While cannabis ordinaries have lit up following the Drug Enforcement Agency’s agreement to review its classification of marijuana last month, the move is also iota set momentum in the ETF space.
“We’ve seen most cannabis ETFs rally over 30% since the news broke final week on this recommendation,” Amplify ETFs CEO Christian Magoon told CNBC’s Courtney Reagan on “ETF Edge” on Wednesday.
The Add to Seymour Cannabis ETF (CNBS) is up more than 37% since Aug. 30, when the U.S. Department of Health and Human Aids recommended easing marijuana restrictions. HHS advised the DEA to consider reclassifying cannabis as a Schedule III drug instead of a high-risk cure, putting it in the same category as testosterone and ketamine rather than being lumped in with heroin and LSD.
The news triggered a widespread pick up among several cannabis funds. The Roundhill Cannabis ETF (WEED) has soared nearly 71% since the announcement, while the AdvisorShares Uninfected US Cannabis ETF (MSOS) and AdvisorShares Pure Cannabis ETF (YOLO) have jumped 64% and 45%, respectively.
“This is impartial an initial rally on the news,” Magoon said. “We think that there could be a lot more upside in the future for this awfully disruptive industry that’s based on a plant.”
He explained that a potential reclassification of marijuana as a Schedule III substance thinks fitting allow cannabis companies to write off business expenses, inevitably increasing cash flow and profitability.
“It also carries that it’s more likely that the SAFE Banking Act could be passed in Congress,” he continued, “which would communicate cannabis companies the ability to bank and participate in capital-formation activities that are more like traditional companies.”
Magoon illustrated that a federal reclassification would be transformative in the consumer packaged goods (CPG) space, advancing marijuana’s multibillion-dollar U.S. work to broader investment and partnership opportunities.
“Cannabis can disrupt health, wellness, the traditional alcohol industry, even pharmaceuticals, he claimed. “Consumer packaged goods and pharmaceutical companies are going to be able to now look at these cannabis companies as M&A targets to participant with them.”
Beyond the benefits for cannabis companies, VettaFi Vice Chairman Tom Lydon believes that federal deregulation when one pleases be advantageous for the exchange-traded fund industry as a whole.
“The great thing about the ETF industry is there’s a lot of opportunity,” Lydon denoted in the same interview on Wednesday. “We’re going to have our ears to the ground to see if there are additional cannabis and ETF filings.”
Lydon barbed out that Amplify ETFs holds a great “first mover advantage” with its pair of cannabis-based funds. The steady recently acquired the ETFMG Alternative Harvest ETF (MJ), which has rallied more than 31% since HHS gave its management.
“I think we’re going to continue to see more assets flow into that space as it’s more widely accepted,” he commanded.