President Donald Trump signed an executive order Thursday directing federal agencies to reclassify marijuana, loosening long-standing restrictions on the drug and marking the most consequential shift in U.S. cannabis policy in more than half a century.

The order, once finalized by the Drug Enforcement Administration, moves cannabis out of Schedule I classification — the most restrictive category under the Controlled Substances Act, alongside heroin and LSD — to a Schedule III classification, which encompasses substances with accepted medical use and a lower potential for abuse, such as ketamine and Tylenol with codeine.

“This action has been requested by American patients suffering from extreme pain, incurable diseases, aggressive cancers, seizure disorders, neurological problems and more, including numerous veterans with service-related injuries, and older Americans who live with chronic medical problems that severely degrade their quality of life,” Trump said from the Oval Office on Thursday.

Also on Thursday, the Centers for Medicare and Medicaid Services, led by Dr. Mehmet Oz, is expected to launch a pilot program in April enabling certain Medicare-covered seniors to receive free, doctor-recommended CBD products, which must comply with all local and state laws on quality and safety, according to senior White House officials. The products must also come from a legally compliant source and undergo third-party testing for CBD levels and contaminants.

Shares of cannabis conglomerates were down following the announcement, likely from worries of new compeititon from international companies.

Trulieve’s stock finished the day down about 23%, Green Thumb Industries fell more than 16% and Tilray Brands fell about about 4% as of close on Thursday. The AdvisorShares Pure US Cannabis ETF, which tracks American operators, slid almost 27%.

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

The reclassification is viewed by many analysts as a financial lifeline for the cannabis industry. The move exempts companies from IRS Code Section 280E, allowing them to deduct standard expenses like rent and payroll for the first time. It also opens the door for banking access and institutional capital previously sidelined by compliance fears.

Many on Wall Street also expect the changes and the Medicare pilot to draw major pharmaceutical players into the sector to chase federally insured revenue.

While CBD has surged in popularity in recent years, with infused consumer goods ranging from seltzers to skin care, the Food and Drug Administration has stopped short of granting the compound its full backing.

Studies have found “inconsistent benefits” for targeted conditions, while FDA-funded research warns that prolonged CBD use can cause liver toxicity and interfere with other lifesaving medications.

Currently, the FDA has only approved one CBD-based drug, Epidiolex, for rare forms of epilepsy.

“I want to emphasize that the order … doesn’t legalize marijuana in any way, shape or form, and in no way sanctions its use as a recreational drug,” Trump said.

Experts and industry insiders told CNBC this week that a reclassification could pave the way for more research into the effects of CBD use.