Medical Cannabis Rescheduling Spurs 20% Rally and 15% Sell-Off in Pure Cannabis ETF
Acting Attorney General Todd Blanche’s order reclassified FDA-approved and state-legal medical cannabis to Schedule III, lifting IRS 280E tax restrictions and unlocking millions in free cash flow. AdvisorShares Pure Cannabis ETF saw a 20% pre-release rally followed by a nearly 15% sell-off as investors parsed the order’s limited scope.
1. Major Rescheduling Order
Acting Attorney General Todd Blanche signed an order moving FDA-approved and state-legal medical cannabis from Schedule I to Schedule III of the Controlled Substances Act, fulfilling a campaign promise and removing the most restrictive classification since the 1970s.
2. Tax Relief and Cash Flow
The reclassification lifts IRS code 280E tax restrictions that previously barred deductions for Schedule I and II drug sales, unlocking millions in additional cash flow for medical cannabis firms.
3. Market Reaction
AdvisorShares Pure Cannabis ETF rallied over 20% on rumors ahead of the order’s announcement, then sold off nearly 15% as investors digested the order’s narrow applicability to only medical products.
4. Next Steps and Timelines
The DEA is scheduled to begin hearings in June on extending rescheduling to recreational cannabis, with final determinations expected by mid-July, leaving current recreational operations subject to existing tax burdens.