Weed ETF waives fee ahead of much-awaited drug relabeling

Roundhill Investments is completely waiving the fee for its $5.6 million cannabis fund as US regulators move to reclassify marijuana as a less dangerous substance.

Starting Monday, the actively managed Roundhill Cannabis ETF (ticker WEED) is dropping its expense ratio to zero from 40 basis points for at least one year, according to a filing submitted to the US Securities and Exchange Commission last week. 

“With the likely upcoming reclassification of cannabis to a Schedule III drug potentially serving as a catalyst for the space, Roundhill is offering this fee waiver for the WEED ETF to make investing in cannabis more accessible,” said David Mazza, Roundhill’s chief executive officer. 

The Department of Justice in May had formally started the procedure of shifting marijuana’s legal status to Schedule III, less dangerous, from Schedule I, most dangerous, a move that’s been backed by President Joe Biden. 

WEED has lost 58% since its April 20, 2022 inception — a date celebrated among cannabis aficionados every year — but has notched a nearly 5% gain year to date.

Still, the dozen exchange-traded funds linked to cannabis and psychedelics tracked by Bloomberg Intelligence have seen 17 consecutive monthly inflows, with investors plowing $393 million into them this year alone. The largest in the group is the $889 million AdvisorShares Pure US Cannabis ETF (MSOS), launched in September 2020, which has an expense ratio of 74 basis points.

The long-awaited step toward potential acceptance of marijuana is widely viewed as a victory for the industry, with many anticipating significant benefits, from reduced civil and criminal penalties to tax advantages. No decision has been made yet and reclassifying cannabis will not decriminalize it.