As more states approve access to legal medical and recreational marijuana, sales are soaring; the industry saw over 34% growth in 2016, according to researchers at ArcView. This trend is expected to continue.
Sales topped $6.9 million in 2016 and continue to rise each month. More than half of the US states have approved marijuana products for medical use and another handful have legalized recreational use as well.
What does this massive growth and soaring sales mean for investors? It could be the time to get in early on a rising trend – or it could be too risky to invest until the political climate and conversation is more settled. Learning more about the pros and cons of investing in legal marijuana products can help you decide if this investment is right for you.
Here are three reasons why investing in cannabis is a good idea.
A Growing Industry
Marijuana is rapidly becoming a big business, and one savvy investors should keep an eye on its trends. Because there are many small providers in legal states, more money is available for research, investment and even lobbying for more pot-friendly laws in the states that still outlaw the substance.
With business growth comes tightened competition and hence, more innovation. Because of this, there are more ways to consume marijuana than ever before.
Modern pot is available in a variety of products, from baked goods and consumables to cannabis oil and the traditional cigarette form. As businesses expand on the ways marijuana can be used, there is more opportunity for growth.
Research into the many uses of this versatile substance, and the ways it can be used to benefit adults suffering from a variety of debilitating conditions. This will make cannabis more mainstream and accepted as a medication.
Political Problems
While marijuana continues to be a federally outlawed substance, voters at the state level have embraced the drug and there is a strong push for legalization in other states.
Because of this, legal marijuana stocks show promise in many ways. However, the contested political climate and lack of banking support could cause profits to go up in smoke.
It’s tough for marijuana providers; even though they are following the law within their own states, they have trouble accessing bank services, including lines of credit and checking accounts. Some banks are wary of providing services to the cannabis industry; to do so could still be considered money laundering.
As a result, marijuana businesses work in cash, which can limit growth. Since the substance they sell is outlawed, a marijuana business is also left out of all the friendly tax deductions most businesses can claim – they pay taxes on everything, not just their profits. Troubles with banking and taxes may make it more difficult to confidently invest.
Loopholes and Lawmaker Resistance
Even places that have legally voted marijuana into law in some form are a tangled mess when it comes to actually regulating providers, which could hamper growth in the long term. In places like Florida, which recently approved the drug for some medical purposes, lawmakers are throwing up roadblocks, outlawing sales within city limits in many areas.
Georgia lawmaker Allen Peake made headlines by providing medical marijuana free of charge to thousands of patients who could not legally purchase it. Under Georgia law, these patients were legally allowed to possess and use marijuana, but could not buy or grow it.
Deciding on whether to invest in legal marijuana stocks depends on your personal comfort level of comfort with risk, and how the federal government sees cannabis products over time. Marijuana will continue to be a risky albeit potentially profitable investment until the political climate changes.
Regards,
Ethan Warrick
Editor
Wealth Authority
