Friday, March 29, 2024

What’s Preventing Most Investors From Jumping Into The Cannabis Industry

If not for a few key issues, the cannabis industry would become the investment community’s happiest place, according to a new report from the stock advisors over at Motley Fool.

In 2016, legal marijuana sales hit an all time high of nearly $7 billion. As more states continue to allow legal weed to become part of their world, some of the latest market analysis predict the sale of legal grass could generate somewhere near the $50 billion mark within the next decade. Although these numbers are only estimates, the current data indicates that the legal cannabis trade is growing up to30 percent a year – one of the primary reasons investors are eyeing the industry like a starving hawk.

But there is enough standing in the way of this newfound industry to given investors pause.

One of the biggest concerns right now is that the marijuana market might not survive the Trump administration, specifically the pot-hating leader of the Justice Department, U.S. Attorney General Jeff Sessions. Although he has yet to confirm his true intentions with respect to legal marijuana, Sessions has given the cannabis community ever reason to suspect that a federal crackdown is on the horizon. He has mentioned at least once since his confirmation that he believes legal weed is connected to an increase in violent activity, as well made comments concerning the herb’s contribution to the national opioid epidemic.

On Friday, a report from NPR’s “All Things Considered” suggested that Sessions might threaten to pull funding if states do not comply with federal marijuana laws. We already know that he has approved a task force to execute a full review of existing policies, including those pertaining to marijuana. At bare minimum, there is belief that Sessions will at least amend the Cole memo set out by the Obama Administration, which allowed legal marijuana to function regardless of its outlaw status with the Feds.

“The lack of a clear line in the sand between federal and state laws, and even legal cannabis laws within some states, can also create issues and lead to business uncertainty. While the sky could be the limit for marijuana stocks, they’ve been largely held back by a number of adverse factors,” Sean Williams wrote in his article for The Fool.

There is also a push in some states to eliminate marijuana cultivation cooperatives, which could prove beneficial for pot stocks, reports the Fool. In Colorado, lawmakers are working to put the kibosh on both the grey and black markets by dismantling those legal operations that allow multiple people to grow weed under the blanket of a single farmer.

“Though a tougher regulatory environment might not seem like a good thing for the industry, it’s actually great news for legal businesses and marijuana stocks” Williams wrote. “By more precisely defining the legality of who can grow recreational pot, Colorado is laying the groundwork for its legal businesses to thrive.

“Since Colorado is such a marijuana pioneer, other states may soon follow its lead,” he added.

A couple of weeks ago, a new medical marijuana fund launched in the Canadian market, where marijuana is expected to be fully legal by 2018, suggesting that investors are hungry to start sinking their money into the cannabis industry. However, while the fund managed to sell over one million shares within the first 24 hours, financial experts were quick to point out that apprehension still exists because the majority of the cash was not coming from big money sources.

Although big time investors are interested, they will almost certainly remain aloof about adding pot stocks to their portfolios until the U.S. government put an end to prohibition once and for all.

“We really need to see a change of heart on Capitol Hill if real progress is to be made within the pot industry and with marijuana stocks as a whole,” Williams concluded.


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