Marijuana Legalization Benefits Now Include Profit Potential For Wall Street Investors: Report

  on November 17 2012 3:52 PM
Medical marijuana
A new study suggests that daily medical marijuana use may be an effective cure for Crohn's disease. Reuters

Relieving pain, slowing the onset of Alzheimer’s disease, and fighting depression are some of the benefits  marijuana can offer patients, some studies claim. Now, a group of pot activists is envisioning a new benefit: legal profits.

The Election Day proposition that legalized small amounts of marijuana for personal use in Colorado and Washington. The states will also provide data on how much money the marijuana trade makes, a number that’s been hard to determine due to drug laws that ban the possession and sale of marijuana.

In 2010, CNBC reported that the marijuana business in America grossed about $40 billion annually. Legalization, the report said, could expand that business into a $100 billion industry, with some economists predicting higher numbers, depending on how governments levy taxes on the sale and distribution of plant.

That estimate is bolstered by a CBS News study from this year that found that marijuana use had increased 80 percent in the years between 2008 and 2012, statistics that weren’t available to CNBC researchers in 2010.

Pot advocates are hoping for a domino effect of sorts now that Washington and Colorado voters have approved ridding their states of criminal laws. Public opinion seems to be swaying in California after legalization was denied in 2010, with the San Francisco Chronicle advocating a change.

“Though it may seem the dust has barely settled from California's failed effort in 2010 to legalize marijuana under Proposition 19, the winds of change may be blowing here again, this time from the north,” wrote editorialist John McKay, a former U.S. attorney in Seattle.

“Washington state voters, along with those in Colorado, have voted to legalize marijuana for adult use and to regulate within state borders production, transportation and sales. We plan to capture much-needed revenue while moving from a law enforcement model to a public health approach, emphasizing treatment and education over handcuffs and jail.”

Wall Street would agree. After a positive review of Medbox, a company that sells dispensing machines to legal marijuana outlets, Market Watch reported that the company's share price jumped from $4 to $250, a 3,000 percent increase.

Shares were back down to $100 shortly thereafter, but it's clear that investors see serious potential in a company that’s been compared to a Redbox for cannabis. Medbox is even seen as a company poised to take off in drug stores and pharmacies.

“We believe an appropriate trading range is between $5 and $10 but, alas, the market will do what it will do,” said Medbox founder Vincent Mehdizadeh. “We couldn’t really understand why that was happening other than that there was a high demand for stock with limited supply.”

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