Cannabis stocks surge as Biden administration moves to reclassify marijuana

Cannabis stocks leapt on Tuesday afternoon, buoyed by a Biden administration decision to ease federal restrictions on marijuana.

The U.S. Drug Enforcement Administration is expected to approve an opinion by the Department of Health and Human Services to reclassify marijuana as a Schedule III substance, NBC News reported, citing four sources with knowledge of the decision.

For more than 50 years, marijuana has been labeled a Schedule I substance, the same category that drugs like methamphetamine and heroin fall into. Drugs in that category are defined as substances with "no currently accepted medical use and a high potential for abuse," according to the DEA.

A move to Schedule III would place marijuana alongside Tylenol with codeine and anabolic steroids – that is, "drugs with a moderate to low potential for physical and psychological dependence."

Investors in cannabis stocks cheered the move, with the AdvisorShares Pure US Cannabis ETF (MSOS) surging nearly 20% in afternoon trading. Amplify U.S. Alternative Harvest ETF (MJUS) jumped about 19%.

Individual marijuana stocks with small market capitalizations also rallied. Curaleaf Holdings surged 19% to touch a new 52-week high, while Trulieve Cannabis climbed nearly 30%.