Top Risks Facing the Cannabis Industry in the US

Top risks facing the cannabis industry in the US

1 min read

The US cannabis industry has boomed since a select few states legalized cannabis in 2014, and many people are optimistic about the industry’s future.

The industry isn’t guaranteed success, though. Below, we discuss some of the top risks facing the US cannabis industry in the coming years.

Product liability

Although many strict regulations surround the cannabis industry to protect quality control through every phase of the growing and distribution process, product liability is always a major concern. Like any agricultural business, the entire cannabis industry could suffer if any product sold in the US winds up tainted during the growing, storage, shipping, or selling process.

This is why affordable and accurate cannabis testing is essential for consumer safety and the success of the industry. Cannabis testing helps ensure companies don’t get regulatory fines, and it limits the possibility of one mistake stunting the growth of the whole industry.

Supply chain disruption

As the COVID-19 pandemic clearly demonstrated, the US and global supply chain are fragile. This supply chain worry is especially true with cannabis, as it’s a relatively new industry with limited infrastructure and significant federal restrictions.

Federal law still prohibits the transport of cannabis from one state to another, which means that the industry is much more susceptible to inventory shortages. If one state, such as California, has a poor growing season or a natural disaster occurs, there’s no relief available by purchasing excess inventory from other states. Until the US relaxes federal restrictions on the transport of marijuana, the industry will always be susceptible to inventory shortages.

Interest rates & raising capital

The cannabis industry is still relatively young, which means it must raise capital. However, the restrictions we mentioned earlier make many powerful institutions wary of investing in the industry.

These federal restrictions mean that cannabis companies have to go elsewhere for capital—to institutions that may not be as stable or have higher interest rates. These higher interest rates and unstable capital mean that if there’s a significant change—such as the Federal Reserve hiking rates—the entire industry may become financially exposed.

These are some of the biggest risks facing the US cannabis industry, but there are still others. However, most of these risks stem from the federal restrictions on marijuana. So until the government lifts these restrictions, many of these worries will persist.

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