Marijuana stocks tumble as Trump reclassifies drug but stops short of legalisation

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Marijuana stocks plunged on Thursday after President Donald Trump signed an executive order to speed up the loosening of restrictions on the drug, but stopped short of legalising it.

The AdvisorShares Pure US Cannabis ETF closed down 27 per cent after Trump announced an executive order that directs the Department of Justice to reclassify marijuana as a less dangerous drug that would be acceptable for medical use with a prescription.

“We have people begging me to do this. People in great pain,” the president said.

The order could also make it easier to conduct medical research using the drug.

“The lack of appropriate research on medical marijuana and consequent lack of [Food and Drug Administration] approval leaves American patients and doctors without adequate guidance on appropriate prescribing and utilization,” it reads.  

Despite some exceptions, marijuana is illegal under the 1970 US Controlled Substance Act. However, two dozen states have legalised small amounts of marijuana for adult recreational use, and almost all states allow it for regulated medical use.

But Thursday’s order was “mostly a symbolic win” for the marijuana industry, said Jaret Seiberg, an analyst with TD Cowen in Washington.

“The executive order does not change policy,” he wrote in a report. “State-legal recreational and medical markets will still be in violation of federal law. It is why this is unlikely to impact capital markets or commercial banking access.”

The AdvisorShares cannabis exchange traded fund remains up 28 per cent so far in 2025.

Former president Joe Biden had proposed reclassifying marijuana but did not complete the process before the end of his term.

In Trump’s first administration, he toughened regulations for marijuana that were loosened under former president Barack Obama. In 2018 Trump’s then-attorney- general Jeff Sessions rescinded an Obama-era policy that stopped the government from strict enforcement of cannabis laws.

“Good people don’t smoke marijuana,” Sessions said in 2018, adding that Obama’s guidance had “undermine[d] the rule of law and the ability of our local, state, tribal, and federal law enforcement partners”.