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Marijuana stocks have rallied in the past few weeks thanks mainly to rising possibility of a Biden victory in the presidential election. A Biden administration is expected to support the decriminalization of recreational marijuana and the legalization of medicinal marijuana at the federal level.

Medical use of marijuana is now legal in 33 states and in the District of Columbia, while its recreational use is legal in 11 states and DC. Some more states are expected to legalize marijuana’s recreational use soon.

Cannabis however remains illegal at the federal level. That results in major challenges for US marijuana companies. 

A “Blue Sweep” could therefore be a game-changer for the cannabis industry, which is growing rapidly. We could see a boom in domestic production. In fact, most Americans support marijuana legalization, but the industry is evolving rapidly and therefore these stocks are very volatile.

2019 was a terrible year for most pot stocks and the underperformance continued earlier this year. ETFs, lower the risk of investing in this high-risk, high-reward industry.

The ETFMG Alternative Harvest ETF (MJ - Free Report) is the first and largest US-listed ETF to target the global cannabis industry. Canopy Growth (CGC - Free Report), Cronos (CRON - Free Report) and Aurora Cannabis (ACB - Free Report) are its top holdings. The Cannabis ETF (THCX) and the Global X Cannabis ETF (POTX) are also passively managed.

The AdvisorShares Pure Cannabis ETF (YOLO - Free Report), the Cambria Cannabis ETF (TOKE - Free Report), and the Amplify Seymour Cannabis ETF (CNBS - Free Report) are actively managed. TOKE is the cheapest pot ETF. The newest product in the space-- AdvisorShares Pure US Cannabis ETF (MSOS - Free Report) --is an actively managed ETF that focuses exclusively on US cannabis stocks and swap contracts.