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U.S Cannabis Companies Trade In Canada Because They Are Banned On Wall Street

By Roger Malespin (photo/istock/AndreyKrav )

U.S. cannabis companies are heading north in droves due to marijuana being a schedule 1 drugs at the federal level. This week, Medmen, one of the most prominent and successful cannabis companies in the US, started trading on the Canadian Securities Exchange (CSE) because they and other cannabis companies cannot legally trade on the TSX, Nasdaq and NYSE.  Medical marijuana is legal at the federal level in Canada , and the country is in the process of legalizing recreational marijuana as well. 

When asked about the future of public cannabis companies trading in US exchanges, MedMen CEO Adam Bierman said "There are no straight roads and there are no clear paths." 

The CSE is jokingly referred to as the "cannabis stock exchange" because 76 of its 379 companies are in cannabis. "Yes, yes, we've heard that one," Richard Carleton, CEO of the CSE, said of the nickname. He said he lists companies "operating within the boundaries of what is a tightly regulated state framework."

Many financial analysts have said that it is in the interest of the U.S. to resolve this matter soon or risk losing out on untold billions that would without a doubt go to Canada because of their clearly defined laws. 

It should be noted that Canadian companies can trade on American exchanges so long as those companies are not breaking any federal rules, namely, having their farms or grow houses in Canada and not the U.S. As long as a company does not cultivate cannabis on American soil, they can likely trade on any exchange here. One such company is Canopy Growth (CGC), a Canadian company on the NYSE as of May 24th.
"You can list here [in the US] if you're not breaking any of the rules in any of the jurisdictions that you operate, and I don't break any rules because I don't operate in any jurisdictions where it's federally illegal, which unfortunately includes the US," said Bruce Linton, CEO of Canopy, which is traded on the Toronto Stock Exchange under the ticker WEED.
The burgeoning cannabis industry is a major reason for rise of exchanges like the CSE. According to Jason Zandberg, an analyst who covers Cronos for PI Financial, "Exchanges like the CSE are becoming relevant in North America whereas three or four years ago the CSE wasn't even relevant in Canada," he said. "We have seen many businesses that have embraced the cannabis sector and have surpassed their competitors that have not."

Clearly, this is another in a long list of reasons why the federal government needs to reschedule or outright remove cannabis from the schedule drug list. Medmen is already projected to be the biggest US-based cannabis company on the CSE and one of the top ten cannabis companies in Canada, with a pre-money value of $1.65 billion. 

The majority of the cannabis unicorns, those companies with $1+ billion market capitalizations, are licensed producers of medical cannabis in Canada. If history has taught us anything, there’s nothing like losing money to get the super rich into motion, and hopefully U.S companies and investors will soon have the same freedom as our neighbors to the north sooner than later.