Marijuana Laws Create New Business Opportunities, Risks

Marijuana Laws Create New Business Opportunities, Risks

 Lots of business startups are now emerging to capitalize on the new laws being passed by states to legalize marijuana for recreational use. One investment firm estimates that sales of cannabis will reach $75 billion by 2030, so plenty of creative business ideas are blooming fast. But while this growing market is spawning a new line of money-making ideas and investments, marijuana businesses are already facing some unique challenges.

The opportunities in the cannabis industry span the range from growing to retail, and from production to analytics. Cannabis farmers have been growing legally indoors and outdoors for the medical marijuana market for a few years now, and the demand is expanding to serve recreational customers. A revival of interest in hemp as an industrial material has also spurred more development in the crop. To help growers meet new regulatory demands, a company is using QR codes to help growers track their high-value product. 

More and more dispensaries are opening up in states where marijuana is legal. Customers in California, for example, need only be 21 years of age or older and carry a valid, government-issued ID. Dispensaries sell smokable marijuana in bud form, oils for topical application or consumption, as well as edibles like marijuana-infused cookies and gummy bears.

Dispensaries also sell smoking accessories like pipes, and new businesses producing these products are popping up. One company utilizes 3-D printing techniques to make water pipes with custom artwork.

Most of the troubles these new businesses face arise from the fact that the federal government classifies cannabis as a schedule I substance, meaning that it remains completely illegal at the federal level to grow, possess or sell it in any amount. Every marijuana business is under constant threat of federal raids, and interstate commerce is complicated or downright illegal.

Most insurance companies won’t carry businesses in the marijuana industry, which makes fires particularly devastating. Theft is also a problem, due to the high value of the commodity, but insurance is hard to acquire to protect investments. Finally, liability insurance would help defend against liability risks in this market that can’t sell to minors, but most sellers must take on this risk themselves.

Also because of the schedule 1 status of marijuana at the federal level, banks won’t give out loans for new businesses. That makes it hard, if not impossible, for companies to acquire enough startup capital, or for farmers to fund their operations. New banking solutions are in the works to satisfy this need, however, and some startups are turning to private banking.

Water rights and quality for growers are somewhat of a roadblock, given that the federal government manages much of this through the USDA.

Lucrative opportunities abound in the marijuana industry for creative entrepreneurs with some tolerance for risk, but so do the challenges. One bright spot on the horizon is that the federal government is considering legislation to deschedule marijuana. If that happens, expect this industry to really take off.