President Donald Trump signed an executive order Thursday directing federal agencies to reclassify marijuana, initiating the most significant reform of U.S. cannabis policy in more than 50 years and easing decades-old federal restrictions on the drug.

Once finalized by the Drug Enforcement Administration, the order will move cannabis out of Schedule I — the most restrictive category under the Controlled Substances Act, alongside heroin and LSD — and into Schedule III, a classification reserved for substances with recognized medical value and a lower risk of abuse, such as ketamine and Tylenol with codeine.

Speaking from the Oval Office, Trump said the decision responds directly to the needs of Americans suffering from serious medical conditions.

“This action has been requested by patients dealing with extreme pain, incurable diseases, aggressive cancers, seizure disorders, neurological conditions and more — including many veterans with service-related injuries and older Americans facing chronic health problems that dramatically reduce their quality of life,” Trump said.

Also on Thursday, senior White House officials said the Centers for Medicare and Medicaid Services, under the leadership of Dr. Mehmet Oz, is preparing to launch a pilot program in April that would allow certain Medicare beneficiaries to receive doctor-recommended CBD products at no cost. The program will require strict compliance with federal, state and local safety standards, including third-party testing and sourcing from legally compliant producers.

Despite the long-term policy significance, shares of major cannabis companies fell following the announcement, reflecting investor concerns over increased competition, including potential entrants from international and pharmaceutical markets.

Trulieve shares dropped roughly 23%, Green Thumb Industries declined more than 16%, and Tilray Brands fell about 4% by Thursday’s close. The AdvisorShares Pure US Cannabis ETF, which tracks U.S. cannabis operators, slid nearly 27%.

Industry leaders, however, praised the administration’s move as a historic turning point.

“Millions of registered patients across the United States — many of them veterans — rely on cannabis to manage chronic and debilitating symptoms,” said Ben Kovler, founder and CEO of Green Thumb Industries. “We commend the administration for taking this historic step. This is only the beginning.”

Analysts view the reclassification as a potential financial lifeline for the cannabis industry. By removing cannabis from Schedule I, companies will no longer be subject to IRS Code Section 280E, allowing them to deduct standard business expenses such as rent and payroll for the first time. The change is also expected to improve access to banking services and institutional investment, areas long constrained by regulatory uncertainty.

Wall Street observers say the policy shift — combined with the Medicare pilot program — could also attract major pharmaceutical companies seeking access to federally insured markets.

While CBD products have grown increasingly popular in recent years, appearing in everything from beverages to skin care, the Food and Drug Administration has taken a cautious approach. Some studies have found inconsistent benefits for certain conditions, and FDA-supported research has warned of potential risks, including liver toxicity and interactions with other medications. To date, the FDA has approved only one CBD-based drug, Epidiolex, for rare forms of epilepsy.

Trump emphasized that the executive order does not legalize marijuana.

“I want to be very clear — this order does not legalize marijuana in any way, shape or form, and it does not authorize recreational use,” he said.

Experts and industry officials told CNBC that the reclassification could nonetheless accelerate scientific research into cannabis and CBD, helping clarify their medical benefits and risks under a more modern regulatory framework.