The federal government has announced that it will not challenge state marijuana laws — a potential boon to the up-and-coming marijuana industry.
The only catch: Drug sales must not conflict with eight specific priorities, including distribution to minors, cartels, gangs and states where the drug remains illegal. If a state violates one of those priorities, the federal government will intervene, according to this recently released memo, which states in part:
“Outside of these enforcement priorities, however, the federal government has traditionally relied on state and local authorizes to address marijuana activity through enforcement of their own narcotics laws. This guidance continues that policy.”
At this point, 20 states and the District of Columbia allow for medical marijuana use, while Colorado and Washington have decriminalized possession of less than an ounce of marijuana.
And although marijuana still remains classified as an illegal drug, this kind of leniency might increase the odds that other states will follow the lead.
That makes the memo positive news for companies look to cash in on the marijuana business, like marijuana stocks Medical Marijuana Inc. (MJNA), Cannabis Science (CBIS) and Growlife (PHOT) — likely part of the reason Growlife has actually been encouraging visitors to its website to support the “Respect State Marijuana Laws Act of 2013.”
Of course, investors should still proceed with caution. While betting on marijuana — the most popular illegal drug worldwide — might seem like a smart bet after this news, many of the marijuana stocks are volatile and also have extremely small market capitalizations, meaning it wouldn’t take much to create a quick, massive move in the stock.
Many investors have made a quick buck betting on legalization via marijuana stocks over the past year. Still others, though, have watched their investment fall flat following a big-time February spike.
Meanwhile, the Financial Industry Regulatory Authority recently issued a new “scam warning” for marijuana stocks, noting that:
“Con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success.”
So while the Fed’s focus might be good news for the marijuana industry, be sure to do your homework before you throw your own money at it.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.