CommonQuestions
Invest in Marijuana? Questions You’ll Want to Know the Answers to First
Anything and everything you’ve ever wondered about investing in cannabis.
Marijuana stocks have been practically unstoppable over the past couple of years, and they’re certainly attracting their fair share of investors. A majority of pot stocks with a market cap in excess of $200 million have seen their share prices jump by 100%, 200%, or perhaps even more over the trailing-one-year period.
Yet, investing in marijuana is no guarantee of success. Opportunities do exist, but there are also plenty of risks. If you’re planning to get it on the green rush, you’ll first want to know the answers to some very critical questions. Whether you’re new to investing or a seasoned veteran, these questions concerning marijuana stocks are for you.
- What’s the potential for marijuana stocks?
Though it’ll depend on your source, most analysts expect the marijuana industry to grow by 23% to 35% annually over the next five years. Cannabis research firm ArcView believes a compound annual growth rate of 26% will lead to nearly $22 billion in legal North American weed sales by 2021, while Cowen & Co. is looking for $50 billion in U.S. sales alone by 2026.
- Does the public support legalizing marijuana?
In the U.S., according to both Gallup’s and CBS News’ latest polls, the public is very much in support of legalizing recreational marijuana. In April, CBS News found that 61% of respondents were in favor of national legalization, while Gallup’s October 2017 survey found 64% support for the idea. A separate survey from the independent Quinnipiac University in April 2017 found 94% favorability toward legalizing medical cannabis compared to just 5% who opposed the idea.
- Does anyone not support the legalization of marijuana?
Yes. Though most surveys don’t break down the specifics of their data, Gallup has found that a small majority of senior citizens aged 55 and up still favor keeping marijuana illegal. It is worth mentioning, however, that favorability toward pot among seniors has improved in recent years, meaning this last major opponent may soon have a net positive view on pot.
- Is it legal anywhere?
Yes. Uruguay is the only country in the world right now where recreational and medical marijuana is completely legal. Beyond that, there are around a dozen countries that offer some degree of legal medicinal use. Our neighbors to the north, Canada, legalized medical marijuana back in 2001, and they might become the first developed country to legalize adult-use weed by July 2018. Cannabis is wholly illegal in the U.S., where it’s a Schedule I drug, putting it on par with heroin and LSD.
- How many states is weed “legal” in the U.S.?
Despite being illegal federally, 29 U.S. states (and the District of Columbia) have passed laws allowing physicians to prescribe medical cannabis since 1996. Furthermore, residents in eight states (and the District of Columbia) since 2012 have passed propositions legalizing the sale of recreational weed.
6. Why doesn’t the U.S. government want to legalize marijuana?
This is a complex question with no definitive answer. Rather, it involves a confluence of factors. Right now, Republicans are simply too tied up with tax reform and healthcare reform to give marijuana reform the time of day. The GOP also has a less favorable view of pot than Democrats, so they’re less likely to bring reform legislation to the table. Lastly, lawmakers don’t believe there’s enough known about the benefits-versus-risk profile of cannabis, which sways them to stand pat on its current scheduling.
7. So, what’s protecting state-level cannabis businesses right now?
U.S. pot businesses are currently being protected by the Cole Memo and the Rohrabacher-Farr Amendment. In simple terms, the Cole Memo, named after former Deputy Attorney General James Cole, outlines a series of “rules” states have to follow in exchange for the federal government taking a hands-off approach. These rules include keeping pot out of the hands of minors, and ensuring that weed doesn’t leave a state’s borders. The Rohrabacher-Farr Amendment, which has to be approved each year, ensures that medical weed businesses can’t face federal prosecution for operating in one of the 29 legal states.
8. Do U.S. weed companies face other financial constraints?
Also yes. Most marijuana companies are cash-only businesses since banks often want nothing to do with them. Basic financial services, even including a checking account, may be off-limits because financial institutions report to the Federal Deposit Insurance Corporation, a federally created entity. If the federal government were to crack down on the weed industry in the future, banks that assist marijuana companies with checking accounts and loans could be criminally charged and/or fined.