Pot is that rare industry where Canada has an edge over its more powerful neighbor. The longer a U.S. federal ban on the drug is in place, the harder it will be to catch up.

U.S. pot companies are now being taken out by cash-rich Canadian rivals. Last year, the Canadians bought 57 businesses south of the border, more than double the number in 2017. Deeper pockets are also helping them to dominate CBD products—derived from cannabis but without a high—that are of interest to some of the world’s biggest consumer companies, including...