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Cannabis stocks soared on news that the US Department of Health and Human Services (HHS) has recommended a rescheduling of the drug to be a Schedule III narcotic, a lower priority classification than its Schedule I status today. That indicates the Biden administration remains somewhat focused on decriminalizing cannabis, but this effort will do little to bolster the companies suffering under the most critical issues that stem from an ongoing federal prohibition. It remains to be seen if the HHS’s guidance will add some momentum to  ongoing regulatory reform efforts among lawmakers.

Congress continues to crawl toward measures to allow the cannabis industry to access federally chartered banks, but it is unknown when bills like the SAFE Banking Act may finally come to a vote in the Senate. Moreover, cannabis prices continued to be crushed by oversupply in many markets, which has continually suppressed retail pricing among dispensaries. A crash in cannabis stocks over the past two years has resulted in the de-listing of indices tracking firms in the industry, as well as the recent closure of a cannabis ETF.

Related ETFs: AdvisorShares Pure US Cannabis ETF (MSOS), ETFMG Alternative Harvest ETF (MJ)

Shares of North American cannabis firms received a much-needed shot in the arm yesterday, after the US Department of Health and Human Services (HHS) concluded a review of marijuana’s current scheduling as a narcotic under federal law. President Biden requested that the HHS secretary and the attorney general conduct this review back in October 2022, the results of which have now been sent to the Drug Enforcement Administration (DEA). Though HHS itself did not disclose its findings to the public, a letter acquired by Bloomberg, originally sent from HHS to Drug Enforcement Agency Administrator Anne Milgram called for marijuana to be reclassified as a Schedule III drug under the Controlled Substances Act. That would be a marked shift from its current classification as a Schedule I narcotic, the highest scheduling possible.

DEA drug scheduling runs from one to five, with drugs at the top end of that scale, like cannabis, supposedly having a high potential for abuse with no accepted medical use, along with a lack of accepted safety for use under medical supervision. This puts cannabis on par with narcotics like heroin and fentanyl. A reclassification, down to Schedule III would imply that cannabis only has moderate to low potential for…

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