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A new frontier for Silicon Valley: The marijuana trade

Daily Ticker

It looks almost like a marriage made in heaven: Liberal entrepreneurs in Silicon Valley are starting companies that can profit from the growing marijuana trade.

"The entire tech-industrial complex is getting in on the action: investors, entrepreneurs, biotechnologists, scientists" and more, writes Mat Honan, senior writer at WIRED, in his latest story "High Tech: How Silicon Valley entrepreneurs are rushing to cash in on cannabis."

Related: Grover Norquist wants "tax equality" for marijuana industry

These entrepreneurs include manufacturers of vaporizers such as Firefly and UpToke, which allow pot smokers to inhale vapor instead of smoke; software makers including MJ Freeway and Agrisoft, which track pot sales and inventory; and the Stanley Brothers  Jared, Jesse, Joel, Jon, Jordan, and Josh  who operate medical marijuana dispensaries in Colorado in addition to a nonprofit that produces a strain of medical marijuana.

Named for a young epileptic patient, the Stanley Brothers’ Charlotte's Web marijuana strain “was a revelation," writes Honan. "After Charlotte began taking an extract form the brothers' strain in 2012, her seizures dropped from 3,000 a week to three or four a month." Today around 200 pediatric patients and 100 adults take Charlotte’s Web.

Related: Pot Pushback Goes Up in Smoke: $20 Billion Economy Awaits Marijuana Legalization

No one knows how much money these businesses make or how big the market will grow  "we're talking about a black market in most of the country," says Honan  but he tells The Daily Ticker in the video above that some of the investors he's talked to anticipate making "hundreds of millions of dollars."

So far only two states  Colorado and Washington  have legalized marijuana for recreational and medical use, and another 18 plus the District of Columbia allow it for medical use only. But the federal government hasn't legalized the drug for either purpose, so growers and other businesses tied to the trade have serious difficulties using banking services.

Related: Marijuana will be the single best investment idea of the next decade: Todd Harrison

The Treasury Department and Justice Department have issued guidance indicating they won't pursue banks operating in states where marijuana has been legalized. Big banks including J.P. Morgan (JPM) and Bank of America (BAC) continue to avoid these customers.

Honan says there's been talk about pot businesses using bitcoin and other virtual currencies in their banking relations but so far there haven't been any "large-scale solutions" to this problem.

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