ECONOMIC AND INVESTMENT RISKS OF INVESTING IN CANNABIS AND CANNABIS-RELATED INDUSTRIES
As with any investment, investments in cannabis or cannabis-related industries carry risks that an investor must be made aware of before they choose to invest their money. These risks include, but are not limited to, loss of principal, low or no returns, long time horizons, the inability to take back your principal, the lack of a liquid market for your investment, regulatory and legal risks, market risks, and general suitability issues relating to the viability of a particular issuer. In addition to these general risks, an investment in the cannabis industry also has industry-specific risks that you need to be aware of before you invest. Among others, such risks include:
- Cannabis remains illegal under Federal law and is classified as a Schedule 1 Drug per the Controlled Substances Act (CSA) as determined by the U.S. Drug Enforcement Agency (DEA). Timing as to the modification of this classification is uncertain and there is no guarantee that Cannabis will become federally legal.
- Illicit cannabis sales may continue to disrupt state regulated markets.
- Because Cannabis remains federally illegal, some businesses may experience difficulty in establishing and maintaining a bank account and thus there is a heightened level of operational risk as these entitities operate mostly in cash.
Investments in private placements involve a high degree of risk and may result in a partial or total loss of your investment. Private placements are generally illiquid investments. Investors should consult with their investment, legal, and tax advisors regarding any private placement investment.