Trump reclassifies cannabis to Schedule III, eases restrictions on weed

President Donald Trump on Thursday signed an executive order directing federal agencies to reclassify marijuana, easing long-standing restrictions on the drug and marking the most significant shift in US cannabis policy in more than half a century.

The order, once finalized by the DEA, moves cannabis from Schedule I classification — the most restrictive category under the Controlled Substances Act, along with heroin and LSD — to Schedule III classification, which includes substances with an accepted medical use and lower potential for abuse, such as ketamine and Tylenol with codeine.

“This measure has been requested by sick Americans with severe pain, incurable diseases, aggressive cancers, seizure disorders, neurological problems and more, including many veterans with service-connected injuries, and older Americans with chronic medical problems that severely deteriorate their quality of life,” Trump said from the Oval Office on Thursday.

Also on Thursday, the Centers for Medicare and Medicaid Services, led by Dr. Mehmet Oz, is expected to launch a pilot program in April that will enable some seniors covered by Medicare to get free doctor-recommended CBD products, which must comply with all local and state laws on quality and safety, according to senior White House officials. Products must also come from a legally compliant source and undergo third-party testing for CBD levels and contaminants.

Shares of cannabis conglomerates were mixed after the announcement. Tilray BrandsThe stock is up about 6% while Trulieve shares are down about 15% and Green Thumb Industries is down about 5% in afternoon trading. the Advisor Shares Pure US Cannabis ETFwhich tracks US operators, fell more than 10%.

“Millions of registered patients across the United States, many of them veterans, rely on cannabis for relief from chronic and debilitating symptoms. We applaud the administration for taking this historic step. This is just the beginning,” Ben Koffler, CEO and founder of Green Thumb, said in a statement to CNBC.

The reclassification is viewed by many analysts as a financial lifeline for the cannabis industry. The move exempts businesses from IRS Code Section 280E, allowing them to deduct standard expenses like rent and payroll for the first time. It also opens the door to access to banking services and institutional capital that were previously marginalized due to compliance concerns.

Many on Wall Street also expect the changes and the Medicare pilot project to lure big drug players into the sector to chase federally insured revenue.

While CBD has soared in popularity in recent years, with consumer goods ranging from seltzer to skincare, the FDA has stopped short of giving the compound its full support.

Studies have found “inconsistent benefits” for targeted conditions, while FDA-funded research warns that prolonged use of CBD can cause liver toxicity and interfere with other life-saving medications.

Currently, the US Food and Drug Administration (FDA) has only approved one CBD-based drug, Epidiolex, to treat rare forms of epilepsy.

“I want to stress that the executive order…does not legalize marijuana in any way, and does not in any way prohibit its use as a recreational drug,” Trump said.

Experts and industry insiders told CNBC this week that the reclassification could pave the way for more research into the effects of CBD use.