Federal Prohibition Of Marijuana Makes Trading Cannabis Stocks Challenging

One of the biggest obstacles facing the cannabis industry is lack of access to banking and other financial institutions — a challenge that doesn’t appear to be disappearing any time soon. 

The U.S. Senate for the sixth time tossed out the Secure and Fair Enforcement (SAFE) Banking Act, a proposal that would grant state-legal marijuana businesses access to federally insured banks. 

The cannabis industry was valued at $9.1 billion in 2020 and expected to grow to $70 billion by 2028, according to Grandview Research. Those kinds of numbers make cannabis an attractive investment for many people. 

But the plant’s federal illegality makes it more difficult to trade using traditional brokerage accounts. Laws governing the use and sale of marijuana are inconsistent from state to state and create compliance challenges for U.S. firms that manage investors’ accounts and trade securities for them. 

The Secure and Fair Enforcement (SAFE) Banking Act would have alleviated banking challenges facing the cannabis industry and provided a safety net for banks and financial institutions working with cannabis companies, paving the way for trading cannabis in a traditional brokerage account.

Public Cannabis Companies Are Out There

Even so, some cannabis companies such as Tilray Brands Inc. TILRY and Aurora Cannabis Inc. ACB, and Verano VRNO are publicly traded. 

Then there’s Green Thumb Industries GTII GTBIF, a leading cannabis consumer packaged goods company and owner of RISE dispensaries. 

In New Jersey, where cannabis is newly legal, the Cannabis Regulatory Commission approved seven medical marijuana operators, including Green Thumb, to begin selling adult-use cannabis on April 21. RISE Bloomfield and RISE Paterson were among the first stores to begin adult use.

Green Thumb’s first-quarter financial highlights released May 4 include:

• An 25% year-over-year increase in revenue to $243 million, from $194.4 million the same period last year
• Adjusted operating earnings before interest, taxes, depreciation and amortization of $67 million, or 28% of revenue
• $175 million in cash at the end of the quarter

While many trading firms shy away from the cannabis industry, one Chicago-based company is helping investors profit from the industry. Founded in 2004, Gar Wood Securities LLC offers institutional and self-directed traders personalized and cost-effective execution and cleared trading services. 

To learn more about Gar Wood Securities, click here.

This material is not intended as investment advice and is not meant to suggest that any securities are suitable investments for any particular investor. All investments are subject to risk and may lose value. Marijuana is still considered an illegal substance under federal law. Gar Wood Securities does not condone or encourage the use of marijuana or any other illegal substance. Investing in marijuana related investment products is considered high risk and should be done with caution as part of a well-diversified portfolio. For more information regarding Marijuana-Related Investments, see the SEC Investor Alert: https://www.sec.gov/oiea/investor-alerts-bulletins/ia_marijuana.html

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