There have been some signals over the last several months that President Donald Trump may be considering a more permissive stance on cannabis. This potential for change at the federal level, dubbed “the Trump effect,” has produced new levels of optimism among cannabis investors, CNBC reports.

There are two major developments that have cannabis investors feeling hopeful about the industry. The first is Trump’s openness to including coverage of CBD by Medicare. The second is the growing support in Congress for stricter hemp regulations. 

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When taking into account both of these potential changes, “We could be looking at a true inflection point for cannabis,” cannabis company Tilray Brands (NASDAQ:TLRY) CEO Irwin Simon told CNBC. “If reforms move forward, it could attract more companies to do business in the U.S.”

Trump posted a video to Truth Social in September that made anti-aging claims about cannabis and encouraged its coverage under Medicare. The video was produced by The Commonwealth Project, an organization dedicated to promoting CBD use among those 55 and over, which was founded by billionaire Howard Kessler, a member of Trump’s inner circle.

The video prompted immediate movement in cannabis stocks, CNBC reports. Shares in Tilray jumped 42% intraday, and other companies like Aurora Cannabis (NASDAQ:ACB) and Canopy Growth (NASDAQ:CGC) also saw large spikes, jumping 25% and 18%, respectively. All three companies have since seen their stocks return to pre-Trump post levels. 

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“A lot of folks in the industry saw [Trump] posting the video as a bit of a surprise, but we think he’s trying to gauge how the public feels about cannabis products,” legalization group Marijuana Policy Project Executive Director Adam Smith told CNBC. “Some people call it the ‘Trump effect,’ and think if he leans into CBD, it’s possible that other Republicans will support.”

However, Kevin Sabet, the president of cannabis opposition group Smart Approaches to Marijuana, says investors wildly overreacted to the post. 

“It’s a big stretch to say a post or two is a fully throated endorsement of reform,” he told CNBC. “A lot of times his posts don’t line up with formal policy positions.”

Trump’s potential willingness to cover CBD under Medicare has also led many to believe that 2018’s Farm Bill, which legalized the growing of hemp, will receive long-awaited updates by year-end. These updates will include federal standards for safety, testing, and labeling of hemp, according to CNBC.

“[This proposed] regulation isn’t scary, as long as it is effective, because the clearer the lines are, the better it is to be in the business [when] you don’t have a looming axe over your head,” Pamela Epstein, chief legal and regulatory officer of hemp producer Terpene Belt Farms, told CNBC.

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Other cannabis professionals agree.

“Federal regulations would help some investors see cannabis as not a fringe investment with their money,” cannabis consulting firm Quantum 9 CEO Michael Mayes told CNBC. “By next year, it’s possible. Smart, consistent rules could be the key to unlocking billions in growth while working to ensure consumer safety.”

While investors and advocates acknowledge that even with the so-called “Trump effect,” the industry still faces a number of uphill battles, they’re optimistic that policies are moving in the right direction.

“For many of us, it’s not a question of when but what the regulations will be and how they’ll be enforced,” cannabis company Cronos Group (NASDAQ:CRON) CEO Michael Gorenstein told CNBC. “If the next administration delivers clarity, that alone could shake up this industry.”

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