The U.S. Department of Health and Human Services (HHS) is proposing a significant change to the classification of cannabis under U.S. law. According to a report by Bloomberg, the HHS recommends that cannabis be reclassified as a Schedule III controlled substance, moving it from its current classification as a Schedule I drug.
Market Impact
The news of this potential reclassification has caused a surge in cannabis stocks. The AdviserShares Pure US Cannabis ETF (MSOS) has experienced a substantial increase of nearly 33%. Additionally, the ETFMG Alternative Harvest ETF (MJ) has risen by 19.5%. Several individual cannabis stocks have also seen notable gains:
- Canopy Growth Corp. (CGC) is up by 18.5%
- Curaleaf Holdings (CURLF) has experienced a 17% increase
- Tilray Brands Inc. (TLRY) has risen by 17.5%
- Cresco Labs (CRLBF) is rallying with an impressive gain of 30.3%
- Green Thumb Industries Inc. (GTBIF) has increased by 19.7%
- Trulieve Cannabis (TCNNF) is up by 17.9%
Background and Requested Review
In October 2022, President Joe Biden requested that Attorney General Eric Garland and HHS Secretary Xavier Becerra conduct a review of the scheduling of marijuana under federal law. The review was prompted by a letter from Assistant Secretary for Health Rachel Levine to the Drug Enforcement Administration (DEA), which referenced a comprehensive assessment conducted by the Food and Drug Administration.
Schedule I vs. Schedule III
Under current federal law, Schedule I drugs, such as heroin, LSD, and marijuana, are classified as having no medical benefits. However, if cannabis were to be reclassified as a Schedule III substance, it would be grouped with drugs that have recognized medical uses. Schedule III drugs currently include products containing less than 90 milligrams of codeine per dose, ketamine, anabolic steroids, and testosterone, as outlined by the DEA’s website.
The reclassification of cannabis has the potential to have a significant impact on the cannabis industry and its stakeholders. However, it remains to be seen whether the HHS recommendation will be implemented and how it will shape the future of cannabis regulation in the United States.
