The cannabis industry has become one of the most exciting markets to invest in following the growing popularity of medical marijuana. Various governments across the world have shown a keen interest in the industry by allowing companies and research organizations to conduct numerous studies on medical applications of cannabis.

Some governments have already established frameworks for the legalization of cannabis with some like Spain already allowing private and controlled growing and possession of marijuana. In the U.S., the state of Colorado is one of the leading markets in the country as the legalization of recreational marijuana continues to open new opportunities in a handful of states.

This is what could finally drive the cannabis industry to its full potential. While medical marijuana is a genuine opportunity for industry growth in the long term, the legalization of recreational marijuana could help the cannabis industry reach greater heights in a relatively shorter time. But the former has higher chances of becoming legal globally than the latter.

With recreational marijuana, the process between growing and converting the product into cash is much shorter than what medical products go through. There isn’t much research required, no clinical trials and no drug administration approval needed.

Regulation has been the greatest obstacle to the growth of the cannabis industry but a lot could change soon. In most countries, cannabis is still classified under the category of drugs with no medical value and a substantial risk of abuse, but research has brought in another perspective to this argument and a lot could change in the coming years, including reclassification.

And while industry experts believe it could take a lot longer than expected before federal regulation in several countries, some like Canada are moving fast and this could trigger a chain reaction across the globe.

However, from a stock market investing point of view, it might be a while before the impact of recreational marijuana is felt. Currently, only small players in the industry have taken the opportunity to pounce but once more states legalize recreational marijuana, the bigger players might join the market.

For now, medical marijuana will continue to be the focal point in the stock market with companies like GW Pharmaceuticals (GWPH) among others continue to recover from the 2015-2016 pullback.

But for the industry to realize its true potential, other segments like recreational marijuana may have to play their part. From a pharmaceuticals perspective, the terrain is rugged and comes with a lot of challenges including rivalry from other competing pharma companies, as well as, hurdles in the drug approval process.

If a rival company launches a drug that rivals a cannabis extract drug, then the chances are that shares of the producer of the cannabinoid product might tank momentarily to reflect investor reaction.

For instance, shares of GW Pharma tanked following successful trials of Zogenix’s (ZGNX) experimental drug ZX008, which showed a high degree of effectiveness at reducing seizures in a late-stage study of patients with a rare form of epilepsy known as Dravet syndrome.

This drug is viewed as a direct competitor to GW Pharma’s Epidiolex, a cannabinoid product developed for the treatment of Dravet syndrome. This means that, apart from facing rivalry from other medical marijuana players, medical cannabis companies also face massive competition from other non-cannabinoid drugs developed to treat the same conditions.

Therefore, it is paramount that for the cannabis industry to grow, other industry segments like recreational marijuana play their part, and this will require proper regulation not limited to a few countries around the world.

Conclusion

In summary, whenever people talk about the cannabis industry, the first thing that pops to mind is medical marijuana. This is what has supposedly made the cannabis industry one of the hottest markets. However, what most analysts prefer not to admit to is that there is a huge empire of the industry that runs in the underworld.

Proper regulation can help bring a huge part of this empire into the open market to spur the growth of the cannabis industry. However, it might take time for this segment of the cannabis industry to make an impact on the stock market since most players in the recreational space mostly are small scale. But in general, it is correct to say that the future for the cannabis industry is looking brighter than it did a few years ago.