Despite Wall Street’s interest in L.A.’s soon-to-be-booming recreational marijuana market, investors remain wary of weed’s future as Donald Trump prepares to enter the White House in January.

Some companies, such as Seventh Point LLC, already have invested millions in the recreational pot sector in the six weeks since California voters passed Proposition 64, which legalizes recreational weed. But other companies are taking a more cautious approach.

Earlier this month, Innovative Industrial Properties Inc., a newly formed California business with plans to purchase medical marijuana cultivation facilities, made its debut on the New York Stock Exchange. It was a risky move for the NYSE, which became the first major exchange to list a cannabis-related business.

“We are very excited to be part of the NYSE,” says Paul Smithers, CEO, IIPI's president and director. “It was a long process, but the more we got into it, the people at the exchange understood we are a real estate company, not a cannabis company.”

This distinction is crucial to IIPI’s debut on the NYSE. Most pot companies trade over-the-counter (OTC) on decentralized markets that have no physical locations and instead allow participants to trade using phones, email and other proprietary electronic trading systems. Unlike the NYSE and Nasdaq, OTC markets function with an outsider mentality — no one raises a fuss about what products or companies are being traded as long as the proper paperwork is filled out. The two larger exchanges, on the other hand, typically take fewer risks and are much more inclined to follow the federal government’s lead when it comes to tackling, or avoiding, a legally ambiguous product such as cannabis.

“Everyone from Warren Buffett to Snoop Dogg to Peter Thiel is in the [cannabis] game,” says Harris Shapiro, a stock analyst and founder of The Focused Stock Trader and its sister publication, Cannabis Stock Picks.

The secrecy and hesitancy shrouding cannabis has kept these big names on the sidelines for now. There is a sense that everyone, from Fortune 500 companies to private investors, is waiting to see if Congress will approve Alabama Sen. Jeff Sessions, Trump's pick for attorney general. If he is sworn in, the conservative lawmaker could easily revoke the Cole Memorandum, which allows states to determine their own marijuana laws.

As the NYSE weighed whether to accept IIPI into the exchange, Nasdaq rejected a different cannabis-related venture. MassRoots, a Denver-based social media app for pot users, was deemed too risky.

“They were a little uncomfortable with that risk factor,” says Issac Dietrich, CEO of MassRoots. “They spent six weeks reviewing the application and then told us they were not willing to move forward. They didn't want to be a trailblazer.”

For IIPI, gaining entry into the NYSE was no simple feat. Its success is due, in no small part, to the inclusion of Alan Gold, former president of several profitable ventures, including BioMed Realty Trust Inc., which specialized in acquiring, leasing, developing and managing laboratory and office space for the life science industry; and Alexandria Real Estate Equities Inc., a publicly traded, urban office real estate investment trust. This previous relationship with the NYSE helped prove IIPI’s solvency and ease anxious minds, Smithers says.

“[Gold] enjoyed great success on the NYSE, and that was a key factor in the NYSE looking at us,” Smithers says.

But more than that, IIPI distinguished itself as a real estate company, not a cannabis company, with a team whose collective portfolio spoke of leadership, profits and accountability.

“We saw that the real estate for this industry was highly fragmented and inefficient. This presented a tremendous opportunity for us to enter into it and be a key provider of capital to the operators in this industry,” Smithers says.

Most cannabis companies attempting to trade publicly don’t have a proven track record of success, which stymies any potential institutionalization because traditional exchanges like the NYSE and Nasdaq want to see expert management and high profit margins. Without a robust portfolio, the risk is too high. So as long as marijuana remains illegal on the federal level, cannabis companies cannot come out of the proverbial closet and trade publicly. Even high-level investors seeking to enter the cannabis market will remain sidelined until the industry is legitimized.

“They’re going to make sure the company has all the business systems in place,” says Frank Lane, president of Cannabis FN, a financial network serving the recreational and medical marijuana business communities.

“Before, when someone invested in a grow, there was no due diligence. It was more like, ‘Here’s $50,000. I think you can make some money growing marijuana,'” Lake says. “Now, they need to have banking and seed-to-sale tracking.”

To get around some of these restrictions, Shapiro says, Wall Street investors are starting to work closely with their lobbyists in Washington D.C. The idea is to apply enough financial pressure that even conservative lawmakers, like Sessions, begin to ease up on their anti-pot stances and view marijuana from a profit and job perspective.

“Banks are pouring tens of millions into Washington,” Shapiro says. “Congressmen are businessmen, and they will want to get that tax money.”

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