Those investors who looked north of the border to invest in mail order marijuana may have thought federal officials wouldn’t be interested in them. They thought wrong. Since marijuana is still illegal under the Controlled Substances Act, American investors are barred from investing in such companies abroad.
This isn’t the only place the feds are tracking investments. In states where it is now legal, you can bet the Drug Enforcement Administration (DEA) is watching closely the money flowing in, and who from. Reuters recently asked DEA spokesman Rusty Payne about this. He said they are “most interested in those types of activities.” After the news agency ran their report, Canadian medical marijuana stocks fell but regained some lost territory shortly after.
According to Reuters, “OrganiGram Holdings Inc. dropped 6.9 percent in early trading, Bedrocan Cannabis Corp. fell 4.2 percent and Tweed Marijuana Inc. declined 2.8 percent.” In Canada last year, the cannabis laws were overhauled, allowing anyone with a doctor’s prescription to buy marijuana legally. This change has ramped up investor interest, and the feds have begun to notice. What’ll they’ll do about it is anyone’s guess. They have only been observing, thus far.
The Canadian marijuana market is already worth C$1.3 billion and is expected to grow to four times that amount in the next ten years. Marijuana is also legal in several European markets. But Canada has been the most attractive place for U.S. investors to put their money. Co-founder of the private equity firm Privateer Holdings, Christian Groh said, “We really like the Canada model, which is really unlike any other in the world.” He added, “What we’re doing here does not violate local, state, and federal law (in Canada).”
Seattle-based Privateer opened a Canadian subsidiary in order to establish a presence in the market. But there are other investors who forwent the middle man. The trouble is U.S. investors that buy shares in these Canadian firms are technically violating money laundering and drug trafficking laws, according to risk specialist Timothy White. White works for Banker’s Toolbox, a firm that helps banks find and report money laundering.