Colorado may give out-of-state investors access to cannabis market

A group of state legislators in Colorado want to open up the cannabis industry to investors from outside the state and even outside the US with the introduction of a new bill that will remove investment barriers.

With new states adding themselves to the list of those legalising cannabis for medical or recreational use each year, investing in the industry has become a realistic and potentially very lucrative option to individuals, fund managers and companies. Rep. Dan Pabon now hopes to maintain Colorado’s reputation as the largest cannabis market in the US with the HB 1011 bill, which will remove the obstacles preventing the operation of publicly traded cannabis firms within the state. Pabon explained why this was important in light of California’s recent legalisation decision: “With the advent of California and Oregon and other states coming online, there’s much more competition for capital investment and financial resources. … We didn’t want Colorado to be left behind in any way.”

Kristi Kelly, the executive director of the Marijuana Industry Group, said that the removal of the barriers to out-of-state investment will help Colorado operate on a level playing field with other states. In California alone, the cannabis industry is worth a staggering US$3.7bn a year, so investment is likely to come in thick and fast if the bill is passed. She added: “It’s crucial to open up this option to businesses of all sizes, with the appropriate guardrails to maintain the integrity of our regulated businesses. New access to capital benefits small and large businesses alike. Colorado is the only place where this prohibition exists.”

Other industry insiders were unsure of their reaction to the bill but were hopeful that allowing larger corporations and deep pocketed investors from elsewhere in the US and further afield to invest in the state would improve the quality of the product available to users, while also potentially reducing the price. As a result of this, consumers are likely to welcome the news of the bill.

The bill does include some limitations to protect the industry including extra background checks required for investors who hold stocks worth more than 5 per cent of a company that produces cannabis. This would come at an extra cost to the Marijuana Enforcement Division.

Fundamentally, the bill would allow publicly traded companies to hold licenses to produce and sell marijuana and some smaller producers and dispensaries are concerned that this could give a green light to a corporate takeover of the industry. Whatever the outcome, there is little doubt that there is money to be made by those investing in this burgeoning industry, with attitudes to recreational cannabis use rapidly changing throughout the US.

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