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Last month the Liberal Party won the Canadian federal election running on the idea of marijuana legalization. Not surprisingly, this has caused an increased interest in investing in Canada’s marijuana industry. From CTV News:

Experts say American institutional investors looking for cannabis plays are heading north, where medical access to the drug is legal countrywide, to avoid running afoul of U.S. federal laws or sinking their money into companies that could be shut down by U.S. federal authorities.

“That’s a theme we’ve been seeing for a long time — foreign investors investing in Canadian companies, to the point that most of the capital raised now for Canadian companies comes from overseas,” says Khurram Malik, a Jacob Securities analyst who tracks the medical cannabis space.

What this means is that the fledgling American marijuana industry risks falling behind. Once Canada fully legalizes marijuana, the industry there will have predictability, full legal protection, proper access to banking, and more control of their intellectual property. All of these things are currently lacking in Colorado, Washington, Alaska and Oregon since under U.S. federal law marijuana is still a Schedule I substance.

As the first big western country to potentially legalize marijuana, Canada would position itself to become the world leader in marijuana investment, production, development and innovation. This would leave American-based marijuana companies at a real disadvantage on the international stage when the United States finally legalizes marijuana later.

The question is not if Americans will buy legal marijuana, but from where

We know that in the future millions of Americans will be legally consuming cannabis because with an ever growing of number of regular Americans and prominent politicians coming out in support of ending federal marijuana prohibition, change is inevitable. The only question is will Washington move reasonably quickly to give domestic companies the best possible opportunity for growth, or will they drag their feet and risk having much of the money that Americans eventually will spend on legal marijuana go to foreign companies.

This wouldn’t be the first time that bad federal policy held back a domestic industry. Despite having some of the best natural wine growing regions, the American wine industry was crippled by alcohol prohibition. It took the American wine industry several decades to regain its proper place in the international market.

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