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Marijuana Investment: Legal Information About Marijuana Stocks

Business owners have the opportunity to invest in and become part of the marijuana industry as the laws continue to shift to legalization. These legal changes are giving new business owners plenty of opportunities to invest in and become part of the cannabis market. But being part of this business comes with its risks, mainly since cannabis is still illegal at the federal level.

How Can I Invest in the Marijuana Industry?

As is the case with any investment, you need to do your due diligence before investing in marijuana stocks. Among other things, you need to know the type of marijuana products (medical cannabis and recreational cannabis ) and understand the different types of cannabis stocks.

Marijuana Stocks

Marijuana companies in the US and Canada began listing in Nasdaq and the New York Stock Exchange in 2018. Many businesses have now opted to "go public" and have made their shares available for sale. This means investors can purchase stock in publicly traded marijuana-related businesses.

There are three primary types of marijuana stocks. These are:

  • Marijuana-focused biotech companies
  • Ancillary service and product providers
  • Marijuana growers and retailers

Another option you have is to invest in stocks with cannabis-related businesses. You can do this by investing in stocks of organizations that engage in different businesses but still have some interest in cannabis-related businesses. For instance, you can consider buying stocks from Abbvie Inc. , which is normally a pharmaceutical stock. The company, however, also markets Marinol, a synthetic cannabinoid used to help AIDS and cancer patients who suffer from vomiting and nausea.

What Should I Look for in a Marijuana Stock?

Pot stocks are like other stocks. You should do your research to see how profitable the stock is before you make a purchase. This includes:

  • Assessing the financial status of the cannabis stock you are considering purchasing
  • Checking the stock's valuations
  • Researching the company's business strategy to see whether it has a solid business plan
  • Checking the track records of the executives.

Understand the Risks Associated With Investing

The most notable risk associated with this business is that possession and sale of marijuana remain illegal under federal law. This means federal agencies can prosecute marijuana businesses and dispensaries operating in states that legalized marijuana for either recreational or medical purposes. In other words, by investing in a marijuana company, you are investing in a business that faces the risk of prosecution.

Federal law also places strict restrictions on financial institutions and banks dealing with cannabis-related businesses. This makes it difficult for cannabis businesses to raise capital, which could affect your financial investment as a shareholder.

The government may also revoke your security clearance if you invest in marijuana stocks. The memorandum outlined by the Department of Defense explains the government policy on revoking security clearances for people engaged in the cannabis industry.

Make Sure to Monitor Cannabis Laws and Regulations

The cannabis industry is constantly evolving. States continue to decriminalize or legalize cannabis. It is very important you keep up to date on your state's laws and regulations to ensure you remain compliant.

Additional Resources

Thinking About Investing in Marijuana Stocks? You May Want to Speak to an Attorney.

Laws and regulations related to the marijuana market are very complex and constantly changing. In addition, marijuana remains illegal under federal law. If you are thinking of investing in marijuana stocks, it is best to speak to an attorney familiar with the nuances of marijuana law to ensure you comply with the changing laws.

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