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A proposed constitutional amendment for recreational marijuana is under review by the Florida Supreme Court.
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A leading exchange-traded fund in the cannabis space will close up shop as investor interest in the legally restricted industry wanes.
AdvisorShares, the largest cannabis fund manager, said its Poseidon Dynamic Cannabis ETF will see its final day of trading Aug. 25. The fund will liquidate assets and pay shareholders on Sept. 1, according to a notice on the fund’s website.
The fund, led by sibling founders Emily & Morgan Paxhia, launched on the New York Stock Exchange in November 2021 during a pandemic-era cannabis sales boom.
The closure comes as investors lose interest in the quasi-legal cannabis industry that has struggled to scale. Wholesale prices have declined, and Congress has not reformed federal laws that have hampered the sector’s growth.
In an emailed statement to CNBC, co-founder Morgan Paxhia said the fund was not “immune to the broader macro-economic environment and, more specifically, the dramatic shift in investor sentiment that has impacted the cannabis industry.”
While nearly half of U.S states have legalized the recreational use of cannabis by adults, it remains illegal at the federal level. Its classification as a Schedule I substance along with heroin and LSD has barred the sector from accessing most banking services and from being traded across state lines, causing a glut of cannabis in many states and a drop in prices.
Sliding equity values have made investors turn away from the industry, and capital has dried up.
Poseidon Investment Management, which started in 2013 as one of the first cannabis-focused hedge funds in the U.S., has seen its ETF lose roughly 74% in value since it was founded, versus a 1.7% decline in the S&P 500.
Its value has fallen 65% in the last year and traded under $1 on Tuesday. Meanwhile, Pure US Cannabis ETF, another fund in the industry by AdvisorShares, plummeted by about 60% in the same period.
Poseidon is the latest casualty in an industry strained by market forces and economic policy.
Last month, a $2 billion merger between cannabis multistate operators Cresco Labs and Columbia Care went up in smoke more than a year after the companies announced the acquisition. And Mastercard, in a move that further alienates the cannabis industry from big banking, announced last month it will stop allowing cannabis transactions on its debit cards to be in compliance with federal law.
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