People smoke marijuana joints at 4:20 p.m. as thousands of marijuana advocates gather in Golden Gate Park in San Francisco, California April 20, 2012. REUTERS/Robert Galbraith/File photo

NEW YORK (Reuters) - Stock exchange operator Nasdaq has rejected a listing application by MassRoots Inc MSRT.PK on the grounds that it may aid in the use and dealing of an illegal substance, the cannabis social networking company said on Tuesday.

The rejection, handed down on Monday, may insert roadblocks ahead of other cannabis-related companies seeking to list on a national stock exchange, MassRoots Chief Executive Isaac Dietrich said in a statement.

“This will have ripple effects across the entire industry, making it more difficult for cannabis entrepreneurs to raise capital and slow the progression of cannabis legalization in the United States,” Dietrich said.

The Denver-based company, which connects cannabis users, activists and business people through its mobile applications and web portal, said it planned to appeal the decision.

Nasdaq declined to confirm whether it denied the application or say if such a rejection would set a precedent for cannabis-related companies.

The majority of public cannabis companies, including Denver-based MassRoots, are traded over-the-counter, where regulations are less restrictive and trading typically is done between two individuals instead of a centralized exchange like Nasdaq.

At least one company focusing on a cannabis-related products, Insys Therapeutics INSY.O, is listed on the Nasdaq. The pharmaceutical company is developing a cannabis-based drug.

Although cannabis remains classified as an illegal narcotic under U.S. law, it has been legalized for medical use in 23 states since California became the first to do so in 1996.

Colorado, Washington, Oregon, Alaska and the District of Columbia have gone a step further and legalized cannabis for recreational use by adults.