Can Growing Pot Make You Rich?

It makes sense that so many people want to jump up and see what they can grab. The legalization of marijuana felt so improbable in the first place that it makes other long-shot gambles sound possible. So many people have had near-religious conversion experiences when it comes to recognizing the medical value of cannabis: a drug they thought was merely used to get high, suddenly providing real therapeutic value. There's something inherently seductive about legal pot. But the reality is that it's hard to succeed in the Green Rush. One of the biggest issues is that it is very difficult to get good information about cannabis. We have no idea whether we are moving toward full federal legalization or a full federal crackdown. And beyond the unpredictability of the future, the drug's illegality has created a knowledge vacuum wherein rumors, theories and dubious analysis are treated as fact.

All this is further complicated by the simultaneous and overlapping existence of the black market, where commerce cannot be neatly measured and the financial incentive to stay underground is enormous. Even in states with extremely strict regulations around cannabis, federal illegality has forced the industry to operate largely outside of the banking system, which is insured and regulated by federal law. The web of cash transactions and private equity and LLCs that support the marijuana trade has intentionally made the entire business opaque. Without reliable information, it's rather difficult to make sound investments.

At this point, when people ask how they should invest in legal weed: profit off of other people’s belief that they can get rich off of legal weed. Meaning: the buzz around legalization is often more lucrative than legal pot itself. During the Gold Rush of 1849, panning for the precious metal was never quite as financially rewarding as the businesses that sold shovels and food and real estate to the hundreds of thousands of prospectors who arrived in California with dollar signs in their eyes.

Even if you are the well-informed, well-connected owner of a dispensary or cultivation center, pot businesses are not the guaranteed moneymakers you might assume. It's sometimes not even clear what exactly is legal and what isn't. Regulations are arduous, expensive, and in constant flux. Many of the rules a cannabis business needs to follow, such as the tracking programs meant to prevent trafficking, are so ineffective they end up just being colossal wastes of time and money.

Meanwhile, pot businesses often pay double the amount of taxes that normal businesses pay, because the conflict between state and federal law prevents cannabis businesses from taking the same deductions. And then whatever county or city you're operating in has likely added its own taxes, because local governments are also convinced that legal weed is going to make them rich.

So next time you assume that everyone involved with legal weed is making a killing, stop and do some due diligence. Until the feds make the whole thing legal, everything associated with pot is buyer beware.

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