Canopy Growth Shares Surge on U.S. Regulatory Shift

Canopy Growth CA1380351009

Friday witnessed a dramatic rally in the share price of Canopy Growth, with the stock closing the regular session up 20% and at one point gaining more than 35% in pre-market activity. This explosive movement was triggered by reports that the U.S. government is on the verge of reclassifying cannabis at the federal level, potentially turning a long-held political aspiration into reality with profound implications for the entire industry.

The catalyst for the surge appears to be momentum from the Trump administration. Reports indicate President Donald Trump, alongside advisors from the Department of Health and Human Services including Robert F. Kennedy Jr., is working to finalize the move of cannabis from the restrictive Schedule I category to the less stringent Schedule III.

This regulatory shift would carry substantial practical consequences. Currently, Section 280E of the U.S. tax code prevents cannabis companies from deducting ordinary business expenses, imposing a significant financial burden. For Canopy Growth, which has strategically prepared for U.S. market entry through its "Canopy USA" corporate structure, a rescheduling would translate into immediate cash flow benefits and dramatically simplify access to the world's largest cannabis market.

The market's reaction was broad and decisive. The AdvisorShares Pure US Cannabis ETF jumped approximately 30% in pre-market trading. Canopy Growth's outperformance relative to many peers suggests investors attribute particularly high leverage to the company from potential U.S. policy changes.

Fundamentals Align with Speculation

This price breakout concludes a period of sideways consolidation. Having previously stabilized around the one-dollar level, the stock broke through the $1.50 mark in pre-market trading. Notably, this leap is grounded in fundamental news rather than mere technical speculation.

The rally coincides with a period of operational stabilization for the company. In its most recent quarter, Canopy Growth reported a 6% increase in revenue to $67 million, with its core cannabis business growing by 12%. Furthermore, the firm holds $298 million in liquid assets, providing ample flexibility to respond swiftly to regulatory developments.

Critically, Canopy has spent recent years structuring its U.S. assets—including Wana Brands, Jetty Extracts, and Acreage Holdings—to be activated precisely upon a federal policy change of this nature. The company's lengthy, and at times painful, restructuring may now be poised to deliver returns.

From Volatile Stock to Mainstream Contender?

A successful rescheduling would represent the most significant industry event since Canada's legalization in 2018. For the first time, vague hopes would materialize into concrete tax relief and improved access to capital markets. The speed at which the current administration is advancing the issue has surprised many observers, as such processes are typically protracted.

The future trajectory for Canopy Growth shares will likely depend on how quickly relief from Section 280E translates into its financial results. From a technical perspective, maintaining a price above $1.30 will be key to confirming a genuine trend reversal. If achieved, the company could transition from a speculative cannabis play toward an established consumer packaged goods entity. The official publication of a rescheduling order is expected to provide the next major catalyst.