The legal marijuana industry shows great promise, with the first cannabis-based drug receiving approval by the U.S. Food and Drug Administration (FDA) and with massive amounts of investor money flowing into legal marijuana operations. In fact, legal cannabis in North America has made significant developments in recent years. Perhaps the most important was the shift in Canada. On Oct. 17, 2018, the federal government legalized recreational cannabis sales across the country. It also made legal cannabis use among adult Canadians. But what about the United States? At the federal level, cannabis remains a controlled substance, but more states are voting to legalize marijuana in one form or another. And cannabis stocks are growing—no pun intended—in popularity on several major exchanges.

With legalization proceedings in both Canada and the U.S., it was perhaps only a matter of time before another important first would happen: Companies are legally shipping marijuana from Canada to the United States. Below, we'll explore two companies that do this and how they may reshape the international cannabis market.

Key Takeaways

  • Companies are legally shipping marijuana from Canada to the United States.
  • Tilray received approval from the U.S. government to export a cannabinoid product to California for a clinical trial in September 2018.
  • The DEA approved a shipment of legal medical cannabis from Canada's Canopy Growth to a research partner in the U.S.

Tilray

Tilray (TLRY) is one of the major players in the cannabis industry. Back in September 2018, the medical cannabis products company announced it received approval from the U.S. federal government to import a cannabinoid product for a clinical trial in California. The product is designed to address a particular type of seizure disorder. The Canadian company is reliant upon exports to foreign markets because of its focus on the medical marijuana arena, according to a report by Motley Fool. Exporting to the U.S. is crucial because the U.S. government has only one federally-approved facility to grow marijuana, meaning the flow of supplies for medical developers is excruciatingly slow.

Tilray is the first company that received approval from the U.S. Drug Enforcement Administration (DEA) to ship cannabis products into the United States. It is a highly specialized case, but represents a potential path forward for similar medical marijuana research outfits nonetheless.

Tilray was founded in 2013, and is has its main headquarters in Toronto, Canada. The company also has offices in Australia and New Zealand, Europe, and Latin America. It launched its initial public offering (IPO) in 2018, and was the first cannabis company to trade on a stock exchange in the United States. Tilray entered into an agreement with New York University in 2019 to export CBD to the school for research purposes.

Canopy Growth

Another major player in Canada's marijuana industry is Canopy Growth (CGC). Roughly a week ahead of the country's legalization day, the company revealed that the DEA approved its shipment of legal medical cannabis to a research partner in the U.S. The company's president, Mark Zekulin, reportedly suggested that "the United States presents a unique market opportunity and as the most established cannabis business in the world we, in turn, offer a unique ability to advantage standardization, IP development, and clinical research that can improve the understanding and legal application of cannabis and cannabinoids."

Founded in 2013 under the name Tweed Marijuana, it was renamed Canopy Growth in 2015. The company, based in Smiths Falls, Canada, was valued as the world's largest cannabis company as of April 2019 based on market capitalization. According to Cannabis Market Cap, Canopy's market cap was $7.9 billion as of Sept. 30, 2019, with more than 346 million shares outstanding. The company specializes in cannabis and hemp-dried flower, oil, and capsules.

A Hazy Future

The biggest question going forward is whether these cases signal a sea of change to come, or if they're simply one-off events. It is difficult to tell, especially since the laws and rules vary from state to state, not to mention how the drug is viewed by the federal government.

Marijuana is considered a Schedule I drug under the Controlled Substances Act, according to the White House. Therefore, it is still illegal under the federal government. While the National Institute on Drug Abuse says the FDA has approved two cannabinoid-based medications for market, the agency hasn't conducted any wide-scale research or clinical trials about the benefits of marijuana on human patients.

Marijuana is considered a Schedule I drug under the Controlled Substances Act, and is therefore illegal under the federal government.

A total of 33 states as well as the District of Columbia have legalized marijuana to some degree—mainly for medical purposes. Eleven of those states—Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington—made recreational use legal. These numbers, though, continue to rise.

Should this trend continue, it seems likely that lawmakers on the federal level will at least reconsider the possibility of legalizing marijuana nationwide, even if only in particular situations. Regardless of what happens with U.S. regulations, expect that Tilray and Canopy Growth will take firm advantage of this unique opportunity to gain access to the U.S. market. Should the federal government eventually open the doors to cannabis imports on a broader scale, these two companies may be in the best position to capitalize.

The Bottom Line

Canadian companies have received highly specialized approval in particular situations to ship cannabis products into the U.S. It's important to recognize that these are limited scenarios and that the situation is far from an open door for Canadian cannabis to flow southward. Still, given the fact that the U.S. federal government has remained staunchly opposed to legalizing marijuana in any form, it represents a significant shift in policy.