Cannabis stocks jumped on Friday following reports that President Donald Trump will significantly ease federal restrictions on marijuana.
Weed producer Tilray Brands surged more than 33% in Friday's premarket, while Canopy Growth jumped 23%. Cannabis facility operator Innovative Industrial Properties climbed more than 6%.
The Amplify Seymour Cannabis ETF (CNBS) rallied more than 19%.
Trump is expected to tell agencies to reclassify marijuana as a Schedule III drug, The Washington Post reported on Thursday. Such a move would allow cannabis companies to fall under different tax regulations and encourage investment.
Axios reported the reclassification, which would move marijuana away from a group that includes heroin and into a lower tier with less dangerous drugs such as steroids and Tylenol with codeine, would take place early next year.
Trump previously floated a change in weed's classification in August.
"Trump rescheduling marijuana was not an if, in our assessment, but a when," Ed Groshans of Compass Point, a middle-market investment bank, wrote to clients in a Friday note.
Groshans said the reported change would be "positive" for the cannabis industry. He said it should catalyze the allowance of banks to service the sector and grant states the ability to regulate it.
If Trump orders weed's rescheduling in January, Groshans anticipates the Drug Enforcement Administration would finalize a proposed rule for the reclassification by the summer.
Bill Kirk, senior research analyst at Roth, said he's also monitoring if the Supreme Court decides next week to hear a case on state regulations and federal prohibition for cannabis. A positive ruling for the industry in this case could speed up regulatory timelines.
Pot stocks have struggled since many went public around seven years ago even as cannabis has received broader acceptance and easier state classifications.
Tilray shares were down 36% this year before Friday's move. The Amplify Cannabis ETF is still on track to lose more than 8% in 2025, which would mark its fifth straight negative year.