The U.S. government on Thursday reclassified state-legal marijuana as a less dangerous drug, signaling long-awaited action on federal cannabis policy. However, shares in cannabis companies plunged following the news, with some surrendering their earlier pre-market gains.
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DOJ Reclassifies State-Licensed Marijuana Products
Stocks in the following companies fell as of 10:40 a.m. EST:
- Tilray Brands (TLRY) — 2.48% to $7.68
- Canopy Growth (CGC) — 6.16% to $1.30
- Cronos Group (CRON) — 6.96% to $2.61
- Aurora Cannabis Inc. (ACB) — 7.63% to $3.51
The U.S. Department of Justice (DOJ) on Thursday announced that it has placed drug products containing marijuana and medical marijuana products under Schedule III of the U.S. Controlled Substances Act. This category is reserved for substances considered to have recognized medical use and reduced potential for abuse.
The reclassification moves the cannabis compounds responsible for the feeling of “highness” out of Schedule I, which houses drugs such as heroin and LSD that are considered highly addictive with a strong risk of abuse.
Why Cannabis Stocks Are Plunging
The rescheduling follows President Donald Trump’s executive order in December that demanded the reclassification of the drug.
While offering looser restrictions that might lessen the tax burden of cannabis companies, the move by the DOJ stops short of fully legalizing the drug for recreational use nationwide. It comes as cannabis companies have been struggling and have been looking for an easing of restrictive rules to expand use and draw in more institutional interest.
However, Acting Attorney General Todd Blanche, who announced the reclassification, noted that the move is targeted at “strengthening medical research while maintaining strict federal controls.”
“This rescheduling action allows for research on the safety and efficacy of this substance, ultimately providing patients with better care and doctors with more reliable information,” Blanche added.
Which Cannabis Stock Is the Best Buy?
Aurora Cannabis’ (ACB) shares both stand out for their Strong Buy consensus rating from analysts and their leading 86% upside potential, as TipRanks’ Stock Comparison tool shows. This comes with an average price target of $6.59.
