By Steve Gelsi
Cannabis companies including Cresco Labs, Trulieve and Ayr Wellness post solid gains
Cannabis stocks rose Thursday after President Joe Biden said the U.S. government is moving forward with plans to lower the federal classification of cannabis to a less-restrictive category.
"Too many lives have been upended because of our failed approach to marijuana," Biden said in a post on X.
The U.S. Department of Justice has now submitted a notice of proposed rulemaking to the Office of the Federal Register to reclassify marijuana as a Schedule III drug, putting it in the same category as codeine, barbiturates, ketamine and anabolic steroids.
Since 1970, cannabis has been a Schedule I drug, which is the same classification as heroin and fentanyl.
Once cannabis is removed from Schedule I, cannabis companies would no longer have to follow tax provisions under a rule called 280E, which prevents them from taking standard business tax deductions.
Curaleaf Holdings Inc. (CURLF) has said it would save more than $150 million in 2024 taxes if 280E is eliminated.
TerrAscend Corp. shares (TSNDF) rose nearly 10% on Thursday, while Trulieve Cannabis Corp. shares (TCNNF) jumped 10.2%, Canopy Growth Corp. shares (CGC) rallied by 14.7% and Tilray Brands Inc. shares (TLRY) moved up by 6.3%.
Ayr Wellness Inc. shares (AYRWF) jumped by nearly 13%, Cresco Labs Inc. shares (CRLBF) rose by 10% and Goodness Growth Holdings Inc. shares (GDNSF) advanced by 11%. Green Thumb Industries Inc.'s stock (GTBIF) rose by 7.5%, and Curaleaf's rose by nearly 7%.
Among exchange-traded funds, the AdvisorShares Pure U.S. Cannabis ETF MSOS rose by 8.2%, while the Amplify Alternative Harvest ETF MJ jumped nearly 5%.
Schedule III drugs are defined under federal law as having a moderate to low potential for psychological or physical dependence.
Some have argued that cannabis shouldn't be included at all on the list of controlled substances, partly because alcohol isn't on the list.
Once the notice of proposed rulemaking appears publicly in the Federal Register, a 60-day public comment period will begin.
After that, the Drug Enforcement Administration may assign a judge to weigh evidence and make a final recommendation, which would be followed by a final scheduling determination.
The U.S. Cannabis Council said it strongly supports reclassification.
"Our ultimate goal is federal legalization, and we see Schedule III as a necessary and critical step along the way," Edward Conklin, executive director of the industry group, said in a statement.
Meanwhile, Smart Approaches to Marijuana, a Washington-based group opposed to legalization of cannabis, has vowed to challenge the rescheduling effort in court, saying that marijuana is a "psychoactive drug known to come with serious health and mental-health consequences."
The U.S. Department of Health and Human Services last summer recommended a Schedule III designation for cannabis.
Reports initially surfaced on April 30 that the DEA was planning to follow the HHS recommendation.
Also read: Cannabis stocks rally after report that DEA will reclassify drug as less dangerous
-Steve Gelsi
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05-16-24 1414ET
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