THE GIST

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Robinhood is slowly adding U.S. cannabis stocks to its trading platform as the federal government signals reform is on the horizon.

Hawk-eyed social media users noticed that Trulieve (TCNNF), Curaleaf (CURLF), and Green Thumb Industries (GTBIF) — three of the largest U.S. cannabis firms by revenue, were added to the platform in read-only mode this week. A quick scroll of the app found this to be true.

Robinhood didn’t immediately respond to a request for comment.

WHAT HAPPENED

U.S. retail investors have been locked out of investing directly in U.S. cannabis companies.

That’s because non-medical cannabis remains a Schedule I drug at the federal level, so major domestic exchanges like the Nasdaq and NYSE won’t list companies that cultivate or sell the drug to adult consumers even though nearly half of U.S. states allow sales.

The Trump Administration reclassified medical cannabis from the most restrictive Schedule I in April to the far less restrictive Schedule III. A DEA hearing is set for June 29 to debate whether to expand the reclassification to state-legal recreational cannabis.

WHY IT MATTERS

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If that change goes through, expect companies like Green Thumb, Trulieve, and Curaleaf to benefit immensely. Their cost of capital will go down, and they’ll push to move their listings from OTC to more liquid exchanges, if the Nasdaq or NYSE allow. A pesky tax rule that prevents them from taking deductions, IRS code 280E, will go away, immediately increasing profitability.

Robinhood’s read-only add is generally a prelude to full trading functionality. These companies are traded over-the-counter in the U.S., though some maintain listings on secondary Canadian exchanges like the Canadian Securities Exchange or the TSXV.

Still, Robinhood last year added Glasshouse Brands, a California company, to its platform. As well, investors can buy cannabis-themed ETFs, like the AdvisorShares Pure Cannabis ETF, which holds swaps in Curaleaf, Trulieve, and Green Thumb Industries, though investors have not yet been able to buy the names directly.

And investors are able to buy Canadian cannabis stocks like Tilray, Canopy Growth and Aurora on the platform, but these companies have limited U.S. operations and therefore are not an efficient way to trade U.S. regulatory reform.

WHAT’S NEXT

Cannabis is still an emerging, heavily regulated industry. Republicans still control the House, Senate, and White House, but President Trump is a supporter of reform.