Cannabis stocks rallied Wednesday morning following fresh reports that President Donald Trump is poised to sign an executive order rescheduling marijuana from Schedule I to Schedule III.



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<li>CGC stock is climbing. See the chart and price action here. </li>
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The news sent a wave of optimism through the cannabis sector as investors anticipated long-awaited financial liberation associated with Schedule III: the removal of IRS Section 280E. 



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<h2>Tax Relief</h2>



Section 280E of the tax code prohibits businesses from deducting otherwise established business expenses from income associated with the trafficking of Schedule I or II substances. 



For years, 280E has crippled U.S. cannabis operators by preventing them from deducting standard business expenses, resulting in effective tax rates often exceeding 70%.



Rescheduling cannabis to a lower classification, such as Schedule III, would lift the 280E burden, potentially allowing many cannabis businesses to become profitable for the first time. 



&#34;It's an absolute game-changer,&#34; Boris Jordan, executive chairman of Curaleaf Holdings, told the Wall Street Journal in 2024.



&#34;It's something we've been waiting for, for the better part of 10 years,&#34; Jordan added. 



However, experts caution that Schedule III is not full legalization. 



Though the move would ease research restrictions and tax burdens, it does not automatically erase federal criminal penalties for recreational use. 



In fact, marijuana would still remain illegal under federal law, and the conflict with many state laws that have legalized cannabis will still exist. 



<h2>Market Reaction</h2>



Cannabis stocks were moving on above-average trading volumes and trending across social media as investors awaited an official statement from President Trump. 



Investors can monitor the sector through the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS) and the individual stocks of Canadian heavyweights like Tilray Brands, Inc. (NASDAQ:TLRY), Canopy Growth Corp. (NASDAQ:CGC), Aurora Cannabis Inc. (NASDAQ:ACB), Cronos Group, Inc, (NASDAQ:CRON), and SNDL Inc. (NASDAQ:SNDL).



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Photo: Shutterstock

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Cannabis stocks rallied as reports emerged that President Trump may reschedule marijuana to Schedule III, potentially lifting the IRS Section 280E burden. This change could allow cannabis businesses to deduct standard expenses and become profitable. However, Schedule III is not full legalization and federal criminal penalties would remain. Investors are closely monitoring the sector, with stocks like Tilray, Canopy Growth, Aurora Cannabis, Cronos Group, and SNDL seeing increased activity.

High Hopes: Pot Stocks Blaze As Trump Eyes Rescheduling