Cannabis ETFs Surge on Legalization Hopes: More Run Ahead?

Cannabis ETFs are poised for a significant shift following a recent move by the U.S. Department of Health and Human Services (HHS) to recommend the reclassification of marijuana as a Schedule III substance – a lower-risk drug –  under the Controlled Substances Act, as quoted on CNBC.

Marijuana is currently a Schedule I drug under the Controlled Substances Act, meaning it’s deemed to have no currently accepted medical use and a high potential for abuse. This pivotal development brings the cannabis industry one step closer to federal legalization, potentially revolutionizing the landscape for investors and businesses alike.

News of the potential reclassification has already triggered a positive market response, with shares of prominent cannabis companies such as Canopy Growth, Tilray Brands, and Cronos Group experiencing significant price surges.

Hence, cannabis ETFS soared on Thursday. ETFMG Alternative Harvest ETF MJ, AdvisorShares Pure US Cannabis ETF MSOS, ETFMG U.S. Alternative Harvest ETF MJUS, AdvisorShares Pure Cannabis ETF YOLO and Global X Cannabis ETF POTX added 9%, 15%, 13.1%, 13.1% and 8.9% on Aug 31, respectively.

About 40 U.S. states have embraced various forms of legalized marijuana usage. However, endeavors to enact federal-level legalization have encountered significant obstacles.

Federal Reclassification: A Game-Changer for Cannabis ETFs

The current federal classification of marijuana as a Schedule I drug has presented numerous challenges for the cannabis industry. Despite its legalization for recreational and medical use in numerous states, the overarching federal stance has impeded growth and inhibited access to traditional banking services and capital. The HHS’s recommendation to reclassify marijuana as a Schedule III substance signifies a pivotal change that could have far-reaching implications.

Schedule III substances are defined as drugs with a moderate to low potential for physical and psychological dependence. This reclassification aligns more closely with the realities of the cannabis plant’s effects and could help dismantle barriers that have hindered the industry’s progress. Investors and businesses are now keenly observing how the Drug Enforcement Administration (DEA), which has the final authority to reschedule controlled substances, will respond to this recommendation.

The Road Ahead: Cautious Optimism

Cannabis ETFs have been on a rollercoaster ride, reflecting the industry’s shifting dynamics. The recent recommendation has injected renewed optimism into the market.

While the recommendation for reclassification is a positive step forward, there are still hurdles to overcome before the cannabis industry can fully capitalize on its potential. The Drug Enforcement Administration (DEA) holds the final authority to reschedule marijuana, and a thorough review process lies ahead.

Additionally, legislative initiatives like the Secure and Fair Enforcement Banking Act (SAFE) are crucial in providing comprehensive solutions to the industry’s challenges. The SAFE Act, which aims to lift restrictions on banking services for cannabis businesses, remains pending in the Senate after passing multiple times in the House.

(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
ETFMG Alternative Harvest ETF (MJ): ETF Research Reports

AdvisorShares Pure Cannabis ETF (YOLO): ETF Research Reports

Global X Cannabis ETF (POTX): ETF Research Reports

AdvisorShares Pure US Cannabis ETF (MSOS): ETF Research Reports

ETFMG U.S. Alternative Harvest ETF (MJUS): ETF Research Reports

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Zacks Investment Research

This article originally appeared on Zacks

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