Update: Oct 6, 2022: President Joe Biden announced pardons for thousands convicted of federal marijuana possession, urged governors to do the same for state convictions, and called on the Secretary of Health and Human Services and the Attorney General to begin reviewing how marijuana is scheduled. Marijuana is currently a Schedule 1 drug, a higher classification than fentanyl, putting severe restrictions on state medical and recreational industries.
To date, 37 states (plus the District of Columbia) have either decriminalized cannabis or enacted laws authorizing its use for medical or recreational purposes. Of the 37 states that have decriminalized or legalized cannabis, 19 states (plus the District of Columbia) allow recreational adult use. Six other states are expected to introduce legislation this year to create recreational adult use programs.
With more states considering legalizing cannabis or expanding their medical programs to include recreational use, along with previously approved adult use markets still coming online (such as New York), it is expected that domestic cannabis sales will continue to experience strong growth – recent estimates expect total U.S. cannabis sales to exceed $28 billion in 2022, and to reach $46 billion by 2026. 
At the federal level, Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR), and Senator Cory Booker (D-NJ) recently introduced the Cannabis Administration and Opportunity Act, which provides comprehensive federal cannabis reform legislation. The CAOA is quite comprehensive and addresses most of the issues raised by industry advocates and participants. Unfortunately, the breadth of proposed reform contained in the CAOA is generally considered over-reaching and too expansive, so much so that it is unlikely the CAOA will receive the votes needed to pass in Congress.
However, aside from the CAOA, advocates are working to pass the SAFE Banking Act, which would allow federally regulated banks to work with cannabis businesses without violating federal laws. Even though the SAFE Banking Act has been approved by the House of Representatives several times, the bill has yet to gain traction in the Senate as Senators Schumer, Wyden and Booker have taken the stance that the bill does not go far enough from a reform perspective. Still, there is some level of optimism in the industry that a middle ground can be found, and that a group of policy issues can be approved later this year that would combine provisions regarding research and federal criminal record expungement with the SAFE Banking Act.
Legalization initiatives have also been gaining momentum outside of the United States. As such, the size of the total addressable market is expected to continue to expand globally – international market sales were approximately $5 billion in 2021, and it is estimated that international sales will approach $16 billion by 2026, such that total global sales are expected to surpass $61 billion by 2026. 
In Europe, Germany is leading the charge with Olaf Scholz’s government putting cannabis legalization on its list of priorities. Germany, which has already decriminalized medical marijuana, is currently considering the full legalization of cannabis. A consultation process with health experts, economists and cannabis growers has been completed, and it is expected that the process to clear legal and regulatory hurdles will be completed within two years, with a draft legalization bill anticipated by the end of 2022.
Legalization in Germany could be a tipping for global expansion – not only would it put additional pressure on other EU members currently consider legalizing cannabis to move forward with their plans, but by having Europe’s largest economy joining Canada in legalizing cannabis, it could create enough momentum to change the 1961 U.N. Single Convention on Narcotics (which currently prohibits the cultivation and trafficking of cannabis for reasons other than medical or scientific purposes). Such a result would be momentous and would open the doors to a global market.
MJ and MJUS
MJ, the world’s largest global cannabis fund, is well positioned to benefit from both domestic and international growth as its portfolio includes positions in cannabis companies with both domestic operations, including multi-state operators (MSOs) directly involved in the cultivation, production, marketing and distribution of cannabis or cannabis-related products in the United States, as well as companies with global operations. For investors wanting more focused exposure to the U.S. market, MJUS is designed to give investors exposure to cannabis companies generating the majority of their revenues in the United States.
In addition to investing in companies that “touch the plant”, both MJ’s and MJUS’s portfolios include companies that provide ancillary products and services to the cannabis industry, such as FDA-approved pharmaceuticals, growing equipment, consumer accessory products, as well as media, technology and financial services. MJ and MJUS are somewhat unique in this respect – not only are they positioned to benefit from the growth of companies that sell traditional cannabis and cannabis-related products, they are also structured to benefit from the growth of the ancillary segments and products and services relating to the cannabis industry. Not only does this allow MJ and MJUS to capture a broader segment of the emerging cannabis industry, it should also help mitigate some of the volatility that is inherent with any emerging market.
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s statutory and summary prospectus, which may be obtained by calling 1-844-383-6477, or by visiting www.etfmg.com/MJ. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. The possession and use of marijuana, even for medical purposes, is illegal under federal and certain states’ laws, which may negatively impact the value of the Fund’s investments. Use of marijuana is regulated by both the federal government and state governments, and state and federal laws regarding marijuana often conflict. Even in those states in which the use of marijuana has been legalized, its possession and use remains a violation of federal law. Federal law criminalizing the use of marijuana pre-empts state laws that legalizes its use for medicinal and recreational purposes. Cannabis companies and pharmaceutical companies may never be able to legally produce and sell products in the United States or other national or local jurisdictions.
The Fund’s investments will be concentrated in an industry or group of industries to the extent that the Index is so concentrated. In such event, the value of the Fund’s shares may rise and fall more than the value of shares of a fund that invests in securities of companies in a broader range of industries. The consumer staples sector may be affected by the permissibility of using various product components and production methods, marketing campaigns and other factors affecting consumer demand. Tobacco companies, in particular, may be adversely affected by new laws, regulations and litigation. The consumer staples sector may also be adversely affected by changes or trends in commodity prices, which may be influenced or characterized by unpredictable factors.
ETF Managers Group LLC is the investment adviser to the Fund.
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