Canopy Growth’s mega-billion-dollar deal with Acreage has opened the door to the United States. With the purchase of the New York-based Acreage, Canopy Growth continues to be one of the biggest players in the national cannabis market.

The following is a re-post of an article written by Thomas Franck and Yun Li of CNBC

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Canadian marijuana grower Canopy Growth announced Thursday a $3.4 billion deal to acquire Acreage Holdings after cannabis has been legalized in the United States.

The deal, which was finalized Thursday morning in New York, grants Canopy the right to buy all of Acreage’s stock following nationwide legalization; the two companies will operate independently until then. It will also grant Acreage access to Canopy vault of brands including Tweed.

“Today we announce a complex transaction with a simple objective. Our right to acquire Acreage secures our entrance strategy into the United States as soon as a federally-permissible pathway exists,” said Canopy co-CEO Bruce Linton in a press release. “By combining Acreage’s management team, licenses and assets with Canopy Growth’s intellectual property and brands, there will be tremendous value creation for both companies’ shareholders.”

Canopy’s stock soared more than 6.5% Thursday following the announcement. The equity is up 70% since January.

New York-based Acreage Holdings is one of the largest multistate cannabis operators in the U.S., with a presence in 20 states. It bills itself as developing a consumer-centric branded cannabis product line and has leveraged board director and former speaker of the U.S. House of Representatives John Boehner in its efforts on Wall Street.

For its part, $14 billion Canopy Growth remains one of the largest players in the burgeoning cannabis industry. The company is perhaps best known in the United States for its partnership with Corona beer maker Constellation Brands and its plans to locate a hemp operations in New York State. It has announced partnerships with both Martha Stewart and Seth Rogen in 2019.

But despite the announcement, the deal still faces a number of important questions. Though several U.S. states have approved the recreational use of marijuana in recent years, consumption of the plant remains prohibited by federal law.

Even in states that have approved recreational use, for national banks to accept deposits or loan to cannabis businesses could make them vulnerable to a Department of Justice suit and the ire of the Food and Drug Administration. The FDA prohibits companies from adding active ingredients that are drug products in foods and drinks.

The deal could also put them at odds with the stock exchanges on which they’re listed, which have their own policies about illicit business practices.

“Until now, the Nasdaq has not been willing to list companies that have U.S. ‘plant touching’ cannabis operations,” said cannabis lawyer David Feldman, a partner at Duane Morris. “What’s interesting is that they didn’t tie this to Nasdaq, they tied it to legalization.”

“It is interesting that they are limiting it to legalization, rather than completing the acquisition when TSX and Nasdaq are prepared to allow the listing,” he added.

Some of that uncertainty was cleared up late last year, when the recent U.S. farm bill removed hemp from the federal government’s list of controlled substances and opened up nascent markets in CBD, cannabidiol.

Questions remain, however, for those who want to sell or bank money from the marijuana business. Federal regulations currently deter banks from working with legal dispensaries in the U.S. and mandate that banks and other financial firms file “suspicious activity reports” to help monitor money laundering.

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This article was first published on https://www.cannabisimp.com.

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