Pubdate: Sun, 13 Mar 2016
Source: Denver Post (CO)
Copyright: 2016 The Denver Post Corp
Author: Brian Louis, Bloomberg News


Amercanex Isn't Alone in Betting There's Money in the Trading of Cannabis.

Legal marijuana is a $5 billion business in the U.S., and Steve 
Janjic figured he would 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 weed a week.

That's not exactly blockbuster in a country with an estimated 20 
million marijuana consumers.

But it might not be too bad in the case of a young exchange for a 
psychoactive substance transitioning to legitimate, or sort of 
legitimate, considering it is illegal under federal law. Janjic and 
other Wall Street veterans backing Amercanex take the very long view.

Only four states, including Colorado, and the District of Columbia 
have sanctioned pot for recreational use. Nevada might join them 
after a November vote. In 23 states, the drug is allowed for 
medicinal purposes. Polls show a majority of Americans think it 
should be as licit 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 CEO 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 has been a member of Nymex, the Commodities Exchange and the Hong 
Kong Futures Exchange.

For the record, none is a cannabis user, which is probably neither 
here nor there. Even the gluten-intolerant can get rich in wheat futures.

But is there serious money to be made trading the flowers and leaves 
of the cannabis plant? Amercanex isn't alone in betting there will be, someday.

Sohum Shah, a 26-year-old with a degree fromthe University of 
Arizona, started the Cannabis Commodities Exchange three months 
before Amercanex got off the ground.

CCE operates only in Colorado, which in 2012 became the first state 
to vote tomake recreational pot legal. Amercanex is in Colorado and 
California, the first to approve weed 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.

Weed comes in a wide range of quality and potency and price. Although 
there aren't any futures contracts that trade on an exchange, there 
is at least one national gauge of the market, the U.S. Cannabis Spot 
Index compiled by Cannabis Benchmarks, a division of New Leaf Data 
Services LLC.

Amercanex buyers know the quality of what they're buying because the 
exchange sends what's sold on its platform to a laboratory for 
evaluation and shares the results, Janjic said.

But here's the rub: Buyers and sellers must be in the same state.

The U.S. government regulates interstate commerce, and selling or 
possessing marijuana are federal crimes. As 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.

"It's really fun"

In Colorado, purveyors were required until January 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 whole-saler, you're screwed."

In Oregon and Alaska, 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, 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 up for grabs.

Dixie Brands, 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, said CEO Tripp Keber.
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MAP posted-by: Jay Bergstrom