Cannabis Industry Rallies on Federal Policy Hopes: Multiple ETFs Surge Past 50%

A dramatic market reaction unfolded on December 12, 2025, as cannabis-focused exchange-traded funds experienced explosive gains following reports that President Trump intends to downgrade marijuana’s federal classification from Schedule I to Schedule III. This potential regulatory shift has reignited investor appetite in a sector that has endured significant headwinds in recent years.

The performance was remarkable across the board. Roundhill Cannabis ETF (WEED) led the charge with a 55.7% single-day jump, while Amplify Seymour Cannabis ETF (CNBS) captured its best trading session ever with a 54% rally. AdvisorShares Pure US Cannabis ETF (MSOS) climbed 54.3%, and Amplify Alternative Harvest ETF (MJ) posted gains of 42.8%. Even AdvisorShares Pure Cannabis ETF (YOLO) participated in the momentum, rising 34.5% on the session. The Cambria Cannabis ETF (TOKE) also benefited, advancing 20.9%.

Policy Recalibration Could Unlock Industry Potential

The proposed move to Schedule III classification carries significant implications for market participants. According to investment analysts, such a reclassification would fundamentally alter the operating landscape for cannabis enterprises. Banking relationships represent perhaps the most consequential benefit—currently classified Schedule I substances face severe financing restrictions that have constrained business expansion and working capital availability.

Ed Groshans from Compass Point, an investment banking firm focused on middle-market deals, characterized the anticipated policy adjustment as decidedly constructive for the sector’s long-term trajectory. Should the reclassification proceed as reported, Groshans projects a finalized regulatory framework could materialize by mid-year, though ultimate approval remains dependent on administrative follow-through.

Historical Context Reveals Recovery Narrative

The sector’s current momentum stands in sharp contrast to its extended period of underperformance. Individual cannabis stocks and related funds have struggled substantially since the pre-pandemic enthusiasm faded. Tilray (TLRY), a leading cultivator and processor, has surrendered approximately 84.4% of its value over the preceding five years. The broader MJ ETF declined roughly 78.9% during this timeframe, reflecting investor disillusionment amid regulatory uncertainty and market saturation concerns.

Trump’s administration has proven more accommodative toward the space, however. Since the start of his second term, the MJ ETF has appreciated roughly 37%, while MSOS has surged approximately 53.9%, signaling renewed confidence that meaningful regulatory progress may finally materialize.

Looking Ahead: Between Optimism and Caution

Industry observers frame these developments as potentially transformative for cannabis normalization at the federal level. The convergence of state-level acceptance, shifting public sentiment, and apparent executive willingness to revisit scheduling creates conditions that advocates have pursued for years.

Nevertheless, practitioners acknowledge that volatility will likely persist. Regulatory uncertainty remains elevated, and confirmation of the proposed reclassification is not assured. Market participants should monitor administrative timelines and any public statements regarding implementation details, as policy reversals or delays could significantly impact sentiment and valuations across the sector.