From intricate tax laws to the evolving acceptance of marijuana in the United Nations, cannabis investing is no walk in the park.
The green wave of cannabis reform swept through America on Election Day 2020, ushering in new laws across five states. The momentum could continue, depending on the Senate’s balance of power, which will be determined in two January runoffs in Georgia.
The belief among some in and around the cannabis investment space is that if the Democrats win Senate control, the industry could see the passage of crucial bills, including the MORE and SAFE Banking Acts, bolstering the cannabis market’s long-term potential.
“We see a Biden/Harris win as much more important for long-term cannabis investments. It should lead to continued decriminalization, expungement, and depending on the Senate, federal legalization,” said Cannapreneur Partners Co-CEO Todd Sullivan.
However, New Frontier Data‘s Senior Director of Industry Analytics, Kacey Morrissey, explained that the industry saw growth under President Trump, including a 37% CAGR increase between 2016 and 2020.
With growth of some kind likely to occur under both parties, one may think it is time to invest. However, the market’s varied views cast a layer of uncertainty every investor must assess before taking the plunge.
Is The Cannabis Boom Ready To Happen? Is It Here? Did It Happen Already?
Depending on whom you ask, the answer is likely to vary.
Some, like Cresco Labs Co-founder Joe Caltabiano, says now is the time. The JSC Fund founder cites evolving public perception and laws as critical indicators. “Companies have already experienced significant headwinds, and with all of the positive momentum, you will see those winds now propel companies forward to greater profitability and higher stock price,” he predicted.
New Frontier Data’s Morrissey discussed positive signs as well, including the ongoing market performance during the pandemic. “The strong performance of the cannabis industry during the COVID-19 pandemic has affirmed the ‘recession-proof’ nature of the industry,” she said, predicting that investors are likely to be attracted to a market with numerous beneficial converging factors.
Others aren’t as sure. CEO of infusion tech company Vertosa, Ben Larson, said that anyone looking to make a boom in the space now is certain to go bust.
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Larson, who served in the founding of cannabis accelerator Gateway, said that a boom is not underway at this time. He believes that a true green wave will come with “significant institutional support,” which includes a passage of the MORE Act, banking access and cross-state commerce. “Any so-called ‘booms’ that are happening now or have happened in the past are purely speculative,” stated Larson.
Tips For Would-Be Cannabis Investors
Opinions may vary on the status of the market’s investment boom. However, each source stressed the importance of investor knowledge before getting involved.
Vertosa’s Larson noted that a Democrat-held White House is no silver bullet. However, the current industry is still worthwhile for informed investors. “Investors have to be very deliberate and do their due diligence to ensure they understand the triggers for growth of the investments that they’re making,” he said, highlighting that many company projections hinge on institutional support coming to fruition.
Cannapreneur Partners’ Sullivan gave similar feedback, noting that nothing has changed on the federal level despite the House’s passage of the MORE Act in December. He predicts a growing investor turnout, with the private markets excelling over the next two to three years.
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Like Larson, Sullivan sees institutional support as a key factor. Urging the need for interstate commerce, he said there is a long way to reach this legislative goal and other critical points in the market’s progression. “If commerce continues to be restricted across state lines, even with federal legalization, companies will still have a tough time expanding, and the national market won’t change too much,” Sullivan said.
Potential investors have a myriad of additional points to consider when considering cannabis. From intricate tax laws to the evolving acceptance of marijuana in the United Nations, cannabis investing is no walk in the park. Investors must be well-versed in the subject or face a high risk of losing their shirt.