation reserved for illegal drug enterprises.
“They are saddled with this 280E tax, which taxes them as narcotics traffickers,” Ahrens explained. “They cannot deduct any business expenses. Not a single business expense, not even payroll, certainly not rents and mortgages.”
Moving cannabis to Schedule 3, a category for substances with accepted medical use, would “automatically remove” this punitive tax burden. This shift would allow U.S. companies to finally deduct standard operating costs, instantly transforming their balance sheets and cash flow profiles.
A Market In Transition
The industry is reacting to the news after a strong 2025, where the AdvisorShares MSOS ETF reportedly outperformed the S&P 500.
However, Ahrens warns that the sector remains the “most volatile place to invest.” He describes the last few years as a “quagmire” of empty political promises that have left many institutional investors on the sidelines waiting for reform to become “real.”
While Ahrens predicts a market “pop” upon the finalization of rescheduling, he views this as just the first step in a “multi-leg process.”
The Remaining Hurdles
Even with rescheduling, challenges remain. Ahrens notes that U.S. cannabis companies still cannot list on major exchanges like the NASDAQ or NYSE—a privilege currently enjoyed by their Canadian counterparts.
Furthermore, the industry is still waiting on “safe harbor” provisions for banking.
“We don’t know the timing,” Ahrens cautioned, advising investors to expect continued volatility as the government clarifies the boundaries between medical and adult-use programs under the new federal standard.
Here’s a list of a few cannabis stocks and ETFs for investors to consider.
| Stocks / ETFs | 6-Month Performance | Year-To-Date Performance | 1-Year Performance |
| Tilray Brands Inc. (NASDAQ:TLRY) | 40.28% | -2.73% | -19.19% |
| Aurora Cannabis Inc. (NASDAQ:ACB) | -10.00% | -2.53% | 8.46% |
| SNDL Inc. (NASDAQ:SNDL) | 1.90% | -7.47% | -8.52% |
| Canopy Growth Corp. (NASDAQ:CGC) | 6.25% | 4.39% | -46.64% |
| AdvisorShares Pure U.S. Cannabis ETF (NYSE:MSOS) | 68.55% | -0.42% | 35.13% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image Via Shutterstock
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