Cannabis Stock Plummet: DEA's Cannabis Reclassification Hearing Postponed to December Post-Election
(Multibagger) - In a surprising turn of events, cannabis company shares plummeted on Tuesday after the U.S. Drug Enforcement Administration (DEA) announced the delay of its cannabis reclassification hearing to December 2, following the U.S. presidential election.
Cannabis Stocks Take a Hit
The Department of Justice, which supervises the DEA, disclosed that Attorney General Merrick Garland had recommended earlier this year to reclassify cannabis from a Schedule I drug to a Schedule III drug. Schedule I drugs are categorized as having a high potential for abuse and no accepted medical use.
As a result, shares of major cannabis players saw significant declines. Curaleaf and U.S.-listed shares of Canopy Growth (NASDAQ:) dropped over 10%, while Illinois-based Verano Holdings experienced a 12.9% decline.
The AdvisorShares Pure US Cannabis ETF also faced a rough day, dipping 9.1% after falling as much as 12% earlier in the session.
Canada-listed companies weren't spared either, with Green Thumb Industries (OTC:), Tilray Brands (NASDAQ:), and Trulieve Cannabis (OTC:) down 8.6%, 6%, and 5%, respectively.
Political Uncertainty Adds to Market Volatility
Analysts at TD Cowen commented, "We believe both candidates are likely to let rescheduling advance, though we have more confidence in Kamala Harris than in Donald Trump." They further noted that the outcome would heavily depend on Trump's choice for key positions such as Attorney General, the director of the DEA, and the Secretary of Health and Human Services, should he win.
The Health and Human Services' (HHS) National Survey on Drug Use and Health for 2023 revealed marijuana as the most commonly used illicit drug, with 21.8% of people aged 12 or older, or 61.8 million people, reporting usage.
The Road to Reclassification: What It Means
Reclassifying marijuana would mark a significant step towards narrowing the policy gap between state and federal cannabis laws. Currently, medical cannabis is legal in 38 states and various U.S. territories, while recreational use is permitted in 24 states and Washington, D.C. However, it remains federally illegal.
Pete Sahani, CEO of cannabis hardware firm The Blinc Group, stated, "The extended wait for rescheduling decisions could maintain the status quo, leaving businesses to navigate a patchwork of state regulations and ongoing federal ambiguity."
Breaking It Down: How This Affects You
- Cannabis Stocks: If you’re an investor in cannabis stocks, the delay in the DEA hearing has caused significant volatility. Stocks like Curaleaf, Canopy Growth, and Verano Holdings have seen double-digit percentage drops. This might be a reactive dip, presenting a buying opportunity if you believe in the long-term growth of the cannabis industry.
- Political Implications: The rescheduling of cannabis largely hinges on the upcoming U.S. presidential election. Understanding the candidates' stances on cannabis policy could help in making informed investment decisions.
- Regulatory Landscape: The reclassification of cannabis from a Schedule I to a Schedule III drug would be monumental. It could pave the way for more consistent federal and state regulations, potentially reducing legal risks and increasing business opportunities.
- Health and Usage: With over 61.8 million people using marijuana, the reclassification could also affect public health policies and medical research, potentially expanding the medical use of cannabis.
In summary, the postponed DEA hearing adds a layer of uncertainty for both investors and businesses in the cannabis sector. However, the reclassification could herald a new era of regulatory clarity and market growth. Stay informed and consider the political landscape as you make your financial decisions.