Tim Seymour, CIO at Seymour Asset Management, tells "Worldwide Exchange" cannabis rescheduling to Schedule 3 could be transformative, with state approvals growing and an $80B market poised for more growth.

Cannabis-related stocks and ETFs have experienced notable increases, though this comes after several years of underperformance. The industry has recently seen more coordinated lobbying efforts in Washington, with both major political parties showing some support for regulatory changes, including the rescheduling of cannabis from Schedule I to Schedule III. This shift, supported by recent FDA findings on the medicinal use of cannabis, could significantly impact the industry's tax structure and overall business outlook.

Despite growing approval at the state level, the cannabis sector remains complex due to varying state and federal regulations. Many states have established adult-use, medical, or recreational cannabis markets, and the overall market is estimated to be worth around $80 billion. However, investors face challenges navigating the legal landscape, as federal and state rules continue to evolve.

Seymour: States steadily approving cannabis markets

I want to show some of these stocks, Tim, or at least some of these ETFs that track them, because they are up massively this morning. But I also want to put that in context over the last three to five years. These stocks have been at least hammered. And maybe that that's putting it lightly over the course of the past three to five years. So just how important is this new development? Well, good morning, Dom. And I think that's a cannabis green tie you're wearing. I'm not sure. But and to be clear, I'm actually the portfolio manager of CNBS, which is an active cannabis ETF. And it's been it's been a wild six years since we launched this fund. And it's certainly been one that's had a lot of promises for seemingly promises or Washington and macro. That seemed like it was game on. What's happened in the industry over the last two weeks or so is there's been some sense at the industry, which has finally come together to lobby Washington, I think more appropriately. And you have a Trump administration that on the campaign trail was very clear that they were either in favor of cannabis. They certainly were in favor of removing a lot of the uncertainty around the sector and rescheduling from schedule one to seemingly schedule three is something that for people in the industry, but also for people outside of the industry, cannabis is kind of a bipartisan issue. This is hardly controversial, proving cannabis as medicinally, you know, epic efficacious, and that it actually has a use is something that hasn't been that difficult. And under the Biden administration, the FDA put out a 208 page memo saying that in fact, it did have medicinal use. So that's the dynamic here rescheduling from schedule one to three. So going from the same as LSD and heroin to something that actually does provide medical benefit is something that would change the tax structure of the industry and would be a game changer. All right, Tim, there's also a ton of confusion, even from some people who are part of this ecosystem with regard to just what the business outlook is given the legal and regulatory framework, both at the state and federal level for these, because even if there is, there are many states now where you can buy cannabis related products. Yet at the same time, many of those places still have restrictions on the types of sales that can happen. And there is a whole federal versus state who's got more influence over a particular market. How difficult is that for an investor to get overcome to want to be in some of these types of stocks? What you're referring to is that state by state cannabis has been made either. There's an adult market. There's a medical market. There's a recreational market that's been approved. And if you follow the move of the states, it's been a one way and very consistent move. It's been a steady march. States are approving cannabis. If you think about where we are for the industry from the hemp derived THC is something that also has been controversial because hemp was legalized through the farm bill. And this is all complicated stuff. If you're an investor and have not necessarily been following this sector for the last 10 years like I have. But if you think about where we are, the dynamic is that this is arguably, you know, an $80 billion market right now. If you add up adult medical illicit, and there's no question to me where the top line is growing, there's no question that consumers who've been looking for exposure to this kind of growth, it's there does not mean that it won't be a complicated trade. But it does mean that you're investing now well ahead of a lot of institutional capital if you are in fact investing into this sector.

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