Cannabis Industry Introduction

Over the past couple of years, cannabis has crept out of the shadows of the stoner culture and emerged as a multi-billion dollar industry that has taken root in sectors including healthcare, pharmaceuticals, consumer goods, and agriculture. Public companies with ballooning valuations are racing to be the most innovative, while established blue-chip companies are partnering or buying marijuana-related businesses to gain access to the industry.

As the legal cannabis industry continues to develop and public support for the legalization of recreational and medical marijuana use grows, an increasing number of investors have taken note. The latest Gallup poll released in November 2022 indicates that 68% of American adults support the legalization of marijuana in the U.S, up sharply from only 12% who supported it more than five decades ago in 1969. According to a Pew Research Center study conducted in October 2022, the majority of Americans (88%) say that marijuana should be legal for either recreational use by adults (59%) or for medical use only (30%).

Share prices of cannabis companies, represented by the ETFMG Alternative Harvest ETF (MJ), have plummeted more than 50% this year due to investors’ disappointment by the failure of marijuana use legalizing reforms under U.S. President Joe Biden. On October 6, 2022, however, President Biden announced that he is pardoning all prior offenses of simple possession of marijuana at the federal level. He is urging governors to do the same with regard to state offenses.

In May 2021, Representative Jerrold Nadler (D-NY) reintroduced the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act in the U.S. House of Representatives. This bill decriminalizes marijuana, removes cannabis from the list of scheduled substances under the Controlled Substances Act, and eliminates criminal penalties for an individual who manufactures, distributes, or possesses marijuana. 

The bill makes other changes as well, which include requiring the Bureau of Labor Statistics to regularly publish demographic data on cannabis business owners and employees and does not allow denying benefits and protections under immigration laws on the basis of a cannabis-related event. As of April 2022, the bill is awaiting action from the Senate.

With interest in pot stocks rising, many new and veteran investors without intimate knowledge of the business are considering making investments in cannabis companies and stocks. As with any new industry, learning about the ins and outs of the diverse and fast-growing marijuana business can be overwhelming. Below, we’ve broken down some of the most common and important terms that you’re likely to encounter as you follow the cannabis market.

Access Point

An access point is a location where medical marijuana patients are authorized to buy or pick up cannabis. The term access point is often used somewhat interchangeably with the term dispensary. In either case, the location refers to a state-authorized facility that must abide by strict processes and guidelines.

Agitation

Agitation refers to a specific procedure in the process of harvesting marijuana plants and products. In agitation, producers utilize physical contact with marijuana plants in order to break off trichomes for collection and processing. Trichomes contain most of the marijuana plant’s cannabinoids and other active compounds (see Crystals and Trichomes below).

Backcross

Successful marijuana production requires extensive knowledge of botany and biology, and backcrossing is an industry term borrowed from these fields. Producers backcross a marijuana plant when they facilitate plant breeding in such a way as to transfer one or more desired traits from a parent to an offspring. Specifically, this process typically entails breeding a plant with one of its parents in order to strengthen particular genes in rare strains.

BHO

BHO refers to butane hash oil, a potent cannabis concentrate made from marijuana plants using butane as a solvent. It contains extremely high amounts of THC, can be manufactured in a variety of ways and can have different consistencies. It is also known as honey oil or earwax.

Bud

A marijuana plant bud is a flower found on mature plants. Buds contain high levels of cannabinoids, making them a popular choice for harvesting.

Cannabidiol

Cannabidiol, commonly abbreviated as CBD, is one of the dozens of molecules found in the cannabis plant which are referred to as cannabinoids. CBD has become popular in recent years due to a belief that it provides medical benefits for patients suffering from various afflictions including seizures, pain, arthritis, and more.

CBD is unlike THC in that it does not contain psychoactive properties. This means that individuals can use CBD for its medical benefits without feeling high. CBD is most commonly delivered to users via oils, topical products, and tinctures.

Cannabinoids

This term refers to a large group of chemical compounds found in the cannabis plant. These compounds engage with receptors in the cells of the brain which are related to neurotransmission. The two best-known cannabinoids are tetrahydrocannabinol (THC) and CBD. THC is well-known for producing psychoactive effects in users of cannabis products—the compound responsible for the high associated with cannabis use.

CBD is better known for its health effects and does not include a psychoactive component. Besides these two cannabinoids, there are dozens of other compounds in the various parts of a cannabis plant as well.

Concentrate

Concentrates are highly potent extracts from the cannabis plant that contain cannabinoids like THC. All the plant material is removed in the production process. Common concentrates include hash, kief, and hash oils. They are used in both medical and recreational settings.

Cross

Multiple cannabis plants can be interbred to generate a new strain of product in a process known as crossbreeding or crossing for short. New strains of marijuana are produced in order to control for factors including appearance, potency, and more.

Crystals

The term crystals refers to trichomes—a white, crystal-like part of the cannabis plant that contains high concentrations of THC. Crystals are used to produce various concentrates.

Dabbing

While smoking and ingesting cannabis-based products remain two of the most favored methods of consuming marijuana, a relatively new method called dabbing has become popular. To dab, a user places a small amount of a cannabis concentrate on a hot oil rig pipe. The concentrate is vaporized and the user then inhales the vapor.

Decarboxylation

Decarboxylation is a process used to transform certain inactive cannabinoids into active compounds like THC and CBD. The process involves the slow heating of marijuana at a low temperature and is commonly utilized to make edibles.

Dispensary

Stores that sell marijuana products are known as dispensaries. Some dispensaries may carry more than just marijuana itself, including items like paraphernalia or clothing as well. Because legal cannabis sales are governed differently depending upon the U.S. state or Canadian province, the specific requirements and the setup of a dispensary depend heavily on where it is located.

Edibles

Products containing cannabis-based chemicals are designed to be orally ingested are known as edibles. Some of the most popular edible products include baked goods, candy, and soda.

Feminization

The process of feminization results in cannabis seeds that produce only female plants. In the cannabis industry, female plants are often seen as more desirable than their male counterparts, because only female plants produce flowers. Producing only plants of one type also protects against undesired fertilization.

Germination

Germination is the part of the life cycle of a cannabis plant when the seed begins to sprout and develop into a seedling.

Hash

Also known as hashish, this is a highly potent concentrate of marijuana trichomes achieved by one of several extraction techniques.

Hemp

Hemp is a variety of the Cannabis Sativa plant. It contains very small traces of THC and high amounts of CBD. Hemp fibers are used in various industries including the textile, paper, and automobile industries. CBD is extracted from the plant for various uses. Growing hemp was illegal on a federal level in the U.S. up until December 2018. Then the 2018 Farm Bill lifted the ban so long as it contains a maximum of 0.3% THC.

Hydroponics

A hydroponic system makes it possible to grow cannabis without the use of soil and increases the plant’s growth rate. Specifically, hydroponic mechanisms circulate both water and essential nutrients to a cannabis plant’s roots in order to facilitate growth.

Indica

There are three different species of cannabis plants—Indica, Sativa, and ruderalis. Indica cannabis plants tend to have dense clusters of buds and the strain is thought to have a sedative effect.

Kief

When trichomes are removed from a marijuana plant, kief is the result. It is a type of cannabis concentrate also known as dry sieve hash. Kief typically contains high concentrations of THC.

Live Resin

When a cannabis concentrate is made using freshly picked plants that are immediately harvested and frozen, the product is known as live resin.

QWISO

QWISO, or quick-wash isopropyl, is a method to make hash oil that involves the use of isopropyl alcohol to collect trichomes from a cannabis plant.

Resin

Resin is a term that is often used interchangeably with trichomes, though it also holds other meanings in the cannabis industry as well. After a piece of marijuana paraphernalia is used, the residue left inside is often referred to as resin as well.

Ruderalis

Along with Indica and Sativa, ruderalis is one of the three species of cannabis plants. Ruderalis plants are somewhat larger than Indica ones, and it also flowers on its own without stimulation from a light cycle. Ruderalis plants tend to have higher concentrations of CBD relative to Indica and Sativa.

Sativa

Sativa plants are the tallest of all the cannabis species, and the strain is often considered to enhance creativity and energy.

Shatter

Shatter is one of the consistencies found in butane hash oil. This product can be used for dabbing or can be smoked in combination with a flower.

Seed-to-Sale

Seed-to-sale is a term used to refer to the close watch cannabis companies have to keep on each step of the manufacturing process in order to comply with government regulations.

Topical

Topical products are among the newest forms of cannabis products. These include lotions and creams applied topically which aim to address issues like pain and skin problems. Even though some topicals contain THC, the method of absorption means they do not cause the high of other cannabis products.

Trichomes

Also known as crystals, trichomes are resin-producing glands on a marijuana plant. They have the appearance of small hairs. Trichomes are responsible for producing the large majority of a cannabis plant’s cannabinoids.

Frequently Asked Questions

The Bottom Line

The legal cannabis industry is continuing to develop. Public support for the legalization of recreational and medical marijuana use is increasing, and public investors have taken note. In 2022, cannabis stocks, represented by the ETFMG Alternative Harvest ETF (MJ), plummeted more than 50% because investors were expecting legalizing reforms to pass under U.S. President Joe Biden.

The MORE Act – which decriminalizes marijuana, removes cannabis from the list of scheduled substances under the Controlled Substances Act, and eliminates criminal penalties for an individual who manufactures, distributes, or possesses marijuana – is yet to pass in the Senate.