Cannabis ETFs are off to a strong September. Will the buzz last?


While cannabis stocks have lit up following the Drug Enforcement Agency’s agreement to review its classification of marijuana last month, the move is also sparking momentum in the ETF space.

“We’ve seen most cannabis ETFs rally over 30% since the news broke last week on this recommendation,” Amplify ETFs CEO Christian Magoon told CNBC’s Courtney Reagan on “ETF Edge” on Wednesday.

The Amplify Seymour Cannabis ETF (CNBS) is up more than 37% since Aug. 30, when the U.S. Department of Health and Human Services recommended easing marijuana restrictions. HHS advised the DEA to consider reclassifying cannabis as a Schedule III drug instead of a high-risk drug, putting it in the same category as testosterone and ketamine rather than being lumped in with heroin and LSD.

The news triggered a widespread rally among several cannabis funds. The Roundhill Cannabis ETF (WEED) has soared nearly 71% since the announcement, while the AdvisorShares Pure US Cannabis ETF (MSOS) and AdvisorShares Pure Cannabis ETF (YOLO) have jumped 64% and 45%, respectively.

“This is just an initial rally on the news,” Magoon said. We think there will be more upside for this disruptive plant-based industry in the future. “

He explained that a potential reclassification of marijuana as a Schedule III substance would allow cannabis companies to write off business expenses, inevitably increasing cash flow and profitability.

“It also means that it’s more likely that the SAFE Banking Act could be passed in Congress,” he continued, “which would give cannabis companies the ability to bank and participate in capital-formation activities that are more like traditional companies. “

Magoon explained that a federal reclassification would be transformative in the consumer packaged goods (CPG) space, advancing marijuana’s multibillion-dollar U.S. industry to broader investment and partnership opportunities.

“Cannabis can disrupt health, wellness, the traditional alcohol industry, even pharmaceuticals, he said. “Consumer packaged good and pharmaceutical companies will be able now to look at these cannabis firms as M&A target to partner with them. “

VettaFi Vice Chairman Tom Lydon, who is also the vice chairman of VettaFi, believes that the deregulation of federal regulations will benefit the exchange-traded funds industry in general. We’ll be keeping our ears open to hear if any additional cannabis or ETF filings are made. Lydon noted that Amplify’s cannabis-based funds have a “first mover” advantage. The firm acquired the

ETFMG Alternate Harvest ETF(MJ)

which has gained more than 31% in value since HHS issued its guidance.