‘Trump effect’ raises hopes for cannabis rally

Cannabis stocks could be poised to rise after years of stagnation, fueled by investor optimism about the possibility of new federal rules for hemp-derived products and signs that President Donald Trump may take a more lenient stance on marijuana.

Publicly traded cannabis companies have seen their share of ups and downs. Verano Holdings reported earnings on Wednesday that saw revenue reach $203 million, up slightly from the previous quarter but down 6% year over year. However, Verano recorded a net loss of $44 million, due in part to a $5 million impairment charge on a facility in Pennsylvania and a $10 million legal contingency as a result of the settlement.

Next week, two US cannabis giants, Curaleaf and Trulieve, are scheduled to follow up with their earnings reports. While the sector is down roughly 10% this year, based on cannabis-focused ETFs, some executives, like CEO Tilray Brandsremains optimistic about the transformation. Indeed, in October, Tilray BrandsThe stock rose 22% after announcing better-than-expected first-quarter financial results.

“We could be looking at a real inflection point for cannabis,” Tilray CEO Irwin Simon told CNBC. “If reforms go ahead, that could attract more companies to do business in the United States.”

Three developments are driving growth: Trump’s apparent embrace of Medicare coverage of CBD, a non-intoxicating compound derived from hemp; President’s statements regarding reclassification of marijuana drug status; And the movement in Congress to regulate cannabis.

Meanwhile, cannabis is more popular than ever. As of a 2024 report, daily or near-daily marijuana use has surpassed daily drinking in the United States, based on an analysis of 40 years of data from Carnegie Mellon University.

The annual value of U.S. hemp production rose 40% last year compared to the previous year, according to the Department of Agriculture, and hemp-derived products, which include CBD and marijuana-based materials, are now expected to reach a $160 billion global market by 2032, according to Grand View Research.

Optimism in the cannabis market soared in September after Trump shared a video on the website Truth Social that promoted Medicare coverage of CBD and made unproven anti-aging claims about the substance.

The video was produced by the Commonwealth Project — which advocates for seniors who use cannabis and was founded and funded by Palm Beach billionaire Howard Kessler — and appealed directly to the president.

Kessler, known for pioneering converged credit cards, turned to cannabis advocacy in 2019 but has been in Trump’s orbit since at least 2005, attending Trump’s wedding to Melania Trump and appearing at his Mar-a-Lago resort and state dinners. Neither Kessler nor the White House responded to a request for comment on the matter.

Cannabis stocks immediately reacted to the video. On the day of its publication, Tilray shares rose 42%, while Tilray shares rose 42% Aurora hemp The company’s shares rose by 25% Canopy growth jumped 18% and Cronos Group The stock rose 15.5%

“A lot of people in the industry have seen it [Trump] “The release of the video came as a bit of a surprise, but we believe it is trying to gauge how the public feels about cannabis products,” said Adam Smith, executive director of the Marijuana Policy Project, which advocates for marijuana legalization. “Some people call it the ‘Trump effect,’ and they think if he leans toward CBD, other Republicans might support him.”

There is limited data on effective doses of CBD for inflammation or chronic pain, especially in older adults, according to the National Institutes of Health. People are overreacting to the post, said Kevin Sabbitt, president of Smart Approaches to Marijuana, an organization that opposes marijuana.

“It is a huge exaggeration to say that one or two posts are a complete endorsement of reform,” Thabet told CNBC. “His posts are often not in line with official political positions.”

To date, the US Food and Drug Administration (FDA) has approved only one CBD-based drug, Epidiolex, to treat rare forms of epilepsy. Other uses lack scientific evidence and have “largely unknown” effects, said Meg Haney, director of Columbia University’s Cannabis Research Laboratory.

Trump’s post also adds to momentum around regulation of hemp — a variant of the marijuana plant that does not cause a “high, according to the Centers for Disease Control and Prevention — that was legalized under the 2018 Farm Bill. Congress is considering updates to the bill by the end of the year that could adopt long-awaited federal standards for labeling, testing and safety on hemp-derived products that were left unregulated under the original law.

“Organization is not scary, as long as it is effective, because the clearer the lines are, the better it works [when] “You don’t have an ax looming over your head,” said Pamela Epstein, chief legal and regulatory officer at hemp producer Terpene Belt Farms.

Legalization in 2018 created a $1.6 billion cannabis market by 2023, according to Grand View Research. Hemp-derived CBD products containing less than 0.3% tetrahydrocannabinol (THC) — the psychoactive compound responsible for the high — were legalized under the bill and have quickly spread into gummies, drinks, creams and even pet treats, and are expected to grow more than 20% by 2030, the data company said.

The oversight vacuum has left consumers vulnerable to mislabeled, untested and sometimes unsafe products, Smith told CNBC.

“The cannabis sector can grow very quickly without rules,” Smith said. “Problems have arisen with some items masquerading as CBD but containing high levels of THC, products marketed to children and some products with contaminated samples.”

Proposals in Congress range from an outright ban on cannabis to tightening tetrahydrocannabinol (THC) limits. Others in the cannabis industry are lobbying for an “alcohol model” framework — where the FDA would oversee product safety, and the Alcohol and Tobacco Tax and Trade Bureau would manage taxation and distribution.

“Clear rules aren’t scary,” Tilray CEO Simon said. “It is the best way to grow sustainably and eliminate the uncertainty that has characterized this field for years.”

People like Epstein warn that a complete ban could cripple the cannabis economy, which supports about 320,000 jobs nationwide, according to the U.S. Cannabis Roundtable and related industry reports. But others like Michael Mayes, CEO of cannabis consulting firm Quantum 9, said any form of federal standards is necessary to legalize the market and attract institutional investors.

“Federal regulations would help some investors consider cannabis a marginal investment with their money,” Mayes told CNBC. “By next year, it’s possible. Smart, consistent rules could be the key to unlocking billions in growth while working to ensure consumer safety.”

Trump’s apparent openness to CBD has fueled speculation that he may go further.

In August, he said his administration was “looking at” reclassifying marijuana from a Schedule I drug — along with heroin and LSD — to a Schedule III drug.

Advocates said the move would not legalize recreational marijuana but would make it easier to sell. It would also improve access to banking and financial services because it would lift some IRS tax restrictions, which prevent cannabis businesses from deducting standard expenses. The changes could also ease barriers to scientific research, which experts said have been stifled under the drug’s current classification.

“To prove that cannabis has a medical benefit, we need to do large, controlled trials, but we can’t do that if it’s a Schedule I drug. As a result, that means you can’t do the studies needed to reschedule it,” Haney said. “It’s like a chicken-and-egg puzzle.”

A White House official described the rescheduling process as ongoing, and said that “all political and legal requirements and ramifications are under consideration.”

Cannabis industry sources said investor optimism is partly focused on Trump’s chief of staff, Susie Wells, who previously worked at Ballard Partners, a Florida lobbying firm that represents TrueLife, one of the largest U.S. cannabis companies. Although Wells was not registered as a lobbyist for Trulieve, multiple cannabis industry sources described her as a close friend of Trulieve CEO Kim Rivers. People spoke anonymously to talk openly about this matter.

According to the Florida Department of Elections, Trulieve spent more than $100 million supporting a failed ballot measure to legalize recreational cannabis for adults 21 and older. The company reportedly played a key role in securing Trump’s support for the initiative. For the presidential race, according to Federal Election Commission filings, Trulieve donated $750,000 to Trump’s inauguration committee and another $250,000 to MAGA Inc. super PAC.

The Wall Street Journal reported that Rivers attended two events before the inauguration, including a dinner for Vice President J.D. Vance, and joined a $1 million fundraiser at Trump’s golf club in New Jersey in August, where she urged him to reclassify marijuana.

Two days after the fundraiser, Trump made his comments about the classification of marijuana.

Wales, Rivers and Truelife did not respond to requests for comment.

Despite the optimism of investors and advocates, many Republican lawmakers are moving to rein in hemp-derived products, citing safety concerns.

The backlash stems from the post-2018 cannabis boom, which quickly turned into a glut. Licensed acreage rose 445% from the previous year by 2019, according to the advocacy and research group Vote Hemp, but the market has become saturated with the products, forcing many retailers and producers to concentrate or close, experts said.

“Very quickly, there was product bloat, and for a lot of companies, the financial results weren’t there. There was no growth. You had some really difficult balance sheets, and I think investors weren’t sure of the underlying fundamentals,” said Michael Gorenstein, CEO of Kronos Group.

Smith said the market has rebounded today but remains the “Wild West” without regulation. FDA research this summer linked unregulated CBD to potential liver damage, and experts warn that the tetrahydrocannabinol (THC) in hemp could be chemically altered or added in amounts that make it as intoxicating as marijuana.

Lawmakers have responded to safety concerns.

Over the summer, Maryland Republican Rep. Andy Harris introduced a bill redefining hemp to exclude any product containing “quantifiable” THC, which passed a House committee along party lines. The Senate Appropriations Committee advanced similar language unanimously in July, with Sen. Mitch McConnell, R-Ky. — who championed the 2018 legalization effort — calling for the law’s “original intent” to be restored. A Congressional Research Service report in August said the proposals would “effectively ban” nearly all hemp-derived products.

Looking ahead, many in the industry said the future depends on what Trump does next, especially in the next few months. Even the perception of regulatory change spurred investor optimism.

“For many of us, it’s not a question of when, but rather what the regulations will be and how they will be enforced,” Gorenstein said. “If the next administration provides clarity, that alone could shake up the industry.”