What it means for seniors, research, stocks

President Donald Trump is expected to sign an executive order this week that would broadly expand access to cannabis. Industry advocates, executives and researchers who spoke to CNBC said the changes would come with big implications for both consumers and the health care industry.

Trump said Monday he’s “strongly” considering an executive order that would reclassify pot as a Schedule III drug under the U.S. Drug Enforcement Agency, which would place cannabis alongside Tylenol with codeine, rather than Schedule I with the likes of heroin and LSD, as it’s classified now. The order would also authorize a pilot program allowing Medicare to cover cannabis products for seniors.

The proposal is expected to apply specifically to cannabidiol products, better known as CBD, aimed at treating chronic pain, sleep deprivation, and other age-related ailments, said Shawn Hauser, a partner at cannabis-focused law firm Vicente LLP.

CBD has spiked in popularity in recent years, moving into the mainstream via canned cocktails and body lotions, but has yet to win full-throated backing from federal drug regulators.

“I expect the executive order will make clear what kind of cannabinoids are covered, that they have to come from a federally legal source,” Hauser told CNBC.

While many in the cannabis industry view the shift to Schedule III as a done deal, the inclusion of a controversial Medicare provision adds an extra wrinkle that could embed cannabis-derived products into the U.S. health-care system, despite limited clinic evidence of their efficacy, some experts told CNBC.

Insiders like Hauser expect the final order to define legal cannabinoids, administrative methods and a framework for Food and Drug Administration oversight.

“A lot of people want to see it, the reclassification, because it leads to tremendous amounts of research that can’t be done unless you reclassify,” Trump told reporters Monday. “So we are looking at that very strongly.”

Rescheduling and Medicare coverage are likely to trigger new investments from institutional capital and investors that typically follow federal insurance coverage to big pharmaceutical companies, said Timothy Seymour, founder and chief investment officer of Seymour Asset Management and a CNBC contributor.

“The valuation of the sector will be worth a lot more because institutional investors will be allowed in, will have access and will have liquidity, and exchanges will trade them,” Seymour told CNBC. “That immediately could double or triple the sector.”

The push for reclassification comes as a 2024 report found that more Americans reported using marijuana daily, or near-daily, than reported drinking alcohol at the same frequency. It was the first time the share of daily use had flipped in marijuana’s favor, based on analysis of 40 years of data from Carnegie Mellon University.

The Medicare initiative is being championed by billionaire Howard Kessler, a financier and longtime Trump ally who founded The Commonwealth Project in 2019. The organization says it advocates for senior care, including through cannabis use.

Kessler and advocates like Hauser have urged the administration to bypass typical FDA hurdles — like yearslong clinical trials — and use a pilot program to gather real-world data on the safety and outcomes of cannabinoids in the senior population.

Kessler did not respond to a request for comment. The White House also did not respond to a request for comment.

In September, cannabis companies’ stocks rallied on optimism that Trump would soon weigh in after he shared a Commonwealth Project video on Truth Social that branded CBD coverage as “the most important senior health initiative of the century.”

However, the Medicare proposal has drawn scrutiny, even from other Trump allies.

House Speaker Mike Johnson, R-La., has raised concerns about the cost and liability of such a program, the Washington Post first reported, while FDA officials argue that reimbursing Americans for non-agency-approved treatments would be unprecedented.

Beyond the politics, the scientific case for medical cannabis remains contentious.

The FDA has so far only approved CBD-based drug Epidiolex to treat rare forms of epilepsy. This narrow approval reflects both regulators’ caution and the fact that high-quality clinical trials are still limited for most of the other conditions where cannabis is being promoted.

Critics warn that a Medicare pilot program could endanger seniors, a demographic that often takes multiple daily medications. A recent FDA-funded study suggested that prolonged CBD use may cause liver toxicity and interfere with other life-saving medications.

“It’s not at all based on science. This is all based on money, and it’s egregious. That’s not the way we make medical decisions,” said Meg Haney, director of the Cannabis Research Laboratory at Columbia University. “[Kessler], who’s a buddy with the president … can make a lot of money selling something that has no evidence behind it.”

Other research has cast doubt on cannabis’ efficacy entirely, suggesting it may not be effective for many of the conditions targeted by the proposed pilot, Haney said.

For example, a 2023 review of 134 studies involving adults age 50 and older found medical cannabis to have inconsistent outcomes for improving conditions like end-stage cancer and dementia. The review also found more frequent links to harms including depression, anxiety, cognitive impairment and injury.

Rescheduling cannabis would, however, ease barriers to conducting clinical trials that experts say have historically stifled scientific research.

“Medical research has effectively been under lock and key,” said Ryan Vandrey, a Johns Hopkins University professor who helps run its Cannabis Science Lab. “Schedule I makes large, placebo-controlled trials incredibly difficult. Without that data, policymakers are being asked to make decisions in the dark.”

For investors, the specific terms of rescheduling are critical.

Rescheduling would improve growers’ access to banking and financial services because it would lift certain IRS tax restrictions, which bar cannabis businesses from deducting standard expenses.

The economic backdrop is already shifting: The annual value of the U.S. cannabis production jumped 40% last year from the previous year, according to the Department of Agriculture. The global market for cannabis-derived products is projected to hit $160 billion global market by 2032, according to Grand View Research.

Rumors of rescheduling and a possible pilot program helped shares of weed producers Tilray Brands and Canopy Growth jump 44% and 52%, respectively, on Friday.

As Seymour described it, Medicare coverage and federal insurance involvement is the “holy grail” that could unlock institutional capital.

A Schedule III classification could also help legitimize the sector for institutional investors who have been hesitant to wade in, paving the way for more stocks to be listed on the New York Stock Exchange and Nasdaq and shifting valuations from retail sentiment to fundamental cash flows.

“The Schedule I classification is what has held back a lot of institutional investors,” Seymour said. “Having to go out and tell their shareholders … that they own a company who’s selling something that is on a par with heroin, LSD or cocaine … is kind of a tough thing to swallow.”

If cannabis shifts to a reimbursable prescription drug model or federal legality, the category could attract interest from major pharmaceutical companies and distribution could eventually migrate from state-licensed dispensaries to national pharmacy chains like CVS and Walgreens.

That could spell trouble for smaller weed businesses.

Already, large pharmaceutical companies have the deep pockets needed to fund the multi-year, double-blind clinical trials required for FDA-approved drugs — a barrier to entry that few current cannabis operators can surmount.

However, Seymour views Medicare coverage as a catalyst for merger and acquisition activity rather than an immediate death knell.

“You are going to see more consolidation in the sector,” Seymour said. “Smaller companies that have good businesses, that are profitable … are probably going to be seen as targets.”

Meanwhile, Green Thumb Industries CEO Ben Kovler foresees more competition among pharmaceutical companies and cannabis companies to achieve medical breakthroughs.

“The pharma sector, in the past, has been a major lobbyist against [cannabis] because it is a threat,” Seymour added. “Therefore, yes, it’s a huge opportunity for pharma.”

— CNBC’s Brandon Gomez contributed to this report.