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

Last Updated: June 19 2017
Article by 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
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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