- The U.S. government is considering reclassifying cannabis from Schedule I to Schedule III, which would recognize its medical benefits, ease research restrictions, and offer tax relief to cannabis businesses
- Through its Canopy USA structure, Canopy Growth holds stakes in major U.S. cannabis companies like Acreage Holdings, Wana Brands, and Jetty, positioning itself to capitalize on federal policy changes
- Canopy Growth reported a 43 per cent year-over-year increase in Canadian adult-use cannabis revenue in Q1 FY2026, signaling operational momentum as it prepares for potential U.S. market expansion
- Canopy Growth stock (TSX:WEED) opened trading at C$2.08
Background: A potentially historic shift in U.S. cannabis policy
The United States could be on the cusp of a transformative shift in federal cannabis policy. Recent statements from President Donald Trump and widespread media coverage confirm that the administration is currently reviewing a proposal to reclassify cannabis from a Schedule I to a Schedule III controlled substance.
This content has been prepared as part of a partnership with Canopy Growth Corp. and is intended for informational purposes only.
This reclassification would mark the most significant federal policy change in over 50 years, formally acknowledging cannabis’s medical utility and opening new avenues for research, patient access, and industry growth.
Currently, cannabis is classified alongside heroin and LSD under Schedule I, a category reserved for substances with no accepted medical use and high abuse potential. Moving it to Schedule III—alongside drugs like ketamine and anabolic steroids—would signal a federal recognition of its therapeutic potential and reduce regulatory burdens.
Implications of Schedule III reclassification
If cannabis is reclassified, the following changes are expected:
- Medical recognition: Cannabis would be federally acknowledged as having medical benefits, aligning U.S. policy more closely with countries like Canada, Germany, and Australia.
- Expanded research: Researchers would gain broader access to cannabis products for clinical trials, overcoming the restrictive barriers imposed by Schedule I classification.
- Tax relief: Cannabis businesses would no longer be subject to Section 280E of the IRS tax code, which currently prevents them from deducting ordinary business expenses.
This could significantly improve profitability across the sector.
- Regulatory clarity: While not full legalization, Schedule III status would provide a more stable regulatory environment, encouraging institutional investment and broader market participation.
With the U.S. retail cannabis market projected to reach approximately US$50 billion by 2026, the stakes are … high.
Canopy Growth: Positioned for U.S. expansion
Canopy Growth Corp. (TSX:WEED, NASDAQ:CGC) has positioned itself to capitalize on the evolving U.S. cannabis landscape through its Canopy USA structure. This unconsolidated, non-controlling entity holds a portfolio of U.S. cannabis assets, including:
- Acreage Holdings, Inc. – A vertically integrated multi-state operator with a strong presence in the Northeast and Midwest.
- Wana Brands – An edibles company.
- Jetty (Lemurian, Inc.) – A California-based producer of premium cannabis extracts and vape technology.
- The Cima Group and Wana Wellness – Expanding Canopy’s reach into wellness and lifestyle segments.
This structure allows Canopy to maintain compliance with U.S. federal regulations while retaining exposure to the upside of U.S. market growth. Shareholders recently approved the creation of a new class of exchangeable shares; a move designed to accelerate Canopy’s U.S. market entry and enhance flexibility.
Financial momentum and solid readiness
Canopy Growth’s Q1 FY2026 results reflect a company regaining momentum:
- Canada adult-use cannabis net revenue rose 43 per cent year-over-year to C$27 million, driven by strong demand for new products like Claybourne infused pre-rolls.
- Total cannabis revenue increased 24%, while consolidated net revenue grew 9 per cent to C$72.1 million.
- The company achieved CA$17 million of its CA$20 million annualized cost savings target and reduced SG&A expenses by 21 per cent.
CEO Luc Mongeau emphasized the company’s focus on high-demand product categories and retail distribution, while interim CFO Tom Stewart highlighted ongoing efforts to improve gross margins and operational efficiency, stating, “Our financial discipline has already delivered meaningful operating expense reductions, and we see further opportunity to simplify and focus the business. Improving gross margin remains a key priority while maintaining topline performance in all areas of the business.”
Investor takeaway: A catalyst for revaluation
The potential rescheduling of cannabis to Schedule III could be a major catalyst for Canopy Growth and the broader cannabis sector. For Canopy, it would:
- Unlock tax savings and improve cash flow.
- Enable deeper integration of its U.S. assets under Canopy USA.
- Attract institutional investors previously deterred by regulatory uncertainty.
- Accelerate revenue growth in the world’s largest cannabis market.
While regulatory timelines remain uncertain, the momentum is clearly building. For investors, Canopy Growth represents a well positioned, financially disciplined player ready to seize the opportunities of a rescheduled U.S. cannabis market.
About Canopy Growth
Canopy Growth Corp. delivers products with a focus on premium and mainstream cannabis brands, in addition to vaporizer technology made in Germany.
Canopy Growth stock (TSX:WEED) opened Friday trading around 6 per cent lower at C$2.08 on the TSX. Though it has risen 10 per cent since June, it has lost more than 50 per cent since the year began and 80 per cent since this time last year.
On the NASDAQ, CGC stock also opened around 6 per cent lower at US$1.52. It has risen more than 12 per cent since June but has lost nearly 50 per cent since the year began and is also 80 per cent lower since this time last year.
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