Cannabis Reclassification Reshuffles Market: Why Tilray Brands Defied Initial Expectations

President Trump’s executive order moving cannabis from Schedule I to Schedule III status has sent shockwaves through the sector, but not all reactions were celebratory. Tilray Brands (NASDAQ: TLRY), a leading global medical cannabis company, presented a textbook case of “buy the rumor, sell the news”—closing Thursday at $12.34 after falling 4.2% despite weeks of anticipation.

The Policy Shift and Market Response

The reclassification announcement came after cannabis stocks had already rallied sharply over the past two weeks, with Tilray up more than 50% in speculation about this exact outcome. When the news finally broke Thursday, the initial surge quickly reversed, suggesting investors had already priced in the positive sentiment.

The broader market remained resilient: the S&P 500 advanced 0.79% to 6,774, while the Nasdaq Composite climbed 1.38% to 23,006. However, cannabis peers showed mixed signals. Canopy Growth dropped 12% and Cronos Group slipped 2%, indicating the sector’s mixed signals around the policy’s real-world impact.

Tilray’s Performance: Numbers That Tell the Story

Tilray’s stock has endured a brutal journey since its 2018 IPO, hemorrhaging 94% of its value over the past seven years. Thursday’s session saw trading volume explode to 66.7 million shares—514% above its three-month average of 10.9 million—reflecting intense investor interest around the reclassification narrative.

The sharp reversal after initial gains highlights investor concerns: while Schedule III status eases some regulatory barriers for medical cannabis, it falls short of broader recreational legalization that could unlock massive revenue streams for companies like Tilray. The company remains marginally profitable on an EBITDA basis, making it a speculative play dependent on continued regulatory tailwinds.

What Schedule III Actually Changes

The move from Schedule I to Schedule III represents a meaningful but limited victory for the cannabis industry. Medical applications become easier to research and develop, banking relationships may improve, and interstate commerce barriers could erode. However, recreational use remains restricted in most states, constraining the market opportunity for larger-scale commercial expansion.

For Tilray specifically, the policy shift provides a foundation for growth but doesn’t guarantee profitability. After this week’s volatility, investors face a critical question: has the stock fairly priced in the regulatory improvement, or does it still represent an opportunity after the pullback?