"Cannabis is still illegal on the federal level, so it makes investing very risky," said Jessica Rabe, a research analyst with ConvergEx, a New York-based brokerage that released its outlook for the industry last week. Federal laws make it difficult for marijuana businesses to open bank accounts, and as a result many have gobs of cash sitting around, making them targets of robberies.
"The recreational marijuana business shows a vibrant and growing industry as more states legalize the drug," ConvergEx said. However, it said several states with legalized recreational use have put barriers to out-of-state investors, and "the U.S. Department of Justice frowns upon outside money flowing into the marijuana industry as well."
Overall, state-regulated marijuana sales reached $5.7 billion in 2015, up nearly 24 percent from the prior year — boosted by growth tripling in the recreational market, according to "The State of Legal Marijuana Markets" report from ArcView Group, an Oakland, California-based investment network for cannabis start-ups. It forecasts legal cannabis sales are on track to reach $22.8 billion by 2020, with adult use representing more than half the total market.
Nearly half of the states and the District of Columbia have passed legislation or ballot measures to legalize the possession and distribution of marijuana for medical purposes, and four states — Washington, Oregon, Alaska and Colorado — have legalized adult recreational use. At least nine states have medical cannabis or adult legalization measures in the works, including the closely watched ballot initiative effort in California to legalize recreational use statewide for people 21 and older.
Meantime, a U.S. Senate drug caucus hearing set for Tuesday underscores some of the uncertainties at the federal level still facing the marijuana industry.