Short-Lived Cannabis Buzz Sees Recent Gains Wiped by Return to Continual Congressional Stagnation

Cannabis shares have largely cooled off from a big rally at the end of April. A surge of speculation occurred after it was reported that the US Drug Enforcement Agency (DEA) would imminently begin working with the Department of Justice (DoJ) on a potential rescheduling of marijuana. However, many US cannabis firms’ stock prices have now dipped below levels they were trading at prior to this revelation as the momentum provided by the White House has apparently done little to shift more sweeping reforms into gear. 

It doesn’t help that it took more than eight months just to put the wheels of rescheduling in motion after it was initially requested by the US Department of Health and Human Services (HHS) last August. An eventual Senate vote on cannabis banking legislation is still in the works after years of failed attempts to pass multiple different iterations of such bills. Though a simple majority of Senators are on board with the of Secure and Fair Enforcement Regulation (SAFER) Banking Act, they may still be shy of a filibuster-proof majority. 

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

A little over five weeks on from a massive surge in US cannabis shares, the gains have largely been given up on a continual lack of clarity regarding comprehensive federal banking reform that has been desperately needed by the industry for years. The AdvisorShares Pure US Cannabis ETF (MSOS) was trading around $9.00 per share on April 29, but broke out to a 16-month high north of $11.20 per share the next day when media reports that suggested the US Drug Enforcement Agency (DEA) would reclassify cannabis from a Schedule I narcotic – the highest priority at the agency – to a much lower Schedule III substance. 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 physical and psychological dependence, and is comparative to certain anabolic steroids and ketamine.

A slew of surveys and studies highlighted by MRP over the years have exhibited a continual rise in cannabis use among Americans, which has correlated well with a widening tide of decriminalization and legalization for medicinal and/or recreational purposes in 38 US states. New data from UCLA researchers, published in JAMA Network Open showed that more than one-in-six (17%) of 175,734 adults who visited their primary care doctor for an annual wellness visit between 2021 and 2023 reported using cannabis in the three months prior to their appointment. That is a massive sample size that provides insight into how many potential new medicinal marijuana customers could be reached by doctors screening patients for their cannabis use and opening up dialogue about treatment options. Nearly 76% of respondents that utilized cannabis reported their consumption was meant to help manage a range of symptoms they were experiencing, including pain, stress, and sleep.

Despite the slight regulatory momentum that was provided by the White House recently, stagnation in the legislative branch continues to dog more meaningful changes to federal law. MSOS has totally retraced the bounce it received from the news and was trading under $7.60 on Thursday morning. The process of rescheduling, which was initiated by the Department of Justice in conjunction with…