Major changes could reshape the legal marijuana industry in the U.S. in 2021. 

More and more states have legalized cannabis for adult use for medical or recreational purposes. The plant still remains illegal at the national level, bringing state and federal authorities into conflict and complicating the logistics for marijuana businesses. However, with Democratic control of all three branches of the government, the future of the industry could be brighter. 

Where marijuana is legal

Marijuana was on the ballot in five states during 2020 election. Montana, New Jersey, Arizona, and South Dakota became the latest states to legalize marijuana for recreational use in those states via ballot measures. South Dakota also legalized the plant for medicinal use. Mississippi, meanwhile, legalized cannabis for medicinal use only.

Source: NCSL, 2021

California was the first state to legalize marijuana for medicinal use in 1996. In 2012, Washington State and Vermont became the first states to legalize the plant for recreational purposes. Today, cannabis is legal for recreational purposes in 15 states and Washington, D.C. Marijuana is legal for medicinal use in 35 states. 

Where marijuana stands at the national level

Toward the end of 2020, the House of Representatives voted to decriminalize marijuana on the federal level. And while the Senate still has to vote on the issue, Democratic control of the branch could expedite the process. President Biden has expressed support for the decriminalization of marijuana and legalization for medicinal purposes on a federal level.  

Even though marijuana is legal in numerous states, it is still a Schedule I controlled substance on the federal level, which means that it’s classified with harder drugs including LSD, heroin, and peyote. The Trump administration reversed the course of the Obama administration in 2018 and said that the Department of Justice could interfere in state marijuana legislation. But in June, 2019, Congress voted to ban federal agents from enforcing federal marijuana laws in states.  

The contradiction between state and federal law poses a challenge to how legal marijuana companies conduct their business. Cannabis companies tend to have limited access to banks that don’t want to take on the legal risk of serving them. Because of this limitation, many marijuana businesses have to operate in cash only, which can hinder their growth and put them at risk for robbery. Additionally, marijuana could never be fully legal in the U.S.

Investing in the legal cannabis industry

The legal cannabis industry includes companies that grow, package, and distribute marijuana and hemp, as well as cannabinoids such as THC, which is psychoactive, and CBD, which is not. This industry also includes businesses that make chocolates, gummies, and oils containing cannabinoids. 

Additionally, businesses that make the materials used by cannabis businesses are part of this industry. For example, Kush Bottles makes storage containers where people can keep legal cannabis. 

Although marijuana isn’t technically legal in the U.S., you can still invest in cannabis. Some cannabis companies are listed on exchanges in the U.S. but operate out of places like Canada, where cannabis is legal. You can invest in single stocks of companies such as Aurora Cannabis, Canopy Growth, Cronos Group, and Tilray as single stocks on Stash. Corporate Cannabis, an ETF available on Stash, includes shares of Canopy, Tilray, and more.* 
Remember that a diversified portfolio should include investments in bonds, stocks, and exchange-traded funds across different sectors of the economy. Diversification can help you spread out the risk in your portfolio.

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