SEC Issues Warning on Pot-Related Investments

Marijuana growing, sales, and investments have proven to be a profitable endeavor in California, Washington and Colorado. Despite the potential economic perks of entering the marijuana business, the U.S. Securities and Exchange Commission has waned investors about the dangers of investing as more states allow the legal cultivation, sale and use of recreational or medical marijuana. The watchdog department of the agency has penalized five companies that claim to be operating in the industry based on questions of accuracy in public statements and potentially illegal sales of securities and market manipulation. The SEC has published a warning for investors that could potentially lose their financial foothold in the quickly changing marijuana industry.


According to the SEC warning, investors could face both financial losses, as well as criminal liability when investing in pot-related companies. Our Orange County marijuana legalization attorneys are dedicated to protecting business owners, entities, and individual users in California. We are informed and abreast of the legal issues that may impact our clients and marijuana business investors nationwide. This warning sheds light on the growing issues related to the legal discrepancies in state and federal marijuana law. While investors and businesses may be operating legally and in accordance with state law, they could also be under the scrutiny and legal purview of the federal government.

With over 20 states and the District of Columbia having some form of legalized marijuana activity, the federal government can still investigate and prosecute individuals in the cannabis business. The SEC warned investors that they could also be held liable under the Controlled Substances Act. According to reports, a statement issued by the Department of Justice, businesses were likely to face federal intervention and prosecution if they were involved in interstate commerce or if they were selling products to minors. California pot business owners should be aware of those sales or activities that could be construed as interstate commerce or potentially lead to distribution to minors.

Marijuana enterprises tend to be smaller operations, which can make transparency for investors more difficult. According to the SEC, these companies are generally riskier investments than larger corporate entities. Though there continue to be money-making opportunities, the SEC has issued clear warnings about potential financial losses and criminal liabilities. One of the targeted companies allegedly filed inaccurate or inadequate records on assets, revenue and financial statements according to the SEC.

Whether you are a marijuana business owner or an investor, it is important to know your rights and to stay abreast of trends and legal developments in California and at the federal level. Our attorneys have extensive experience in marijuana law and are committed to protecting the rights of cannabis business owners, enterprise, and their investors. When faced with a legal question, it is important to turn to a marijuana attorney that you can trust. While the SEC has raised real concerns, investors should consult with an independent advocate. One of the issues that the SEC has also raised is that there may be fraud in the marijuana industry. Investors in California should consider the potential risks of this particular industry, according to the SEC statement.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

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