Now 29 states have legalized medical marijuana, starting with Alaska in 1998 and most recently West Virginia in 2017.
Many cities, including Washington D.C., Atlanta, Chicago, Houston, Miami and Detroit have decriminalized small amounts of marijuana and have replaced jail time with fines.
The sweeping change in laws has allowed entrepreneurs to step up to meet enormous pent-up demand. It has also allowed investors to invest in companies and reap profits, though there are still some serious pitfalls.
The most serious one may be the federal government’s recent reversal of policy on allowing states to legislate medical and recreational marijuana consumption. The feds still consider it a Schedule One Drug, in the same classification as heroin.
Despite the pressure from Washington, there are at least five ways that you can invest in the cannabis business depending on your expertise, your entrepreneurial skills and the level of risk you can comfortably assume.
The first is getting a state license and starting a cannabis business yourself. This can be risky, time-consuming, and costly; you will need to comply with strict local and state requirements and, of course, first secure a license.
Even then the market can be fickle. Multi-million-dollar investors with deep pockets and years of experience will be competing for each dollar spent on legal weed.
Likewise, many states have up to 20 applicants for each license, and the entire process can take years with no guarantees.
The next best option is often called “touching the plant,” business such as cultivation, wholesaling, edibles, topical applications, and even pet products.
You can get into this line either through buying a coveted license or partnering with a company that has one.
If you have expertise in both cannabis and one of those markets then this might be the time for you launch your world-beating cannabis cupcake, massage oil or pet treat product.
Again, local and state laws are complex. Banks, for instance, might not allow you to deposit funds or borrow money for a cannabis business.
Indirect investing
Investing in a business that doesn’t “touch the plant” includes a much broader range of skills, such as PR, marketing, recruiting, lightning, soil, energy, and biotech.
Though these business might not fall under asw much legal scrutiny, but they all require expertise or partnerships with experts and you may still have issues with getting adequate banking.
There are now some cannabis stocks listed in the NASDAQ and others sold over the counter. A handful have seen explosive growth, though they sometimes drop like stones or stagger along for years.
Investor networks are another avenue and offers many benefits, such as working with experts in the field that can vet companies, teams and products, though many require you to be an accredited investor and have a $50,000 minimum to invest.
The presumed reversal of the Obama-era policy on cannabis, however, means the DEA’s former hands-off policy is questionable.
That means owners of marijuana business and even consumers could be prosecuted, and that would put a huge damper on the market and profits.
