Cannabis Stocks' Reaction to Trump's Proposed Rescheduling Executive Order: Analysis & Implications

On December 11, 2025, the Washington Post reported President Trump’s intent to issue an executive order rescheduling cannabis from Schedule I (highest restriction) to Schedule III under the Controlled Substances Act [1]. The immediate market reaction reflected mixed sentiment: real-time data shows AdvisorShares Pure US Cannabis ETF (MSOS) closed +2.17%, Tilray Brands (TLRY) +2.30%, and Canopy Growth (CGC) -1.30% on the announcement day [0], with an initial 30%+ after-hours rally fading as investors weighed implementation risks.

A Forbes analysis explains rescheduling would eliminate the 280E tax prohibition, which currently blocks U.S. cannabis companies from deducting standard business expenses (resulting in effective tax rates over 70% for some firms). This change could save hundreds of millions annually, boosting cash flow for reinvestment and potentially enabling uplisting to major exchanges (NYSE/NASDAQ) [2].

Reddit discussions reveal divided sentiment: bears emphasize Trump’s unfulfilled 2016 cannabis legalization pledge, predicting a short-term pump-and-dump scenario [3]; skeptics link action to potential financial incentives (e.g., corporate donations) [3]; and others warn of lobbying opposition from anti-cannabis groups [3]. Historical context shows Trump made similar reform pledges during his 2024 campaign, but past inconsistencies have left investors wary [4]. Additionally, Republican-led bills like the “No Deductions for Marijuana Business Act” could block tax benefits even if rescheduling occurs, adding regulatory uncertainty [5].

1. 280E Tax as a Fundamental Driver
   : The tax’s elimination would address a core industry financial burden, but legislative counteraction [5] could neutralize this benefit.
2. Political Credibility Impacts Short-Term Moves
   : Investor skepticism about Trump’s track record [3] tempered the initial rally, highlighting the role of political trust in market reactions.
3. Reform Dependence on Complementary Changes
   : Rescheduling alone may not unlock full benefits (e.g., banking access, exchange uplisting), which require additional regulatory actions.
4. Underappreciated Risks
   : Lobbying opposition [3] and legal challenges could delay or block the order, despite initial market excitement.

• Tax Relief
  : Elimination of 280E would drastically reduce effective tax rates, improving profitability and cash flow [2].
• Market Access
  : Rescheduling could enable uplisting to major exchanges, attracting institutional investment [2].
• Banking Services
  : Improved regulatory status may grant access to traditional banking, reducing operational costs [2].

• Unfulfilled Promises
  : Historical patterns suggest Trump may not follow through without clear incentives [3].
• Legislative Blockades
  : Bills like the “No Deductions for Marijuana Business Act” [5] could limit tax benefits.
• Lobbying & Legal Challenges
  : Anti-cannabis groups may delay or overturn the order [3].
• Implementation Timeline
  : Rescheduling requires scientific review and public comment, which could take months or years [0].

The 2025-12-11 report of Trump’s planned rescheduling order is a pivotal development for the U.S. cannabis industry, with potential to resolve the crippling 280E tax burden. However, mixed market reactions and significant implementation risks (unfulfilled promises, legislative counteraction, lobbying) temper long-term optimism. Market sentiment remains divided, reflecting concerns about political credibility and regulatory uncertainty. Decision-makers should monitor implementation timelines, legislative developments, and lobbying efforts for further clarity.