(Reuters) - Shares of cannabis companies sank on Tuesday after the U.S. Drug Enforcement Administration (DEA) postponed its cannabis reclassification hearing to Dec. 2, after the U.S. presidential election.
The Department of Justice, which oversees the DEA, said Attorney General Merrick Garland recommended cannabis be reclassified as a Schedule three drug instead of Schedule one earlier this year. Schedule one is reserved for drugs with a high potential for abuse and no accepted medical use.
Shares of Curaleaf (TSX:CURA) and U.S.-listed shares of Canopy Growth (TSX:WEED) fell over 10%, while Illinois-based Verano Holdings was down 12.9%.
The AdvisorShares Pure US Cannabis ETF dipped 9.1%, having fallen as much as 12% earlier in the session.
Canada-listed Green Thumb Industries, Tilray (TSX:TLRY) Brands, and Trulieve Cannabis were down 8.6%, 6% and 5% respectively.
"We believe both candidates are likely to let rescheduling advance, though we have more confidence in Kamala Harris than in Donald Trump," said analysts at TD (TSX:TD) Cowen in a note.
Analysts also noted that the outcome would heavily depend on Trump's choice for key positions such as Attorney General, the director of the DEA, and the Secretary of Health and Human Services, should he win.
The HHS' National Survey on Drug Use and Health for 2023 showed that marijuana is the most commonly used illicit drug, with 21.8% of people aged 12 or older, or 61.8 million people, reporting use.
Reclassifying marijuana would represent a first step toward narrowing the wide policy chasm between state and federal cannabis laws.
Medical cannabis is legal in 38 states and various U.S. territories, while recreational use is permitted in 24 states and Washington, D.C.; however, it remains federally illegal.
Until then, "the extended wait for rescheduling decisions could maintain the status quo, leaving businesses to navigate a patchwork of state regulations and ongoing federal ambiguity," said Pete Sahani chief executive officer of the cannabis hardware firm, the Blinc Group.