NEW YORK (MainStreet) - As more established investors flock to the cannabis vertical including Peter Thiel of Paypal fame, the conversation about investing in cannabis is slowly shifting, but larger investors still remain wary of the vertical - and for several reasons.
There are still huge and looming legal liabilities for investors that begin with braving the drastically shifting regulatory intrastate mandate and the federal law. The recent grand jury and SEC subpoenas of Medbox (MDBX) late last year also undermine the depth of accountability now being required and not always present at newly public cannabis companies that must also be corrected and assuaged before larger institutional investors will brave the market.
But a new question has now entered the conversation as marijuana becomes more broadly legal. Is it morally legit to invest in the industry?
There are two ways investors seem to be approaching the issue. The first is to look at the cannabis business as akin to a "sin" industry, like tobacco or alcohol. From the other perspective, however, the industry offers broad opportunities to shape an ethical debate and the agriculture industry of the future.
Michael Swartz, an analyst with Viridian Capital and Research who covers the industry, says that while it can be difficult to know how to distinguish between investments on this level, it is not impossible.
"In states with legal recreational and medical markets, such as Washington and Colorado, there are separate licenses required to operate for medical or recreational purposes," he said. "This dual licensing system has made it easy to distinguish between a 'sin' investment and 'non-sin' investment. Other industry sectors such as consulting, software or security, will not have such a fine line. Companies in these sectors have the tendency not to limit themselves to operating for strictly medical or strictly recreational purposes, since they have the ability to service both recreational and medical markets."