The legal status of cannabis in the United States remains a complicated issue. Although many individual states have moved to legalize the substance, legalization at the federal level remains elusive. Still, in states with legal cannabis like California and Colorado, eager business leaders have already created a new industry. Now, many of those companies are recognizing that the federal legal issues will prevent them from listing themselves as publicly traded entities on certain U.S. stock exchanges. According to CNN, many of these companies are instead choosing to look elsewhere for stock exchange listings, with Canada being one of the top contenders.
Canadian Legal Status Opens Doors
In Canada, there is currently no federal ban on the sale of marijuana. Medical marijuana is also legal across the country, and the nation is reportedly going through proceedings to legalize cannabis for recreational use as well. All of these factors have made Canadian stock exchanges especially tempting for U.S.-based marijuana companies. In spite of the fact that medical marijuana is legal in 30 states and recreational cannabis use is legal in 10, U.S. marijuana companies are not able to list on U.S. stock exchanges, or even to receive basic financial services, as a result of the federal ban.
For companies like MedMen, a Los Angeles-centered chain of marijuana dispensaries, the solution was to list on the Canadian Securities Exchange (CSE). MedMen CEO Adam Bierman suggested that the process was not an easy one, saying "there are no straight roads and there are no clear paths."
CSE Becomes Marijuana Heavy
As of this writing, 76 of 379 companies listed on CSE are in the cannabis industry. Due to the high proportion of marijuana stocks, the CSE has sometimes been facetiously referred to as the "cannabis stock exchange." CSE CEO Richard Carleton insures that the exchange works only with companies "operating within the boundaries of what is a tightly regulated state framework."
While there are some Canadian cannabis firms that have made in-roads into the U.S. market, in general cannabis supporters tend to believe that the U.S. federal regulations are restricting the industry in the States. Arcview Group CEO Troy Dayton, whose firm specializes in cannabis research, believes that "if the U.S. doesn't get its act together and resolve this federal-state conflict, we're going to lose a business that should rightfully be ours." Still, through an interesting reversal, Canadian companies like Canopy Growth (CGC) have managed to be listed on U.S. exchanges. The reason this is possible is because these companies don't violate rules in any jurisdictions in which they operate; if they only work in Canada, they may be able to list on a U.S. exchange, as they're not violating the U.S. federal regulations. To many supporters of the cannabis field, this logic is counterintuitive.