Since the effective federal hemp-derived THC ban was approved in the latest budget deal, cannabis investors are in meltdown mode. They are acting like the change is a sign the Trump administration is no longer serious about rescheduling – the main catalyst expected near term.
This is probably wrong.
Cannabis sector CEOs closer to the rescheduling process than most investors think the sector-changing reform is still on track.
“I believe the President is a man who says what he means,” said Trulieve (TCNNF) CEO Kim Rivers at a recent cannabis conference in Washington, D.C. “He is on record of being supportive of medical cannabis rescheduling and will make the decision when he and his staff decide it’s the right time.”
Curaleaf (CURLF) CEO Boris Jordan also remains positive that President Donald Trump will go ahead with rescheduling. Though Jordan has been cautioning that the change might happen closer to the 2026 midterms, for enhanced political effect.
This makes sense, because the recent elections show that younger voters continue to favor politicians on the left. So, Republicans have a need to implement policies that attract youth. Cannabis reforms, like rescheduling, would be one way to do this. Polls also consistently show that the vast majority of voters (as much as 90%) – especially youth – favor legalization in some form.
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Rescheduling means the transfer of cannabis to Schedule III from Schedule I under the Controlled Substances Act. The change would help cannabis companies enormously by boosting their cash flow. That’s because rescheduling would neutralize an IRS provision that bans the deduction of most business expenses against proceeds from the sale of Schedule I substances.
State Progress Continues
Meanwhile, positive cannabis reform and sales trends continue at the state level.
For example, Virginia’s Joint Commission on the Future of Cannabis Sales is expected to unveil its proposal to legalize recreational-use cannabis sales on December 2. The state’s General Assembly would then likely pass the proposal in 2026. Sector analysts think that means legal sales could begin next fall. Though in my view, this is unlikely since it’s typically taken a year for sales to launch after getting the green light from lawmakers or voters in referenda.
Incoming Governor Abigail Spanberger (D), during her campaign, said she would sign legislation that greenlights retail sales. Virginia legalized possession and home cultivation in 2021, but sales have remained illegal. Virginia sales legalization will benefit Green Thumb (GTBIF) and Verano (VRNO).
Next, a key Florida recreational-use legalization referendum effort by Smart & Safe Florida remains in the balance, but it is by no means out of the running.
Smart & Safe Florida recently suffered a setback when a Florida judge sided with Gov. Ron DeSantis’s (R) administration, affirming a request to invalidate about 200,000 signatures from people supporting the proposed referendum.
The administration protested petitions that didn’t include the full text of the initiative, but merely a website link to the text. Smart & Safe Florida had argued that was enough, but the court ruled otherwise.
The ruling wipes out a third of the campaign’s 675,000 petition signatures, putting the referendum campaign at risk. Smart & Safe is challenging the ruling. It has to secure 880,062 valid signatures by February 1, and it can still hit that target.
A recent Fabrizio, Lee & Associates poll found that 89% of Florida voters think they should decide on legalization, not lawmakers.
Smart & Safe placed a similar referendum on the 2024 ballot. But only 56% of Floridians voted in favor of the change, a bit short of the requisite 60%. Legalization would open up a huge cannabis market in Florida, primarily benefiting Trulieve, which is not surprisingly the main financial backer of Smart & Safe.
Meanwhile, consumers continue to vote in favor of cannabis reform with their wallets. Cannabis continues to be very popular in Heartland states, judging by sales trends. This bodes well for federal cannabis reforms, like rescheduling, since it confirms poll results showing majority support for cannabis reform.
For example, legal cannabis sales in Missouri hit $127.63 million in October, bringing the year-to-date total to $1.26 billion, a nearly 15% increase over the $1.1 billion sold during the same period last year. Recreational-use stores opened in February 2023.
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