Pubdate: Tue, 08 Mar 2016
Source: Arkansas Democrat-Gazette (Little Rock, AR)
Copyright: 2016 the Associated Press
Note: Accepts letters to the editor from Arkansas residents only
Author: Steve Karnowski, the Associated Press


(AP) - Legal marijuana is a $5 billion business in the U.S., and 
Steve Janjic figured he'd get a piece of it. With a commodity 
exchange. For a product that can't be transported across state lines.

Not to worry. "It's never easy to pioneer an industry," said Janjic, 
a former foreign exchange executive at Tullett Prebon LLC who has put 
$1 million into Amercanex Corp., an electronic cannabis-trading 
platform that handles sales of about 100 to 150 pounds of marijuana a week.

That's not exactly blockbuster in a country with an estimated 20 
million marijuana consumers. It may not be too bad, though, in the 
case of a young exchange for a psychoactive substance transitioning 
to legitimate, or sort of legitimate, considering it's illegal under 
federal law. Janjic and other Wall Street veterans backing Amercanex 
take the very long view.

While only four states and the District of Columbia have sanctioned 
marijuana for recreational use, Nevada may join them after a November 
vote. In 23 states, the drug is allowed for medicinal purposes. Polls 
show a majority of Americans believe it should be as legal as beer, 
giving Amercanex high hopes.

"I look at this as an early Nymex," said Richard Schaeffer, a former 
chairman of the New York Mercantile Exchange. "I look for this to 
become a very substantial matching engine bringing buyers and sellers 

Schaeffer, 63, is Amercanex's chairman, and Janjic, 49, is chief 
executive officer and co-founder. Others from the financial world 
involved include futures trader Timothy Petrone, a member of Nymex 
and the Chicago Board of Trade, former Nymex board member David 
Greenberg and James McNally, who's been a member of Nymex, the 
Commodities Exchange and the Hong Kong Futures Exchange.

Amercanex isn't alone in betting there will be serious money to be 
made trading the flowers and leaves of the cannabis plant someday. 
Sohum Shah, a 26-year-old with a degree from the University of 
Arizona, started the Cannabis Commodities Exchange three months 
before Amercanex got off the ground.

Cannabis Commodities Exchange operates only in Colorado, which in 
2012 became the first state to vote to make recreational marijuana 
legal. Amercanex is in Colorado and California, the first to OK 
marijuana for medicinal use, and Janjic said there are expansion plans.

The hurdles are sizable. For an exchange to fully function, a 
commodity has to have standardized specifications and some regulatory 
oversight, as products from corn to metals do, so everyone can be 
assured of exactly what they're buying and selling, said Dale 
Rosenthal, who teaches finance at the University of Illinois at 
Chicago. "There's not a clear reference price" for raw marijuana 
either, he said, another sticking point.

Marijuana comes in a very wide range of quality and potency and 
price; the legal stuff hasn't been around long enough for any 
national benchmarks. Traditional spot and futures markets for 
commodities like wheat or crude oil are linked to a single, widely 
accepted variety with a minimum quality standard.

Amercanex buyers aren't operating blind, Janjic said, because the 
exchange sends what's sold on its platform to a laboratory for 
evaluation and shares the results.

But buyers and sellers have to be in the same state. The U.S. 
government regulates interstate commerce, and selling or possessing 
marijuana are federal crimes. So, then, is sending it across borders 
- - and Amercanex is an exchange for spot trades of physical purchases, 
not paper-only futures or options contracts. Right now, federal law 
is "the risk in this game," Janjic said.

In Colorado, purveyors were required until January 2015 to cultivate 
what they sold, and most still do. "The only way that I think you can 
really be successful is by growing your own," said Bruce Nassau, the 
CEO of Tru Cannabis, which has five stores. "If you're buying from a 
wholesaler, you're [in trouble]."

In Alaska and Oregon, merchants are allowed to use their own raw 
materials, but Washington legalized in 2014 with a law forbidding 
retailers from doing so. "In a system like that, exchanges become 
more useful," said Adam Orens, the founding partner of the Marijuana 
Policy Group.

Amercanex started in July 2014 with 20,000 seats, though it has 
retired about 8,000. The seats began selling for $2,500 each and are 
now going for $10,000, Janjic said; 7,000 are are still available.

Dixie Brands Inc., a Denver-based maker of 
tetrahydrocannabinol-infused products, bought a seat last year, and 
has an equity stake. Amercanex will help distribute its goods more 
efficiently, CEO Tripp Keber said. "You're starting to see some other 
players come into the market, which I think is a strong endorsement."

Last year, legal marijuana sales rose 17 percent to $5.4 billion, 
according to a report from ArcView Market Research and New Frontier, 
and if every state had legitimatized marijuana the sum could have 
been $36.8 billion. California, the most populous state, might start 
boosting the numbers soon.

Campaigns are collecting signatures for November ballot measures. 
"California is very important," Janjic said. "It's shaping up to be 
the largest marketplace in the world."
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MAP posted-by: Jay Bergstrom