Cannabis Stocks Rally as U.S. Rescheduling Debate Heats Up

LOS ANGELES — For the first time in more than a year, cannabis stocks are enjoying a sustained rally. Exchange-traded funds focused on the sector have climbed sharply in recent weeks, and several of the country’s largest multi-state operators have posted double-digit gains.

The trigger is a familiar one: renewed talk of moving cannabis out of the nation’s most restrictive drug classification and into a category that recognizes its medical value. While the change would not legalize cannabis federally, it could reshape the industry’s economics almost overnight.

What’s Driving the Rally

1. Rescheduling Hopes Ignite Investor Confidence
The dominant driver behind the surge is renewed talk of moving cannabis from Schedule I to Schedule III. Such a reclassification would acknowledge its medical value, eliminate the heavy tax burden from Section 280E, and open the door to more sustainable business operations. Investors are betting that even partial progress could significantly improve the industry’s financial outlook.

2. High-Profile Advocacy Raises the Stakes
Public figures from sports, entertainment, and business have stepped up their calls for reform, putting the issue in front of mainstream audiences. Mike Tyson, now a cannabis entrepreneur, has become one of the most visible advocates—using interviews, public appearances, and industry events to champion rescheduling, expanded banking access, and broader industry legitimacy.

3. Fresh Capital Flows Into ETFs
The broader market’s appetite for high-risk, high-reward sectors has spilled over into cannabis ETFs. Bargain hunters and thematic investors are rotating into the space, seeing potential for outsized gains if policy changes materialize. This influx of speculative capital has amplified short-term price moves and fueled momentum across top holdings.

A Regulatory Shift With High Stakes

The center of the debate is the Controlled Substances Act, which famously lists cannabis alongside heroin and LSD under Schedule I. The proposed reclassification to Schedule III would place it in the same category as certain anabolic steroids and ketamine—substances considered to have medical uses and subject to fewer restrictions.

Chief among the implications is the long-standing demand for the elimination of Internal Revenue Code section 280E, a provision that prevents cannabis companies from deducting ordinary business expenses. Under current law, salaries, rent, marketing, and other standard costs cannot be written off, leaving many legal operators with effective tax rates exceeding 60 percent.

For large multi-state operators, this tax burden has been a heavy anchor on profitability. Rescheduling could release millions of dollars in annual cash flow, providing capital to expand operations, invest in innovation, and hire more staff.

Banking Reform on a Parallel Track

Even if the drug is moved to Schedule III, most federally regulated banks will remain reluctant to work with cannabis businesses until Congress passes specific legislation. That’s where the SAFE and SAFER Banking Acts come in—bills that would grant cannabis companies access to the full range of banking, insurance, and lending services that other industries take for granted.

Market Reaction: ETFs Lead the Way

Over the past month, cannabis-focused ETFs have rallied from deep lows:

• MSOS — up 17% in the past month, though still down 24.5% year-to-date and off 51.7% over the past 12 months.

• MJ — up 12% in the past month, down 18% year-to-date.

• TOKE — up 8% in the past month, down 10% year-to-date.

• CNBS — $21.09 as of Aug 7, yielding 4.8% annually, up 9% in the past month.

ETFs have been buoyed by gains in their largest holdings, including Green Thumb Industries, Curaleaf Holdings, and Trulieve Cannabis.

Standout Stocks

• Curaleaf (CURLF) — up 76% over the past month on strong Q2 earnings and international expansion.

• Trulieve (TCNNF) — up 31% in the past month, lifted by cost-cutting and same-store sales growth.

• Turning Point Brands (TPB) — up 113.9% year-to-date.

• Village Farms (VFF) — up 26.2% year-to-date.

• LEEF Brands (LEEEF) — up 16% in the past month, with New York expansion underway.

• Glass House Brands (GLASF) — down 5% in the past month on oversupply concerns.

Why Rescheduling Isn’t a Silver Bullet

Rescheduling would not legalize cannabis for recreational use nationwide. Interstate commerce would remain prohibited, and the state-by-state patchwork of regulations would persist. The illicit market, which continues to undercut legal operators, would also remain a formidable competitor.

The State-Level Laboratory

California is leading with cannabis cafés, social equity expansions, and new retail concepts, but has also raised excise taxes from 15% to 19%. Other states are experimenting with their own regulatory and market innovations—creating opportunities and tensions alike.

Is This a False Dawn?

The sector has been here before: rallies fueled by optimism that fizzled when legislation stalled or regulators dragged their feet. The difference this time is the convergence of several catalysts—public advocacy, investor inflows, and the real prospect of tax relief.

Still, nothing is guaranteed. Hearings on rescheduling have been postponed with no firm timeline, and Congress has a history of letting cannabis banking reform languish. If momentum stalls again, recent gains could evaporate just as quickly as they appeared.

Positioning for What’s Next

Investors who believe in the sector’s long-term growth are using the rally to build positions in financially disciplined, multi-state operators with diversified revenue streams. Traders looking for short-term gains are riding the wave of ETF momentum but remain wary of policy disappointment.

For operators, the strategy is clear: be ready to capitalize on reform when it comes, but run lean enough to survive if it doesn’t.

An Industry in Transition

The current rally may prove to be the start of a new chapter—or another temporary spike in a long, volatile story. For now, optimism is back in the air. Whether it lasts will depend on whether Washington can convert rhetoric into regulation.