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Marijuana plants for the adult recreational market hanging in a drying room at a farm in Suffolk County, N.Y., on Oct. 4.Mary Altaffer/The Associated Press

Shares of Canada’s largest cannabis companies leaped sharply on Thursday after U.S. President Joe Biden announced plans to review how the drug is classified under federal law and said he will pardon Americans with previous cannabis offences.

While not a promise of legalization, the review was seen by investors as a step toward the long-awaited legislation that could allow Canadian cannabis producers to expand their operations into new markets south of the border.

Shareholders pushed the shares of Tilray Brands Inc. TLRY-T up by 33 per cent in the hour after Mr. Biden shared his plans on Twitter on Thursday afternoon – a spike so sharp that the trading regulator, the Investment Industry Regulatory Organization of Canada, put a halt on trading.

While past hopes for sweeping legalization have repeatedly been dashed upon reaching the U.S. Senate, analysts say this most recent market swell reflects investor enthusiasm – and impatience.

“This is not a new phenomenon, but what is new is the velocity and the amount of capital that just poured into the market,” Canaccord Genuity analyst Matthew Bottomley said. With cannabis stocks prices scraping near historic lows, investors might see it as a low-risk and high-potential reward, he said.

Canopy Growth Corp. shares jumped by nearly 25 per cent in the same period on Thursday afternoon. Cronos Group Inc. and Aurora Cannabis Inc. stock surged by 15 per cent and 9 per cent, respectively.

Canadian companies are not currently allowed to own or operate U.S.-based businesses that sell cannabis products. Tilray has ventured into U.S. markets by buying a bourbon company, which it plans to adapt to produce THC-infused spirits. Canopy has options to acquire three U.S. cannabis companies once THC is legal.

In his tweet, Mr. Biden said he will ask regulators to initiate the process of reviewing how marijuana is scheduled under federal law. Although several states have legalized cannabis for recreational use, at the federal level cannabis is still illegal and ranked alongside drugs such as heroin. As a result, those caught possessing cannabis could face jail sentences.

According to Omar Khan, the senior vice-president of corporate affairs at cannabis retailer High Tide Inc., descheduling would be a major step toward raising money on U.S. markets.

“Federal descheduling would open the doors for a Nasdaq-listed company like High Tide to begin selling cannabis in legal U.S. states without the fear of being delisted,” Mr. Khan said in a statement.

Mr. Biden also said he will pardon all prior federal offences of simple marijuana possession, and will call on state regulators to do the same in their own jurisdictions.

“Sending people to jail for possessing marijuana has upended too many lives – for conduct that is legal in many states. That’s before you address the clear racial disparities around prosecution and conviction,” Mr. Biden said on Twitter.

The President made his announcement just weeks before many states begin their midterm elections. Legalization of cannabis and pardoning people for past convictions are widely supported among U.S. voters: According to a recent survey by political statistics provider Politico, 60 per cent of voters think recreational cannabis should be allowed in the country.

Legislators are also considering the Secure and Fair Enforcement Banking Act, which could include measures to protect financial institutions that provide services for legal cannabis companies. Until Mr. Biden’s announcement, the SAFE Banking Act was the industry’s biggest hope for a bill that could move the needle toward federal legal legalization, Mr. Bottomley at Canaccord Genuity said. A draft of the act is expected this fall.

Follow Irene Galea on Twitter: @IreneHGaleaOpens in a new window

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