What if I told you there is a great industry that you can invest in early and earn tons of money in the future. No, the industry isn’t making money yet, and no one knows when it actually will. But so many analysts are saying it’s going to be huge in five or so years. Yes, the product is illegal at the federal level. However, it’s allowed in some way in dozens of states – although it’s often more expensive and harder to get it legally in those states than it is to buy it on the black market. But trust me – this is the investing opportunity you’ve been waiting for!
Would you invest?
Chances are you’d run away if you got that pitch. However, that’s exactly what’s happening in the marijuana industry, and investors are flocking to it!
Investing Blindly in the Marijuana Industry
For investors who are putting their money into the marijuana industry, they’re investing in projected growth potential. This is a market that sources like ArcView Market Research predicts will grow to over $21 billion in fewer than five years, and at full legalization across the country, investment firm Cowen & Co. predicts the cannabis market could grow to over $50 billion by 2026.
Of course, full legalization would make a big difference in the marijuana market size, but that is unlikely to happen under the Trump administration based on public comments from officials to date. Marijuana is still a Schedule 1 drug at the federal level. That means marijuana businesses still have difficulty getting bank accounts. Furthermore, marijuana businesses can’t benefit from many business-related tax laws because the product they’re directly or indirectly selling is illegal according to federal law.
While public opinion has shifted and the majority of Americans now believe marijuana is socially acceptable, businesses in the industry still have trouble meeting consumer demand due to restrictive regulations. To make matters worse, many are struggling to do so profitably.
Despite all of these red flags that would make investors flee from other industries, they’re flocking to marijuana. From Florida, Pennsylvania, Maryland, and more, investors want in! Investors big and small are investing in grower, processor, and even dispensary licenses across the country. From PayPal founder Peter Thiel to Roger Jenkins of Barclays Plc, lawyers, politicians, law enforcement officials, celebrities, and more, there is no shortage of people who want to invest in the marijuana industry.
Less Risky Routes to Investing in Marijuana
Others are taking a less risky route by investing in metaphorical picks and shovels. Last year, JPMorgan recommended that investors invest in Scott’s Miracle-Gro since the company made hydroponics acquisitions and marijuana growers need hydroponics. In fact, it’s these ancillary marijuana businesses that are actually making money. According to Above the Law, the money in California is being made in real estate, technology, IoT (Internet of Things), collective management companies, and intellectual property and licensing.
Considering that the marijuana industry in California is expected to add $1.5 billion in state revenue by 2018 and $4 billion by 2020, it’s not surprising to see the state’s lawmakers, businesspeople, and residents taking steps to protect the industry. For example, California’s State Assembly recently passed AB 1578 that would prevent state and local police officers from helping federal drug agents in arresting people who haven’t broken any of California’s recreational marijuana laws (unless there is a court order in place).
The bill goes to the State Senate for a vote next. If it passes, it’s being said the law could become the “marijuana sanctuary state” clause that other states which have legalized recreational marijuana could copy. Of course, such a law would make investing in California’s marijuana industry much more attractive and a lot less risky.
However, with marijuana still a Schedule 1 illegal drug at the federal level, marijuana business growth can only get so big. While the California market is larger than most countries’ economies, that’s not the case across the country. Laws still vary by state making it difficult for companies to expand across state lines. Again, profitability is negatively affected.
Weighing the Risks and Rewards of the Marijuana Industry
Now that you’ve got many of the facts, would you invest in the marijuana industry? This is clearly not an investment opportunity for the risk-averse, but for those people who can see the potential rewards – who see the tides turning favorably for this industry – the time might be perfect. After all, as Thomas Jefferson said, “With great risk, comes great reward.”
Just make sure you do your research first. Read Cannabiz Media’s Marijuana Licensing Reference Guide: 2017 Edition, and ensure you truly understand the value of a marijuana license as well as industry investing opportunities and challenges.