Canada: A Budding Opportunity: The Business Potential In Canada's Marijuana Industry

Last Updated: June 19 2017
Article by Sheena Josan and Emily McDermott

There's no doubt about it — it is still a criminal offence in Canada to possess and distribute marijuana for recreational purposes. While legal for medical purposes under certain circumstances, marijuana remains an illegal Schedule II drug under the Controlled Drugs and Substances Act (the CDSA).1 The Liberal government has made clear its intention to expand the legal framework to allow for recreational access to marijuana under new legislation. Further to that intention, Bill C-452 was introduced in the House of Commons recently, providing long-anticipated insight into the direction the legal framework for recreational marijuana is headed. From a business perspective, the opportunities are plentiful. However, without the proper information, the risks could be too.

Current State of the Law

The law regulating access to marijuana and the sale of marijuana and related goods in Canada is complex with federal, provincial and municipal laws intersecting to regulate the market. At the federal level, marijuana has been regulated by the CDSA since 1996. The current legal landscape makes marijuana available for medical purposes through a tightly regulated system. After repeals of several different sets of regulations, the current Access to Cannabis for Medical Purposes Regulations (the ACMPR)3 came into force on August 24, 2016. The ACMPR allows medical patients to access marijuana through a licensed producer, by producing limited quantities for personal use, or by designating someone else to produce limited quantities for them. While the ACMPR provides a legal framework for medical patients and the producers that supply them, recreational production and sale of marijuana remains illegal.

Municipal laws can augment provincial and federal laws by regulating matters that fall under their jurisdiction such as business licensing, land use and public order. The City of Vancouver, for example, has passed a number of business license and land use bylaws allowing marijuana dispensaries to obtain special business licenses in certain geographic areas. A 100% increase in the number of marijuana-related businesses in the city from 2013 to 2015 and the lack of a clear regulatory framework are cited as reasons for passing the regulations.4 It's important to note that the City of Vancouver does not have the jurisdiction to legalize the business of selling marijuana and related goods for recreational purposes. While these bylaws are a proactive step towards licensing the businesses in this market, they do not support business owners operating in the non-medical marijuana and related goods market and the bylaws are broadly worded to apply to businesses that "advocate for the use of medical marijuana." We expect to see other Canadian cities drafting local bylaws in anticipation of the new legislation.

Task Force Report's Recommendations for Legalization of Marijuana

The Task Force on Cannabis Legalization and Regulation (the Task Force) published a report in December 2016 setting out a number of recommendations for the federal government to assist it in regulating greater legal access to marijuana. While the recommendations in the report are not law, they offer significant insight into the direction that the law might go. The Task Force made a number of recommendations relating to the marketing of marijuana and related products, including:

  • setting a national minimum age of 18 for purchasing marijuana;
  • creating a comprehensive list of advertising and packaging restrictions similar to the restrictions on promotion of tobacco products;
  • creating labelling requirements;
  • creating a tax regime that includes equitable distribution to provinces and territories;
  • creating limits on the density and location of storefronts; and
  • creating oversight and approval from local authorities.

Bill C-45

A number of the Task Force's recommendations have been adopted in Bill C-45. For example, Bill C-45 prohibits any promotion, packing and labelling of cannabis that might appeal to young persons and defers to the provinces to enact laws relating to distribution and retail. Readers considering starting a business under this new legal framework should be aware of the strict liability imposed on management. The Bill provides that directors, officers, agents and mandataries who direct, authorize, assent or acquiesce to any violation of the legislation will be held liable for violations and that no due diligence or mistaken belief defences will be available to them. Another interesting aspect of the Bill is the requirement it imposes on corporations to disclose information about shareholders and controlling members. Bill C-45 will not create a legalized recreational marijuana market overnight — the government anticipates that regulated access to recreational marijuana will not occur before July 2018.

Current and Future Opportunities

The potential created by impending legalization of recreational marijuana opens up a number of doors for investment and business purposes.

Ground Entry to the Market

Assuming full legalization, certain forecasts have pegged the potential Canadian marijuana market size to reach nearly $23 billion.5 When looking at sales alone, Canada's market value could range anywhere from $5-8 billion, a figure that is on par with the size of Canada's spirit and wine markets. The potential for new businesses is accordingly substantial and many businesses are hedging their bets by getting market-ready before the legislation is finalized. If the speed at which the Colorado marijuana industry reacted to legalization is any indication, things will move extremely rapidly once the Canadian legislation is introduced. In order to get a jump start on competitors, investors and businesses should turn their minds to the specifics of their market entry strategy. Customer identification, business integration and product differentiation should all be considered when developing a plan to enter the market.


Marijuana companies have already been publically listed and traded in Canada since the introduction of the MMPR. With full legalization impending, the number of market entrants will undoubtedly increase. For the time being however, the highly-regulated structure of Canada's medical marijuana industry allows for only a limited number of producer licenses that can be issued under the ACMPR (currently 38).6 This allows for an industry comprised of specialized and sophisticated issuers, which are better-positioned to attract investment and capitalization.

While some volatility in marijuana stock values is expected until the legislation comes into force, there are certainly some fruitful opportunities to invest in existing issuers listed on the TSX, TSXV, and CSE. In 2016, medical marijuana companies raised $466 million on Canadian capital markets.7 In addition, there has been a recent flurry of M&A activity in the industry. For example, Canopy Growth Corporation, possibly the largest marijuana company in Canada, is the successor of a marriage between Tweed Marijuana Inc. and Bedrocan Cannabis Corp. in June 2015.8 On February 1, Canopy acquired another producer, Mettrum Health Corp., which itself had just acquired Bodystream Cannabis Clinic Network in January. The opportunities for expansion and consolidation in the industry will continue to grow, as many players look to establish a dominant market position ahead of the new legislation. As always, thorough research and due diligence into potential investment targets will be crucial, especially given the increased scrutiny that marijuana-related businesses will, and have already started to, attract from the Canadian Securities Administrators.9

The International Market

With Canada looking poised to be the first industrialized country to fully legalize marijuana, the opportunities for foreign stakeholders are enticing. Firstly, research and development is an ever-growing subsection of the marijuana industry. Cannabis-based pharmaceutical research has received significant attention in recent years. Without legalization, however, U.S. and other international companies may be unable to freely undertake, and raise capital for, their research activities. They may soon look to Canada as the epicentre in which to pursue groundbreaking research and development, given the political support. In fact, one of the Task Force Report's recommendations was for the federal government to subsidize cannabis-based pharmaceutical research, which would create even more favourable conditions for international stakeholders.

Other trends to watch out for will be international partnerships and exclusive agreements for the supply and distribution of marijuana to other countries. As other nations look towards legalization, existing licensed producers in Canada may see a windfall in terms of export potential. Having the cultivation resources and infrastructure already in place, Canadian producers may be sought after for the supply of marijuana. This, coupled with the expected Canadian legalization, could see existing Canadian companies expanding their operations, both in terms of size and geographic reach.


The Canadian marijuana industry is certainly one to watch in the coming year. The recently introduced Bill C-45 provides insight into a new market that promises to generate profitable business prospects across various industries, both directly and indirectly related to the sale of marijuana.

*At the time this article was written, Sheene Josan was an associate in BD&P's Commercial Transactions Group.


1 SC 1996, c. 19

2 Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, 1st Sess, 42nd Parl, 2017 (first reading 13 April 2017)

3 SOR/2016-230


5" Recreational Marijuana: Insights and Opportunities" Deloitte, online: 2016 < >.


7 Sunny Freeman, "Why smaller banks take bigger slice of the growing medical marijuana business", Financial Post, online: January 30 2017, < >.

8 Jocelyn Aspa, "Canadian Marijuana Stocks", Cannabis Investing News, online: February 22, 2017 < >

9 See CSA Staff Notice 51-342: Staff Review of Issuers Entering into Medical Marijuana Business Opportunities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions