U.S. Cannabis Businesses Look Northward as Canada Opens a Vast Legal Marijuana Market

American cannabis entrepreneurs are looking to buy, or be bought by, Canadian companies.
U.S. Cannabis Businesses Look Northward as Canada Opens a Vast Legal Marijuana Market
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Canada and the United Statesshare more than 5,500 miles of border, but they are worlds apart when it comes to marijuana law. Canada is making marijuana legal nationwide on Oct. 1. The U.S. still lists cannabis as a Schedule I illegal drug.

That situation has led to U.S. businesses making a move into the Canadian market in any way they can. “It is like the Wild West was in the early gold rush," an attorney in Ottawa told CBC.

Related: Yet Another Study Finds Marijuana Reduces Opioid Use

A Strange Situation

Entrepreneurs in both Canada and the U.S. are looking for ways to tap into the growing cannabis market, but Canadians clearly have the advantage currently. On Oct. 17, the country will begin nationwide legal sales of  marijuana. Canadian companies have gone public and are set to tap into a $23 billion business opportunity.

They are moving south, as well. Canadian cannabis company Cronos recently listed on the NASDAQ stock exchange in the U.S.

However, while Canadian marijuana companies can list on the U.S. stock exchange, American companies can’t because cannabis remains illegal at the federal level. Companies in the U.S. facing this strange situation are moving into the Canadian market by merging with Canadian companies.

For example, Los Angeles-based MedMen recently did a reverse takeover of the publicly traded Canadian cannabis company Ladera Ventures Corp. It’s a fast-track way to become a publicly traded company.

Related: Cannabis Legalization Isn't a Sure Thing and the Industry Can't Afford to Stop Fighting

Ongoing Concerns

Despite the ability of U.S. companies to buy their way into the Canadian market or for individual investors to put cash into Canadian companies, concerns remain.

For example, speaking with Marijuana Business Daily, Derek Peterson, CEO of California-based TerraTech, said he has concerns that Canada is getting a head start on the cannabis business over the U.S. He said that means he is either building a company in anticipation that the U.S. government will change its policy on marijuana or he is positioning his firm “to be the most attractive takeout target it can be as (Canadian) companies look to the U.S. to deploy capital.”

These concerns were echoed by Jeanne Sullivan, a partner in the cannabis-focused ArcView Investment Group. The national legalization of marijuana in Canada “makes the U.S. laggards in the cannabis sector compared to Canada,” she said.

Legal issues have also arisen. According to the Vancouver Star, some Canadian cannabis executives have been hit at the U.S. border with lifetime bans keeping them out of the country because they work with marijuana.

They are designated as “inadmissible” because the U.S. government deems them to be making a profit out of the drug trade.

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