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Here's how legal weed will play out in America

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Yahoo Finance’s Julie Hyman, Brian Sozzi, Myles Udland, and Andy Serwer discuss outlook for U.S. marijuana laws.

Video Transcript

JULIE HYMAN: [INAUDIBLE] reminded you, it is April 19, which means tomorrow is 4/20, dude. This is traditionally the day that marijuana activists mark as a day of activism. There's a lot less activism perhaps that is necessary now because weed has been legalized in a lot more places. Andy Serwer wrote about that in his weekend column. And our editor-in-chief is joining us now, Andy. So you wrote about not just the wave of legalization that we've seen, but all the different ways in the market now to play it.

ANDY SERWER: Yeah, that's right. And it's an interesting wild and woolly environment, of course, Julie. And weed stocks had their moment two years ago with Canopy, Tilray, and Aurora. We remember that. Then they crashed. They were wildly unprofitable-- still not profitable. They've come back a bit. And that's the Canadian LPs. They're called the Canadian licensed producers. That's one group of companies.

There's another group of companies called MSOs, which are Multistate Operators here in the United States. They can't list on exchanges in the US. And they can't really bank here either. So they have to do things through Canada and then list on the pink sheets here. So that's sort of a bifurcated market. And people have different opinions on which group is a better way to play. Over time, it'll probably work out. But right now, it's got its ups and downs.

MYLES UDLAND: Well, and Andy, in here, we've got a [INAUDIBLE] doing a SPAC to get involved in the weed place. I mean, it's still, from my vantage point, looking at very vanilla, plain, good, old-fashioned US-listed equities, it still feels like the Wild West in terms of how someone would want to invest in this space and how trustworthy, how believable a lot of this stuff is.

ANDY SERWER: Yeah, I think-- so just to take a step back, Myles, We don't have national legalization of marijuana. It's going on a state by state basis. A lot of activity, as Julie mentioned. We've got about 18 states have legalized. We may even get as many as four more this year. But the real key is to get some sort of federal legislation. And no one is suggesting you're going to get federal legalized marijuana any time soon. It's not going to happen this year, even with President Biden, who, by the way, is not for legalization of marijuana, even with a Democrat in the White House, even with the Democrats in control of the House and the Senate.

What you will probably get-- and this is to your point, Myles-- is a Banking Act. There's a bill proposed called the Safe Banking Act. And that would essentially allow these companies in the United States to begin to bank legally. At that point, the thinking is that these companies could begin to list on the US exchanges, particularly, of course, the NYSE and the NASDAQ. And once that happens, we're off to the races. But the problem is what you saw in Canada was so much money floods into the space, that these companies just start to do ridiculous things and become unprofitable businesses.

And that's not great for investors. Highly speculative, and you've got everyone and their brother involved in this business with the SPACs and with the crazy celebrities. Of course, Snoop's involved maybe. And of course, Willie Nelson's involved, and all manner of people. So you've got to watch yourself. And that's why maybe an ETF, you're holding it for a long period of time might make sense. But if you're a trader and you like to play these stocks, they're a lot of fun. Just, it's got to be your kind of fun money.