Expectations for cannabis rallies increase due to ‘Trump effect’

Investor optimism about possible new federal regulations for cannabis-derived products and signals from President Donald Trump that he may take a more lenient stance on cannabis could send cannabis stocks on a rise after years of weakness.

Publicly traded cannabis companies have experienced ups and downs. Verano Holdings reported revenue of $203 million on Wednesday, up slightly from the previous quarter but down 6% from a year ago. However, Verano reported a net loss of $44 million, due in part to a $5 million impairment charge at its Pennsylvania facility and a $10 million legal contingency fee as a result of the settlement.

Two of the largest U.S. cannabis companies, Curaleaf and Trulieve, are expected to follow suit next week with earnings reports. Based on cannabis-focused ETFs, the sector is down about 10% this year, but some executives like C.E.O. tilray brandremains optimistic about the turnaround. Already in October, tilray brandShares soared 22% after the company reported better-than-expected fiscal first-quarter results.

“We could be at a real tipping point for cannabis,” Tilray CEO Irwin Simon told CNBC. “As we continue to reform, we could attract more companies to do business in the United States.”

Three developments are driving growth. President Trump appears to be open to Medicare coverage of CBD, a non-intoxicating cannabis compound derived from cannabis. President’s Remarks on Reclassifying Marijuana’s Drug Status. and Congressional efforts to regulate cannabis.

Meanwhile, cannabis is more popular than ever. Based on Carnegie Mellon University’s analysis of 40 years of data, daily or near-daily cannabis use will exceed daily alcohol use in the United States as of the 2024 report.

The value of U.S. hemp production last year increased 40% from the previous year, according to the Department of Agriculture, and hemp-derived products, including CBD and marijuana-based products, are projected to reach a $160 billion global market by 2032, according to Grandview Research.

Optimism in the cannabis market soared in September after President Trump promoted Medicare coverage of CBD and shared a video on Truth Social that made unproven anti-aging claims about CBD.

The video, produced by the Commonwealth Project, which advocates for older adults who use marijuana and is founded and funded by Palm Beach billionaire Howard Kessler, appealed directly to the president.

Kessler, known as the pioneer of affinity credit cards, turned to cannabis advocacy in 2019, but has been in Trump’s orbit since at least 2005, attending his wedding to Melania Trump and attending Mar-a-Lago and state dinners. Neither Kessler nor the White House responded to requests for comment on this story.

Cannabis stocks were quick to react to the video. On the day this article was posted, Tilray stock soared 42%. aurora cannabis Stock price rose 25%; canopy growth rose 18%, chronos group Inventories increased by 15.5%.

“A lot of people in the industry were looking at him. [Trump] “It’s a bit of a surprise that he posted the video, but I think he’s trying to gauge how the public feels about cannabis products,” said Adam Smith, executive director of the Marijuana Policy Project, which advocates for marijuana legalization. “Some people are calling this the ‘Trump effect,’ and believe that if he leans toward CBD, other Republicans may also support it.”

According to the National Institutes of Health, there is limited data regarding the effective amount of CBD for inflammation and chronic pain, especially in older adults. Kevin Sabet, president of the anti-marijuana group Smart Approaches to Marijuana, said people are overreacting to the post.

“To say that one or two posts is full support for reform is a huge stretch,” Sabe told CNBC. “In many cases, his posts do not align with formal policy positions.”

To date, the FDA has approved only one CBD-based drug, Epidiolex, to treat a rare form of epilepsy. Meg Haney, director of the Cannabis Research Institute at Columbia University, said there is no scientific evidence for other uses and the effects are “very little known.”

President Trump’s post also adds momentum to the regulation of hemp, a variety of the marijuana plant that does not cause a “high,” according to the Centers for Disease Control and Prevention, which was legalized under the 2018 Farm Bill. Congress is considering updating the bill by the end of the year, which could adopt long-awaited federal standards for labeling, testing and safety of hemp-derived products that were left unregulated under the original law.

“Regulation is not scary as long as it is effective, because the clearer the boundaries, the better it is for business.” [when] We don’t have an ax looming over our heads,” said Pamela Epstein, legal and regulatory director for hemp producer Terpene Belt Farms.

Legalization in 2018 is set to create a $1.6 billion hemp market by 2023, according to Grand View Research. Legalized under the bill, hemp-derived CBD products containing less than 0.3% THC (the psychoactive compound responsible for the high) are expected to quickly become popular in gummies, beverages, creams and even pet treats, driving growth of more than 20% by 2030, the data firm said.

But gaps in oversight have left consumers exposed to products that are mislabeled, untested and, in some cases, unsafe, Smith told CNBC.

“The hemp sector may have grown a little too fast without the rules,” Smith said. “We have had issues with some products masquerading as CBD but containing high levels of THC, some products being marketed to children, and some products having contaminated samples.”

Proposals in Congress range from a complete ban on cannabis to tighter THC limits. Other cannabis industry stakeholders are lobbying for an “alcohol model” framework in which the FDA would oversee product safety and the Bureau of Alcohol and Tobacco Tax and Trade would manage taxation and distribution.

“Clear rules aren’t scary,” said Tilray CEO Simon. “These are the best ways to sustainably grow and eliminate the uncertainties that have defined this sector for years.”

People like Epstein have warned that a complete ban could cripple the hemp economy, which supports about 320,000 jobs in the United States, according to the U.S. Hemp Roundtable and industry reports. But people like Michael Mays, CEO of cannabis consulting firm Quantum 9, said any form of federal standard is essential to legalize the market and attract institutional investors.

“Federal regulation will help some investors think of cannabis as not a fringe investment with their money,” Mays told CNBC. “We could do that by next year. Sensible, consistent rules could be the key to delivering billions of dollars in growth while keeping consumers safe.”

President Trump’s apparent openness to CBD has fueled speculation that he may go further.

He said in August that his administration was “considering” reclassifying marijuana from a Schedule I drug to a Schedule III drug, along with heroin and LSD.

The move would not legalize recreational marijuana, but it would make it easier to sell, supporters said. It would also improve access to banking and financial services, as certain IRS tax restrictions that prohibit cannabis businesses from deducting standard expenses would be lifted. Experts say the changes could ease barriers to conducting scientific research, which are suppressed under current drug classification.

“To prove that cannabis has medical utility, you need to do large controlled trials, and you can’t really do that if it’s a Schedule I drug. As a result, that means you can’t do the studies that are needed to reschedule,” Haney said. “It’s like a chicken-and-egg problem.”

A White House official said the rescheduling process is ongoing and “all policy and legal requirements and implications are being considered.”

Cannabis industry insiders say some of the investors’ optimism is focused on Trump’s chief of staff, Susie Wiles, who previously worked at Ballard Partners, a Florida lobbying firm that represented Trulieve, one of the nation’s largest cannabis companies. Wiles was not registered as a lobbyist for Trulieve, but multiple cannabis industry sources say she is a close friend of Trulieve CEO Kim Rivers. People spoke anonymously about the issue.

According to the Florida Department of Elections, Trulieve spent more than $100 million supporting a failed ballot measure that would have legalized recreational marijuana for adults 21 and older. The company reportedly played a key role in securing President Trump’s support for the initiative. In the run-up to the presidential election, Mr. Trulieve donated $750,000 to Mr. Trump’s inaugural committee and another $250,000 to his MAGA Inc. super PAC, according to Federal Election Commission filings.

Rivers attended two pre-inauguration events, including a dinner with Vice President J.D. Vance, and in August he participated in a $1 million-a-plate fundraiser at Trump’s New Jersey golf club, where he reportedly urged Trump to reclassify marijuana, The Wall Street Journal reported.

Two days after the fundraiser, President Trump commented that he was “looking at” the classification of marijuana.

Mr. Wiles, Mr. Rivers and Mr. Trouilleve did not respond to requests for comment.

Despite optimism from investors and advocates, many Republican lawmakers are moving to curb cannabis-derived products, citing safety concerns.

This rebound comes as the hemp boom that began in 2018 quickly turned into an oversupply. According to the advocacy and research group Vote Hemp, licensed acres jumped 445% year-on-year by 2019, but experts said the market was saturated with product, forcing many retailers and producers to pivot or close.

“The products got bloated very quickly, and a lot of the companies had poor financial results. There was no growth. They had very tough balance sheets, and I think investors weren’t confident in the underlying fundamentals,” said Michael Gorenstein, CEO of Cronos Group.

The market is now recovering, but remains an unregulated “wild west,” Smith said. An FDA study this summer linked unregulated CBD to possible liver damage, and experts warn that the THC in hemp can be chemically altered or added in amounts as intoxicating as marijuana.

Lawmakers responded to safety concerns.

Over the summer, Rep. Andy Harris (R-Md.) introduced a bill that would redefine hemp to exclude any products containing “quantifiable” THC, and it passed a House committee along party lines. The Senate Appropriations Committee unanimously introduced similar language in July after Sen. Mitch McConnell (R-Ky.), who defended the 2018 legalization effort, called for restoring the law’s “original intent.” A Congressional Research Service report in August said the proposal would “effectively” ban nearly all cannabis-derived products.

Looking ahead, many industry insiders say the future depends on President Trump’s next actions, especially in the coming months. Even awareness of regulatory changes is fueling investor optimism.

“For many of us, it’s not a question of when, it’s a question of what the regulations are and how they are enforced,” Gorenstein said. “If the next administration comes out with clear policies, that alone could shake up the industry.”