Legal pot like 'alcohol after Prohibition': O'Leary

Kevin O'Leary of 'Shark Tank' reluctant to invest in pot yet
Kevin O'Leary of 'Shark Tank' reluctant to invest in pot yet

"I would very much like to invest" in the booming business of legally selling marijuana for recreational use in Colorado, said venture capitalist and investor Kevin O'Leary.

"My lawyers tell me a different story right now," he lamented Wednesday on CNBC.

Known as "Mr. Wonderful" on the reality show "Shark Tank," O'Leary said he's torn between what's like "getting an opportunity to get into alcohol after Prohibition just ended" and the possible downside of running afoul of the federal government.

"We don't have a federal mandate to legalize marijuana yet. We have state initiatives," he said in a "Squawk Box" interview. "I need to be told by the government federally that it's OK to support this industry."

(CNBC will debut a new special report, "Marijuana in America: Colorado Pot Rush" on Wednesday night at 10 p.m. ET/PT. #PotInAmerica)

Colorado weed shops rolling in green
Colorado weed shops rolling in green

Colorado began recreational pot sales in January. And since then, Pueblo County—the first in the state to report numbers—said its two shops racked up about $1 million in total sales for the month, yielding about $56,000 in local sales taxes.

Brian Ruden, owner of Starbuds Medical and Recreational Marijuana Dispensary in Denver, told CNBC that sales exploded when recreational pot was legalized in January.

"We were all running around like crazy because we just couldn't handle the crowds," Ruden said on "Power Lunch," adding that sales have since become "manageable," but demand is so high that he plans to increase grow capacity and possibly open other locations.

While currently looking into two deals in Colorado, O'Leary is worried about "jurisdictional problems" in another state where marijuana is illegal.

("Shark Tank" airs on CNBC every Tuesday at 8 p.m. and 9 p.m. ET. #SharkTankTuesdays)

"I would never make an investment that would breach my right to be free." He said he's concerned about unforeseen issues that could lead to an indictment or prison time.

But O'Leary said he remains tempted because the margins in this business are "phenomenal."

Legalized pot is expected to be a multibillion-dollar industry. Washington state—the other place where recreational marijuana sales have been legalized—plans to open its doors for business in June.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.
—CNBC's Drew Sandholm contributed to this report. Follow him on Twitter @DrewSandholm.