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Investing in the US Cannabis Industry

by Vende Posted in News

How to Smartly Invest in the USA Cannabis Legal Industry

In early October 2022, President Joe Biden made a pronouncement which took the country closer to legalizing marijuana at the federal level. The pronouncement triggered an increase in the market price of cannabis stocks. While many people want to invest in the cannabis sector, they are concerned about navigating the fact that cannabis is still illegal at the federal level and thus comes with many legal limitations. 

Eve thigh President's announcement might be a positive move, but it doesn’t address some of the critical challenges entrepreneurs and businesses face in the U.S. legal cannabis market. According to Jay Czarkowski, from consultancy Canna Advisors, "While Biden's announcement is certainly progress, it was more of a political announcement than a sweeping impact on business. It doesn't change any business dynamics. It doesn't create any new business opportunities. It's not anything bad or good for business."

Cannabis Industry's Status Quo

The U.S. cannabis industry is still growing and has plenty of business opportunities and potential. However, before investing in the industry, it’s essential to understand various critical aspects of the industry. The first step is understanding the industry's current position before investing your money. Cannabis stocks have suffered a lot of pressure due to the inflation crisis and higher interest rates. Many investors still have a negative market sentiment as they worry about a looming recession. 

Unfortunately, the woes of cannabis stocks didn't start recently. The U.S. cannabis companies were already suffering after lawmakers failed to pass meaningful legislative reforms. Thus many companies face various issues like banking and interstate limitations.  

Cannabis companies with headquarters in the United States cannot raise money from the stock market by being listed on the New York Stock Exchange or NASDAQ markets. The scenarios apply to companies which grow, process, distribute or sell marijuana because marijuana is still a Schedule I drug and illegal at the federal level. However, companies listed in the stock market are primarily from Canada, where marijuana is legalized nationally. 

Cannabis-based companies in the United States face expensive paperwork, strict regulations, and higher taxes and cannot access the federally regulated banking system. Even the big companies in the cannabis industry suffer due to the many hurdles in their operations. For instance, the illegalization of interstate commerce creates multiple inefficiencies for these companies. 

Despite the many challenges, the U.S. legal marijuana market has made tremendous strides. Entrepreneurs and business owners have prioritized local markets in their business operations. Compliance with the state laws and regulations guiding the cannabis industry has helped many businesses operate optimally. Every state that has legalized cannabis use has a regulatory body that guides every industry operation. 

The positives expected in the U.S. marijuana industry are bountiful. Even when under federal prohibition, the industry has made many significant strides. Andrew Bowden, CEO of Item 9 Labs Corp, said, "I anticipate that most cannabis stocks will skyrocket once we truly legalize cannabis on the federal level. Until that happens, we will continue seeing these small wins along the way that will positively impact cannabis stocks."

Thus, investing in cannabis is an excellent opportunity for investors and entrepreneurs who want to increase and diversify their investment portfolios. If lawmakers come up with meaningful federal reforms, the cannabis industry in the United States will skyrocket.

Investing in Cannabis

Operating a cannabis business is only possible in states where cannabis is legal. Currently, 21 states have legalized some use of cannabis. But since we have federal prohibition, U.S. cannabis-based companies don't have their stocks listed on the New York Stock Exchange or NASDAQ markets. Thus ruling out the possibility of purchasing stocks. Nevertheless, the cannabis industry is expansive, covering different aspects of business operations.

  • Some of the critical sectors of the U.S. cannabis industry are:

  • Cannabis growers and retailers

  • Cannabis-based biotechnology companies

  • Ancillary cannabis product and service providers

As an investor, you can pick your preferred investment option from the above sectors of the cannabis industry. Clear State regulations and laws guide each sector. Licensing and compliance for every business vary from one sector to another. Failure to have the proper licensing and compliance with the regulations will result in licensing revocation and even jail sentences. 

One bonus feature of the cannabis industry is that it accommodates big corporations and small scaled entrepreneurs. You don't need significant capital to start your business, with some entrepreneurs opting to make various products using cannabis from the comfort of their homes. While many states are making significant strides in creating cannabis reforms, investors and potential business owners need to ensure they are updated on the industry's current affairs. The various state cannabis regulatory bodies offer plenty of information for the cannabis community.

As you have read in this article it is not as straightforward as other industries. Operating a cannabis business is extremely difficult, and not having the know how can really affect your bottom line. Vende POS is made to help its clients run the business they have always wanted. Providing you with all the necessary tools for your business to succeed is our goal. Schedule a demo with us today and see how running your business on the Vende platform can help.