Investments In The Marijuana Industry Hold Potential For Significant Growth, Despite Some Uncertainty

Investors in marijuana-related companies witnessed several key developments in 2015 as the industry worked around initial obstacles, states refined regulatory frameworks, American public support of legalization increased, and banks and other service providers increasingly did business with marijuana companies. However, marijuana remains illegal at the federal level, and many investors will remain hesitant about making investments with growers in the U.S. until the federal government clarifies its position. In the meantime, many investors remain focused on businesses that provide products and services to growers or businesses in the Canadian market. That being said, with the market expanding as quickly as it is, even ancillary businesses have potential for significant growth, and investors and the media continue to closely monitor regulatory and other industry developments.

Developments at the Federal Level

Marijuana remains illegal under federal law, and while Congress and the executive branch have not legalized marijuana or rescheduled it from Schedule 1, they have taken steps to divert resources away from prosecution. In the Cole Memorandum of 2013, the Department of Justice ("DOJ") instructed federal prosecutors not to prosecute marijuana cases in states whose regulatory schemes meet specified regulation priorities. During 2014, when some federal prosecutors continued to pursue actions against vendors of medical marijuana in states that had legalized such sales, Congress included the Rohrabacher-Farr medical marijuana amendment in the end-of-year omnibus budget bill that stopped federal funds from being used to prevent states with medical marijuana programs from "implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana."

In April 2015, a DOJ representative announced that the department interpreted the amendment to mean only that it was restricted from prosecuting states and that it did not forbid prosecution of individuals and medical marijuana companies. Representatives Rohrabacher and Farr disagreed, and the federal District Court in the Northern District of California in October held that the DOJ may not prosecute marijuana companies operating in compliance with state medical marijuana laws. The Cole Memorandum and Rohrabacher-Farr medical marijuana amendment are widely viewed as important steps toward legitimizing the industry, but do not resolve the ongoing conflict between state regulation and federal prohibition of marijuana. There were hopes that the budget bill for 2016 would take further steps to...

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