Pot stores roll into Washington State

Another black market goes green in the week ahead.

On Monday, Washington becomes the second state to officially sanction the sale of marijuana for recreational use. Up to 20 stores are expected to be legally selling weed by week’s end to customers for no other reason than to get high.

Washington’s pot industry joins Colorado’s as legitimate and tax-producing but also highly regulated and very small. It’s been six months since recreational pot shops have been allowed in Colorado but only about two-dozen stores have gotten the necessary approval. In the past week, Colorado moved to expand the industry beyond existing medical marijuana shops allowing recreational-only stores. Even though Colorado has allowed recreational sales since January, most legal pot revenue still comes from medicinal dispensaries.

The aroma of permissible enterprise is tempting to investors. There are several marijuana companies with publicly traded stocks. Some focus on the science of cannabis, others on the growing and selling of the herb itself. Many trade millions of shares per day. Most are penny stocks and do not trade on a regulated stock exchange.

The prospects for getting in early as the market legalizes for the most commonly used illicit drug in the United States are alluring. This presents plenty of trouble for investors. In May, the Securities and Exchange Commission temporarily suspended trading of five marijuana-related stocks. The stock cops didn’t take the action because of the new business of legal marijuana but rather familiar concerns over the accuracy of public information and trading practices.

The potential of a lawful market generating bales of cash has yet to prove its legitimacy for stock investors.

Tom Hudson is a financial journalist. He hosts The Sunshine Economy on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter @HudsonsView.