Ways to Invest in Cannabis: Flower vs. Ancillary

Posted by Margolin & Lawrence on October 1, 2019



With waves of new research and a consistent emergence of individual testimonies it’s easy to see the impact of cannabis on society and how its influence will only continue to increase. Another obvious point is the money behind the cannabis industry. Individuals involved in finance and investments are either already checking for ways to participate in the glorious emergence of cannabis or have squinting eyes looking in cannabis’ direction because they see dollar signs.

However, federal legalization although inevitably coming is still on the horizon and no accurate timeline of when legalization will formally occur exists. Que the reasoning for hesitation. Government agencies and employers can still make it hard for cannabis participants and users to operate seamlessly as any involvement can lead to severance between clients and companies, denials for future loans or bank services or a complete bar to employment.

But the excitement and opportunity remains and although direct investment and involvement with the flower itself is a prospective opportunity, because cannabis is a business similar to any other industry, flower-less ways to invest exists.

We previously covered guidelines prospective investors and company owners should consider when starting or investing in a business. Find the full blog post, here.

“We understand how important it is for new businesses to raise capital to continue to grow their business. Given that cannabis is still illegal under federal law, entrepreneurs looking to raise capital for their cannabis business need to seek private investment capital. In order to do so, there are a series of important documents private investors want to examine before they decide to invest in your cannabis business.”


Flower Focused Companies

The most obvious way to invest is to either become part owner of a new or existing business or to invest as a financial interest holder and not be an officer in the company. Current categories of cannabis licenses available are below and represent the kind of cannabis business that deal directly with flower and flower extract that can be invested in.


  1. Delivery
  2. Dispensary
  3. Cultivator
  4. Manufacturer
  5. Distributor


The guidelines for Financial Interest Holders still require disclosure of investor information. So if you’re looking for a discreet way to invest, investing directly into one of these types of businesses, new or existing, may not be the way to go.

Investors can also look into the medicinal side of Cannabis and CBD. While recreational is currently all the rage, medicinal companies provide a less vulnerable approach to investing.

For example, GW Pharmaceuticals (GWPH) a company traded on both U.S and Canadian Stock exchanges, have a CBD-based epilepsy drug Epidiolex that was recently approved by the U.S. Food & Drug Administration (FDA). https://www.thestreet.com/investing/stocks/how-to-invest-in-marijuana-stocks-14580218

Another route investors are trying are Blind Trusts. Taking direction from federal officials such as senators, investors can assign their investment accounts into a blind trusts and appoint a trustee who manages and makes all decisions providing no information to the trustor. The thing is, a trustor cannot be aware of the investments being made or provide any input in how the accounts should be managed. The trustor is also not allowed to know what companies or entities their money is being invested in. Once a blind trust is established, a trustor does not need to disclose these investments on any filings and any cannabis involved ventures can remain undisclosed.


Non-Flower Cannabis Businesses

Other types of businesses in cannabis are ones that don’t deal directly with the flower but provide services and systems to companies who do. These companies are predominantly business to business oriented and some are traded on the public stock exchange.

Considering the many aspects involved in cannabis, there are a number of areas in which third parties provide services to cannabis oriented businesses.

For example, Kush Co is currently on the New York Stock Exchange and while it has no direct involvement with flower it manufactures supplies and containers for flowers, vape pens, extract and etc. Other examples include General Hydroponics and Sunlight Supply which provide supplies for cannabis growing.

One of our clients, Greencoast hydroponics is not your average grow store and also an ancillary option for investors. According to their website, they “are an expert grow store, a professional grow store and we play on a different field – we are an absolutely unique resource to this industry.”

Companies like these that are involved in cannabis’s billion dollar industry still reap the benefits while lowering the risk for complications connected with federal illegality. This is a highlight for venture capitalist looking for an open door into cannabis investing.


Overall, the industry provides a number of avenues in which an investor can become involved, both directly and indirectly. And as the industry continues to grow, standards and regulations are certain to change. It remains however to get involved sooner rather than later because the cost to become involved will undoubtedly rise as the industry continues on its current growth path.



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Cannabis, Cannabis Business, Los Angeles Cannabis Regulations, Los Angeles Cannabis Law, Canadian Cannabis Stocks, Investing in Cannabis, Cannabis Investors, Cannabis Investment, cannabis stocks, investments, investing, weed business


This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.