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Let's face it: It's been a rough summer for cannabis stocks.
Since June, the popular marijuana ETF EFTMG Alternative Harvest (NYSEARCA: MJ) has dropped 20%.
After the stellar returns from the first half of the year, investors are asking why cannabis stocks are dropping.
Especially with the cannabis industry's hot first half of 2019, in which Alternative Harvest peaked at $39.25 per share
You see, there are three reasons why cannabis stocks have hit the brakes on big returns. Today, we're going to give you a breakdown of these reasons.
Plus, we'll show you how you could still generate the kind of returns from the marijuana industry you're used to, no matter which way the cannabis market heads next...
High Profile Scandals Are Pushing Cannabis Stocks Lower
Despite a hot start to 2019, a series of scandals shook investor confidence in cannabis.
In July, Canopy Growth Corp. let go of its co-chief executive, Bruce Linton, and one of the firm's principal board members.
Linton was widely considered one of the cannabis industry's most innovative executives. He was the firm's primary founder, and he fostered much of Canopy's growth over the last five years.
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According to reports, beer distributor Constellation Brands Inc. (NYSE: STZ) was a significant driver of Linton's departure. And Constellation invested $4 billion into Canopy last year.
Reports say mounting loss under Linton's guidance made Constellation incredibly unhappy.
As Canopy's biggest investor, Constellation ousted Linton. And this is likely the first stage of a dramatic restructuring of the one of the biggest cannabis firms.
For many investors, this goes against the hands-off approach that made cannabis stocks successful.
Meanwhile, Canadian medical cannabis company CannTrust Holdings Inc. (NYSE: CTST) is battling unlicensed cannabis cultivation accusations.
Plus, the Canadian government seized more than five metric tons of cannabis grown by the firm.
Reports say executives were completely aware of the illegal activities.
Since then, this cannabis stock has tumbled more than 75%. And it'll likely stay at the bottom of the barrel for the foreseeable future.
But these aren't the only things pushing marijuana stocks down. In fact, there may be a bigger storm on the horizon...
Regulatory Woes Are Driving Cannabis Stocks Down
On top of controversy and scandals, cannabis stocks are under attack by the FDA.
In July, the FDA called out U.S. medical cannabis firm Curaleaf Holdings Inc. (OTCMKTS: CURLF) over false health claims.
The FDA said the firm couldn't say CBD could treat Alzheimer's and opioid withdrawal.
The FDA's attack on CBD promotion is the latest in a string of increasing efforts to limit the distribution of CBD.
You see, CBD wasn't included in the 2018 Farm Bill that legalized hemp. So, under current federal legislation, CBD is still classified as a drug.
And until the FDA regulates CBD, American firms cannot include CBD in food or beverages.
With the FDA cracking down on CBD, near-term profits for cannabis stocks are on the rocks.
But the FDA isn't the only interference coming from Washington...