A Potential Policy Shift Ignites a Cannabis Stock Surge

Shares of Tilray Brands, Inc. experienced a dramatic surge on Friday, skyrocketing by more than 44%. This explosive movement was triggered by reports that former President Donald Trump may issue an executive order as early as Monday to reclassify cannabis at the federal level. According to The Washington Post, the directive would instruct federal agencies to move marijuana from Schedule I to Schedule III of the Controlled Substances Act, effectively shifting its classification away from drugs like heroin to a lower-risk category.

For the long-struggling cannabis industry, this represents a potential watershed moment, signaling the first major movement toward federal regulatory reform in years.

A reclassification would carry profound implications for cannabis companies, with tax policy being a central factor. Currently, Section 280E of the Internal Revenue Code prohibits these businesses from deducting standard operating expenses, creating a crippling financial burden. Removing this barrier would dramatically improve profitability.

Market observers had anticipated such a move. "The question was not if, but when Trump would reschedule cannabis," noted Ed Groshans of Compass Point Research & Trading. Furthermore, the change would likely encourage greater participation from financial institutions, easing the sector's longstanding banking challenges.

Analysts suggest the Drug Enforcement Administration could finalize the rule by the summer of 2026. The process could receive an additional boost from an upcoming Supreme Court decision expected next week.

Sector-Wide Euphoria Takes Hold

The news sparked a powerful rally across the cannabis landscape:

• Canopy Growth Corporation shares soared by 52%.
• The Amplify Seymour Cannabis ETF recorded a staggering 54% gain, marking a historic trading day.
• The Amplify Alternative Harvest ETF climbed 28%.
• Innovative Industrial Properties advanced by 9%.

In an interview with CNBC, Tilray CEO Irwin Simon expressed unprecedented optimism regarding the sector's prospects, stating his confidence was higher than it had ever been.

Should investors sell immediately? Or is it worth buying Tilray?

Company Profile: Tilray's Market Position

Tilray holds a leadership position in the Canadian cannabis market, the world's largest federally legalized adult-use sector. The company's portfolio spans more than 40 brands across over 20 countries.

In early December, the firm executed a 1-for-10 reverse stock split, a strategic move aimed at making its shares more appealing to institutional investors. This action reduced the count of outstanding shares from approximately 1.16 billion to about 116 million.

Looking ahead, Tilray has set a target for adjusted EBITDA between $62 million and $72 million for its 2026 fiscal year.

A History of Volatility Provides Context

Cannabis equities have endured a severe downturn since their pre-COVID-19 hype. Tilray's recent trading level near $10 per share stands in stark contrast to its split-adjusted all-time high of over $2,140 reached in September 2018.

Legal experts emphasize the significance of the potential policy shift. Shawn Hauser, a partner at law firm Vicente LLP, characterized the possible reclassification as a "partial victory" but underscored its historical weight. "This marks the beginning of a new era in health policy," Hauser said. "It ends nearly a century of outdated drug laws."

The Path Forward

Attention now turns to Monday, December 15, as the potential date for an executive order signing. The subsequent regulatory process, leading to potential DEA finalization by summer 2026, will be closely watched. Currently, analyst consensus largely rates Tilray as a "Hold," with an average pre-split price target of $2. Institutional ownership remains relatively low, at approximately 9%.

The coming days will determine whether this reported policy announcement materializes into action, offering Tilray and the broader cannabis industry a sustained tailwind after years of a challenging market environment.