Can You Legally Invest In Marijuana, Hemp, Cannabis and CBD Stocks?

“Men in Green” Photo Of Me In My Lawyer Costume Surrounded By Legal Cannabis in California

Everybody wanted to get in on tech stocks in the 90’s. Real Estate was the only place to invest in the early 2000’s. And now, the highest (pun intended) flying stocks seem to be those related to cannabis and hemp. With a majority of U.S. states and all of Canada legalizing some form of marijuana, and with the federal legalization of hemp, it seems that everywhere I turn I see a CBD business, a cannabis dispensary, and someone touting “the next big thing” in a cannabis stock.

But marijuana remains illegal in the U.S. at the federal level. Most banks still refuse to get involved with marijuana businesses even in states where it is legal because of the federal prohibition. So, of course, people want to know: Can I invest in a cannabis business, even though it is illegal to grow, sell and possess marijuana at the federal level and most banks won’t work with these companies?

Luckily, I’m a lawyer. So I can give you a lawyer answer.

It depends. (Generally, I get paid several hundred dollars an hour for my time to say such vague things. You’re welcome for the freebie.)

There is a uncertainty about the legality of investing in a U.S. based marijuana-related company. Ask 10 lawyers the following question, and you will get 10 different explanations (and a huge legal bill): How can it be legal to buy stock, and therefore become an owner of the company, if the company is possibly violating federal law buy growing and selling marijuana?

The reality is that an argument could be made you are committing a federal crime if you buy stock in a U.S. marijuana company that is fully licensed and operating within state law in a state where marijuana is legal. That company is possibly still violating federal law, even if what they are doing in their state is legal. And if you buy stock, you own part of that company. Hence, you are “doing something illegal.” Or, so the argument goes.

The good news is, as of the date this article is being written there have been no reported instances since the recent legalization movement of federal law enforcement authorities bringing criminal charges against investors of a marijuana-related company in a state where they operate legally. In that same time period, there are no reported instances of the federal government charging anyone related to such a company with a crime, not just investors.

This appears to be an instance where authorities could charge someone with a crime, but chances are they won’t. It’s kind of like a policeman clocking you driving 5 MPH over the speed limit. You broke the law, you could get a ticket, but chances are you won’t. On the other hand, if law enforcement did decide to prosecute owners of marijuana companies, the penalty would probably be quite a bit stiffer than few points on your driver’s license.

There are many reasons why it appears that buying stock in a marijuana-related business is not going to land you in jail. I’ll go through some of them below. But, before you invest in any cannabis stock, you should talk to your own lawyer and investment advisor and determine if there are any legal issues that apply to you. There are risks, and you should only invest with your eyes wide open understanding the risk as it applies to you. Don’t consider this article to be legal advice, because it’s not. It’s meant to be an educational, but entertaining, discussion of some of the intricacies of U.S. law in case you’re caught up on all the cats doing silly things in your Facebook feed for a few moments.

Marijuana is A Growth Industry And Nobody Wants to Kill Jobs or Spook the Economy

Legal marijuana is one of the fastest growing industries in the United States. A recent study noted that the total cannabis marketplace in the United States, which was $6.6 billion in 2016, is projected to grow to $24.1 billion by 2025 and that the cannabis industry will account for 250,000 jobs by 2020. One analyst has opined that California alone could account for $25 billion of a projected $50 billion nationwide market by 2026.

In other words, it is already big business. And, it’s getting bigger.

If the federal government wanted to start arresting people for investing in marijuana stocks, they would probably start first by arresting people working at marijuana farms, dispensaries, and even that hippie on the corner of Church and State (an actual intersection in New Hampshire — look it up) vaping his Zombie Killer OG/Girl Scout Cookies blend. (Vaping! Gasp!)

Events like that would send the cannabis industry scrambling. And it would scramble straight up to Canada, where this is all legal. Politicians and law enforcement would be waving goodbye to not only billions of dollars of economic value and growth and hundreds of thousands of jobs, but also to the hundreds of millions of dollars in state and federal tax revenue that the industry generates.

Something tells me that is not going to happen, but you never know. Stranger things have happened. Like pot suddenly becoming legal and mainstream in most of the country, for example.

Federal Agencies Don’t Want To Step On States’ Toes

This is a big one. Our founding fathers were smart enough to recognize that individual states have certain rights to do things that make sense for their citizens, even if those things may not make sense for residents of other states. Those rights remain with the states, and the federal government should stay out of it, according to some very smart people who wrote the constitution nearly 250 years ago.

Of course, it’s not that simple. Federal and state laws don’t always fit together perfectly. Marijuana is illegal everywhere in the U.S. according to federal law, and “everywhere” includes those states where it is perfectly legal within the boundaries of that state. That, my friends, is what we call a legal problem. If the federal government suddenly started enforcing these laws against marijuana investors, we’d have thousands of lawyers getting paid a ton of money to fight it all out while jobs, taxes, revenues and the whole weed enchilada went scrambling to The Great White North.

As a practical matter, in order to bring that fight, the federal government would have to decide that the potential of billions in federal tax revenue over the next decade just isn’t worth it before attempting to take on 30+ state governments, hundreds of thousands of people who are gainfully employed in those states in the cannabis industry, and popular opinion where more than 90% of Americans now favor the use of medical marijuana.

I just don’t see that happening. Then again, I didn’t see a reality TV star becoming president either.

But Everybody’s Doing It!

There are more than 200 publicly traded marijuana-related stocks. Is the federal government going to arrest all of those investors trading in these securities? Will the feds shut down Merrill Lynch and Goldman Sachs and TD Ameritrade and every other stock brokerage in the world for selling something “illegal?” Will the federal government shut down Google for feeding me this ad — clearly aiding and abetting in “illegal drug trafficking” across state lines?

Want to watch the American economy collapse? Start arresting people for investing their money in American businesses or in the stock market. In the immortal words of the great legal scholar Ricky Bobby in Talladega Nights, “That ain’t gonna happen.”

How Do Hemp and CBD Play Into This?

Hemp and marijuana are from the same family of flowering plants (Cannabaceae) and they look nearly the same. See that picture of me dressed in my lawyer costume at the top of this article? I’m surrounded by hemp — not marijuana. Hemp refers to varieties of cannabis that contain no more than 0.3 percent THC — the psychoactive compound in cannabis that gets people high. The varieties of cannabis that have more than 0.3 percent TCH get classified as marijuana. CBD can be derived from both hemp and marijuana, and it’s the same molecule regardless of which plant was the source.

So, is CBD legal? No and yes. In some instances, CBD can still be considered a Schedule 1 controlled substance. However, the DEA recently issued guidance clarifying that the because of 2018 legislation: “Accordingly, hemp, including hemp plants and cannabidiol (CBD) preparations at or below the 0.3 percent delta-9 THC threshold, is not a controlled substance, and a DEA registration is not required to grow or research it.” So basically, even though it’s the same molecule regardless of whether it’s derived from marijuana or hemp, CBD is only federally legal if it’s derived from hemp, but is still federally illegal if it’s derived from marijuana.

Now even I’m confused.

And, there are still unresolved questions at the federal level with the FDA about putting CBD into food and drinks. While the FDA states that it’s illegal to market CBD as a dietary supplement, it also states that the agency is continuing to evaluate the regulatory frameworks for products containing cannabis-derived compounds.

Hemp isn’t just about CBD. It is incredibly versatile and is used in more than 25,000 products including construction supplies, textiles, food and beverages, beauty products and automotive parts. Hemp growers can legally do many things that cannabis growers cannot — get crop insurance, sell and process across state lines, and obtain banking services, for example.

Despite significant public interest, there are still many unanswered questions about CBD products. While it appears safer to invest in a hemp or CBD-related company than a purely cannabis-related company, there are still legal issues to consider as it’s still a new industry with unsettled law.

Kendall’s Final Words

For the sake of argument, let’s say that you’re no longer scared to buy some shares in something that might get someone high. Want some thoughts on what to look for in cannabis-related stocks to invest in?

Hey, I’m a lawyer, not an investment advisor. With that in mind, here are a few thoughts to keep in mind if you do plan to invest in something cannabis related:

1. Do your homework. Research the company, don’t just see the word “marijuana” or those three magic letters “CBD” and plunk down your paycheck for a piece of equity. Look at what the company does, where it operates, what licensing it holds, its marketplace traction, its financial statements and who is on the management team. Look for companies who are working according to best practices and building on strong fundamentals, not just those with the flashiest marketing because the loudest is not always the strongest. Ask questions and do your due diligence.

2. Hemp vs. Marijuana. Hemp, for the most part, is legal everywhere in the United States. CBD that comes from the hemp plant is also legal. But any CBD derived from marijuana is still federally illegal so be sure you’re doing your due diligence on any CBD-related stock to ensure you’re buying from a reputable company.

3. Liquidity. While there are a lot of publicly-traded stocks that involve marijuana and hemp, most are traded over the counter, and not on major U.S. exchanges. For example, the New York Stock Exchange and NASDAQ, which tend to provide the most liquidity, will not list any U.S. company that “touches the plant” when it comes to marijuana stocks because of the federal illegality of marijuana. So this leaves investors who are looking to get a piece of the cannabis marketplace with the choice of investing mostly in OTC stocks (which inherently have less of a market), Canadian stocks which can trade on major exchanges (which is where most of the action is now because the Canadian companies don’t have U.S. grow or sale operations), or investing in a company through a private offering where there may be little to no liquidity.

4. Public Vs. Private. The stock markets and publicly traded stocks have traditionally been the place to increase the value of your overall investment portfolio, over time. But many argue that larger returns can come from investment into private companies at an early stage. Early stage investment in private companies is far riskier than investing in a public company on a stock exchange, but the long-term financial rewards of investing in private companies that do make it big can dwarf the returns of most investments in public companies. While the downsides are plentiful (you have no liquidity, you have to hold the stocks for a long time, and there are far more losers than winners), those that do win tend to create more wealth for the early investors.

For 80 years, only the rich and well-connected could invest in early-stage private companies. That all changed in 2015 with Regulation A — which allows private companies to sell stock to anyone and everyone after filing and being qualified by the SEC and with full disclosures similar to those of public companies. Those who are familiar with my writings and public speaking know I’m a huge fan of Regulation A. Why should only the wealthy have the chance to get in on the ground floor of startups and emerging companies before they go public or get acquired? The answer is, with Regulation A that all changed and now anybody, regardless of wealth or “who you know” can purchase Regulation A stock in a private company at the same early stage that used to be reserved only for a select few.

Some of you may have also read that I am in the process of attempting to have a client, Goldenseed, qualified by the SEC to sell Regulation A stock to anyone in the general public. Goldenseed “touches the plant” — they cultivate, process, distribute and sell both marijuana and hemp from their fully licensed farm and facilities in California. With more than 100,000 square feet of greenhouses to grow marijuana, an 80,000 square foot hemp processing facility and a large number of acres of hemp being grown, Goldenseed and its wholly-owned hemp subsidiary “touch” a lot of plants. If they are qualified by the SEC, Goldenseed may be the first private U.S. company that grows and sells marijuana and hemp to have its stock available to anyone in the general public, not just rich accredited investors. That’s exciting news. But, like all investments (and particularly those involving early stage companies and those in the cannabis industry), there is a great deal of risk and nobody should invest money in any company they cannot afford to lose, and even then, only after doing your due diligence and getting advice from your investment advisors and lawyers.


While my personal opinion is that you likely will not go to jail for investing in a marijuana or hemp related company, I don’t have a crystal ball and I can’t be sure. All investing is risky because you could lose money, but the risk of investing in something that is federally illegal has its own set of risks — many of which are discussed above.

Also, depending on your job (particularly federal government employees), there may be ramifications to investing in cannabis stocks. You also may have to be registered with various state agencies if you invest. There are many moving pieces, so make sure you get legal and investment advice for your individual situtaion.

The gamblers out there will tell you — High Risk = High Reward. That is sometimes true. But I’ve seen my share of those people go “all in” at a Vegas blackjack table and walk away with nothing, except for a “free” watered-down cocktail.


I don’t know how to say this any clearer, so I’ll type it in all caps as if I’m screaming: THIS ARTICLE IS NOT LEGAL OR INVESTMENT ADVICE. I’m not your lawyer and I’m not an investment advisor, so please don’t rely on anything I have written here as advice to you. Every legal and investment situation is unique, and you should only rely on your own lawyers and investment advisors to make legal or investment decisions. Don’t rely on me or this article. Yes, I know after seeing my “Men in Green” photo above, you wish your lawyer were more like me and would lighten up and not use so many big words, but hey, you need to take that up with them (preferably off the clock so you don’t get a legal bill in 6 minute increments).

Golden Seed, Inc. is “testing the waters” for a possible offering of securities under Regulation A of the JOBS Act. No money or other consideration is being solicited by the company at this time, and if sent in response, will not be accepted. No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date.

Your indication of interest involves no obligation or commitment of any kind. If an offering statement has been filed, you may obtain a copy of the most recent version of the Preliminary Offering Circular from Kendall Almerico at Kendall A. Almerico P.A., 1440 G Street NW, Washington DC 20005, or by e-mailing Or, you may obtain a copy of the Preliminary Offering Circular from the SEC’s website by clicking here.




Equity Crowdfunding Securities Attorney (and the least lawyer-like lawyer you will ever meet) ex-sports agent, humor book author and entrepreneur.

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Kendall Almerico

Kendall Almerico

Equity Crowdfunding Securities Attorney (and the least lawyer-like lawyer you will ever meet) ex-sports agent, humor book author and entrepreneur.

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