President Donald Trump just made one of the biggest moves on federal cannabis policy in decades, and the market's reaction tells you everything about the gap between hope and reality in the pot stock world.

Trump signed an executive order Thursday directing federal agencies to loosen marijuana regulations. Cannabis stocks shot up. Then they promptly fell back down. Welcome to the rollercoaster.

Rescheduling, Not Legalizing

Here's what the order actually does: it directs Attorney General Pam Bondi to speed up the process of moving marijuana from Schedule I to Schedule III under the Controlled Substances Act. That would place cannabis alongside common painkillers, which sounds like progress until you realize it's still not legalization.

Right now, marijuana sits in Schedule I, the category reserved for substances the government believes have no accepted medical use and high abuse potential. Moving it to Schedule III acknowledges medical uses exist, but keeps marijuana firmly in the controlled substance camp.

According to the White House fact sheet, the order focuses on "promoting medical uses" of marijuana. The current classification has strangled research for decades, making it incredibly difficult to study safety, effectiveness, and long-term health outcomes. Rescheduling would let researchers use real-world evidence to better understand how cannabis affects vulnerable populations, including adolescents and young adults.

The CBD Piece

The order also tackles access to hemp-derived cannabinoid products, particularly CBD. Here's a regulatory oddity: CBD products aren't controlled substances under federal law, but they lack a clear pathway through the Food and Drug Administration. They exist in a weird legal limbo.

Trump's order directs the White House Deputy Chief of Staff for Legislative, Political, and Public Affairs to work with Congress on expanding access to appropriate full-spectrum CBD products while restricting those that pose serious health risks. It's an acknowledgment that the current system doesn't really work for anyone.

Politicians Do What Politicians Do

Washington's response split predictably along certain lines, though not entirely partisan ones.

Senate Minority Leader Chuck Schumer, the Democratic Senator from New York, called Trump's order "a step in the right direction" in a Thursday post on X. But he emphasized more work remains to "decriminalize cannabis, ease overly restrictive banking regulations that stall industry progress in states where it is legal, and rectify the harms done by the War on Drugs."

Meanwhile, some members of Trump's own party pushed back hard. Senator Ted Budd, a Republican from North Carolina, issued a statement calling the order a "shortsighted policy decision" that will harm young people. "We should not be handing tax breaks to bad actors and foreign drug cartels to advertise a drug that will harm Americans," Budd said Thursday.

The Market's Harsh Reality Check

Cannabis stocks initially jumped on the news before giving back those gains by market close. Why the reversal? According to analysts cited in a Reuters report, investors were disappointed by what wasn't in the order: any provisions addressing cannabis banking.

The banking issue is massive for the industry. Because marijuana remains federally illegal, most banks won't touch cannabis businesses, forcing many to operate on a cash basis. The industry had been hoping for relief on this front. They didn't get it.

Here's how some major cannabis names performed Thursday:

The single-day losses look brutal, but zoom out and nearly all major cannabis stocks are up significantly this month. The market had been pricing in Trump's move for weeks. When the actual order landed without the banking provisions investors wanted, reality set in fast.

That said, the AdvisorShares Pure U.S. Cannabis ETF still scores high on momentum in market rankings, showing favorable price trends across short, medium, and long-term horizons. The volatility might be nerve-wracking, but the broader trend has been upward as investors anticipate continued policy shifts in the cannabis space.