How to Make a Mint From the Marijuana Biz

Marijuana's changing legal status—with Colorado and Washington backing full legalization last week, and Massachusetts becoming the latest of 18 states (plus Washington DC) to allow medical pot—could make it the new boom market for investors to cash in on. The medical marijuana industry is already worth $1.7 billion as of 2011, and Colorado sales topped $180 million in 2010—well before full, state-level legalization. “Call it the ‘green rush,’” says Derek Peterson, CEO of GrowOp Technology, an online hydroponics retailer. “The industry is expanding, and there are all kinds of investment opportunities.” Hydroponics is just one of the ways for investors to get in on the action without actually growing or selling drugs: for example, Medbox, an OTC stock with a $45 million market cap, sells its patented dispensing machines to licensed MMJ dispensaries, which could also theoretically be used in standard drugstores. Of course, federal law still outlaws marijuana across the US. Uncertainty over the government's next moves means investors in this realm do face substantial risks. And the same is true for banks that receive requests to handle marijuana-generated profits, and could be breaking the law if they do so without telling the government. "My opinion would be, if you want to open the account, go ahead," says Richard A. Small, a former Federal Reserve deputy associate director who now handles anti-money laundering compliance at American Express Co. "But every time you take in money, you file a suspicious-activity report, because you do have a violation of the law."