The value of cannabis stocks increases as the Biden administration takes steps to change the classification of marijuana.

• According to four sources close to the matter, the Biden Administration intends to categorize marijuana as a Schedule III substance, alongside drugs such as Tylenol with codeine, anabolic steroids, and testosterone.
• For over 50 years, marijuana has been classified as a Schedule I substance, which places it in the same category as heroin and methamphetamines.
• Stocks linked to cannabis surged on an otherwise down day for the market.

On Tuesday afternoon, cannabis stocks surged due to the Biden administration's decision to loosen federal restrictions on marijuana.

According to NBC News, four sources with knowledge of the matter stated that the U.S. Drug Enforcement Administration is likely to approve a recommendation from the Department of Health and Human Services to reclassify marijuana as a Schedule III substance.

For over 50 years, marijuana has been classified as a Schedule I drug, alongside methamphetamine and heroin, by the DEA. Schedule I substances are defined as having "no accepted medical use and a high potential for abuse."

Placing marijuana in Schedule III would categorize it as "drugs with a moderate to low potential for physical and psychological dependence," alongside Tylenol with codeine and anabolic steroids.

The Amplify U.S. Alternative Harvest ETF (MJUS) surged nearly 20% in afternoon trading, while investors in cannabis stocks cheered the move.

Small-cap marijuana stocks experienced significant gains, with Curaleaf Holdings and Trulieve Cannabis leading the way.