New York State Assemblyman Steve Katz was going 80 mph in a 65 mph zone when the cop pulled him over.

The cop smelled marijuana, and a search revealed a “small bag.” Katz was charged with possession.

The charge isn’t a huge deal in New York anymore. Katz paid a $100 fine and did some paperwork. But here’s the twist: Katz, a Republican, had voted against a New York medical marijuana bill the year before he himself was busted.

Obviously, not an ideal situation for a politician. But Katz appears to be making the most of his run-in with the law. Since the assemblyman was arrested, he’s completely flipped stances on the issue of marijuana prohibition. He even joined ArcView, the network for marijuana companies and investors.

Countercurrent News reports [emphasis mine]:

The marijuana bust was “an epiphany,” he explained. “You’re turning me into a criminal? You got to be kidding.”

Katz says he knows doctors, lawyers, businessmen and pillars of their community who all use marijuana.

“We’re all criminals? This is ridiculous,” he emphasized.

The arrest he faced “didn’t change anything other than make me decide that I was going to not only be a champion for medical marijuana, and for its total legalization, I was going to become part of the wave that’s building in the industry itself. It’s a great feeling. It’s very liberating.”

This incident is part of a much larger trend. The U.S. prohibition on marijuana appears to be ending. Nobody wants to arrest people over marijuana anymore, save for a few diehards.

The social stigma is ending too. Walking around San Francisco these days, one can’t help but notice that skunky smell from time to time. None of the locals seem to think anything’s out of place, nor do the cops.

Just this week Oregon legalized recreational marijuana statewide. No medical prescription required. More than 200 shops in the state began selling pot at 12:00 a.m. Thursday.

Oregon joined Colorado and Washington state as the third state to legalize recreational use. Alaska and others will follow suit next year.

An additional 23 states currently allow medical use of at least some marijuana products. And that list is growing fast (thanks to stories like that of 9-year-old Charlotte, who has for years used a marijuana derivative – CBD – to calm her seizures. Read more on that here).

I believe the trend we’re on leads to total legalization in the next five to 10 years. That means it’s time to…

Think Like an Investor

Now is a time to put your investor cap on. The marijuana brands that are built today will be the industry giants of tomorrow.

And as I’ve said before, I believe the market for marijuana will eventually be larger than the $180 billion U.S. alcohol market.

Why? Primarily because the medical uses for cannabis are very real. Combine them with a recreational market that could rival alcohol all on its own, and you have some very powerful forces at play.

Startups I’m Watching

I’ve made two investments in private marijuana companies so far. One is Eaze, a leading medical marijuana delivery service in California. It’s growing faster than any of the 50-plus other startups in my portfolio, and by a good margin.

Delivery is getting the most attention from venture capitalists these days. Eaze is just one of many startups vying to be the “Uber for pot.”

I can’t reveal my other investment yet, as they’re still fundraising. But here are two companies I’ve been tracking.

Serica

Serica is using innovative solutions to get around payment problems faced by the marijuana industry.

Banks have been known to shut down marijuana-related companies’ bank accounts.

Why would they do that? It all begins with Operation Choke Point, a Department of Justice initiative to cut off funding options to certain industries the federal government doesn’t approve of (namely marijuana, guns and the adult industry).

I’ve spoken with Taariq Lewis, Serica’s founder. It’s amazing what they’re building. And they could have a very bright future. Naturally, there is some regulatory risk involved. I’ll continue watching this one with interest…

Trees

Trees is focused on the high-end cannabis market. I happen to know the CEO, Marshall Hayner. He’s a bright guy, and dedicated to building a great brand experience.

Trees ranks as one of my top marijuana startups to watch. There’s booming demand for “craft cannabis,” much like the fast-growing craft beer market.

Anyone who’s studied marketing knows that high-end brands often enjoy greater customer loyalty and profit margins. That’s just one reason I think Trees is a startup to watch.

Trees’ Big Box with humidity control, retails for $399

AngelList, one of my favorite sites for finding investment opportunities, has an entire section dedicated to marijuana startups. Take a look; maybe you’ll see something that catches your eye…

Good investing,

Adam Sharp