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Cannabis stocks are rallying on reports U.S. President Donald Trump is reclassifying cannabis under federal law.

Stocks such as Tilray Brands (NASDAQ: $TLRY ) and Canopy Growth (TSX: $WEED ) are up on news of the change, which would not legalize the drug at the federal level but change its status.

Trump is reportedly changing the classification of cannabis from a Schedule I substance to Schedule III under the U.S. Drug Enforcement Administration's (DEA) framework.

The U.S. Department of Justice said it will immediately move products containing cannabis to Schedule III, which is a lower tier and further step towards legalization.

The Schedule III classification can lead to greater research into cannabis and will lessen penalties for people caught using the recreational drug.

"Together, these actions provide immediate and long-term clarity to researchers, patients, and providers alike while still maintaining strict federal controls against illicit drug trafficking," said the Justice Department in a written statement.

Drugs in Schedule I, which include heroin and LSD, are considered to have no accepted medical use and a high potential for abuse.

Schedule III drugs, such as Tylenol with codeine, are recognized as having medical applications and are subject to fewer regulatory restrictions and criminal prosecutions.

The move by Trump marks one of the most significant shifts on cannabis policy in decades, signaling a willingness among U.S. lawmakers to reconsider how the drug is categorized.

Cannabis advocates have called for a reclassification of the drug in lieu of outright legalization at the federal level in the U.S.

TLRY stock has declined 96% over the last five years to trade at $7.69 U.S. per share.