U.S. DEA Flexes Muscles at Americans Investing in Canadian MMJ Market

Marijuana law reform has been an increasingly popular issue in the U.S. for years: activists are fighting left and right for basic human rights, while entrepreneurs are constantly on the look out for business opportunities to advance, strengthen, and further legitimize the market. With the U.S. markets currently wallowing in political turmoil, however, the Canadian medical marijuana market — which has been legalized on the federal level — has attracted a significant amount of American marijuana investors.

Some experts are arguing that American investors in the Canadian market are violating the Controlled Substances Act because all money earned from marijuana investments is still recognized by the American government as drug money, and such business is legally considered to be money laundering.. In fact, a recent Reuters report has confirmed that the DEA is “most interested” in such investments, and has been closely monitoring American money in Canadian marijuana stocks.

Following this announcement, medical marijuana stocks in Canada began to fall: Organigram Holdings (OGI.V) fell 6.9 percent, Bedrocan Cannabis Corp (BED.V) fell 4.2 percent, and Tweed Marijuana Inc (TWD.V) dropped 2.8 percent.

There has not been any action by U.S. authorities against Americans investing in Canadian medical marijuana. In fact, DEA spokesperson Rusty Payne admitted that the U.S. agency has “limited investigatory resources” for pursuing such investors, meaning the DEA must set its sights on the marijuana investors with the deepest pockets.

Nonetheless, many investors see lucrative opportunities in the Canadian marijuana market, which is expected to grow tenfold over (up to $1.3 billion Canadian) within the next decade. And while the Canadian market is not the only option available to Americans willing to risk overseas marijuana investments, it has received more U.S. investments than any of the European markets.

“We really like the Canada model, which is really unlike any other in the world,” said Christian Groh of Privateer Holdings, a Seattle private equity firm and one of the region’s largest players in medical marijuana. “What we’re doing here does not violate local, state, and federal law (in Canada).”

Another American investor who owns stock in the Canadian market, who chose to speak with Reuters anonymously, said, “There are so many companies investing in the Canadian side, and this (money-laundering risk) is just not something that is coming up as an issue. You can invest in pharmaceutical companies (whose drugs are not approved) in the United States. This is just another medicine.”

Sources:

http://www.reuters.com/article/2014/10/10/us-canada-marijuana-investors-idUSKCN0HZ0ZY20141010

Photo Credit: Ken Teegardin

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