We've all seen in the news US states such as Colorado legalizing and making marijuana smoking legal.

Public support for further legalization is building. There is also talk that more states could soon legalize. Since this is a new growth industry, we can only speculate in what direction it will grow. But what's clear, plans to keep Marijuana illegal have gone up in smoke.

Marijuana History in the United States

Cannabis was made illegal in the US in 1937 with the passing of the Marihuana Tax Act of 1937. Before the 20th century, Cannabis was widely used both for industrial and recreational purpose with little social stigmas.

Pot smokers have widely referenced that our founding fathers, such as Thomas Jefferson and George Washintgon were active growers and smokers, and that the constitution of the United States was originally written on hemp paper. In Virginia in the 18th century, hemp was promoted as a Tobacco alternative for farmers who worried about Tobacco's soil depletion and less industrial use than hemp.

That fits the irrationality of such an act, where it was growing in popularity both socially and industrially. A long time has passed and recently, there is growing social pressure to legalize and regulate this wonderful plant.

What legalization means for businesses

So far state regulations have varied, each with different rules how to regulate Cannabis. Colorado's is the most interesting, with components such as requiring a certain amount of the plant sold to be grown in licensed facilities in the state. This differs from California's rule which doesn't specify where it should be grown.

A series of new business in this niche are emerging from the cultivation and growing of the plant, the sale and distribution such as dispenseries, and niche businesses such as Cannabis restaurants.

Publicly traded companies

Medbox (MDBX.PK) - Medbox Inc. (Medbox) offers a machine that dispenses medication to individuals based on biometric identification (fingerprint sample). The machine allows pharmacies, hospitals, doctors' offices, and alternative medicine clinics to manage employee possession of sensitive drugs. The system also allows these clinics to demonstrate that the user visiting the machine is a registered patient and that the patient has a valid and unexpired authorization from a physician to possess and use the medicine dispensed. It has national and international presence with offices in Los Angeles, New York, Toronto, London and Tokyo. Medbox, through its subsidiaries, offers consulting services to the alternative medicine industry, as well as to the mini self-storage market. It provides consulting services primarily to individuals and groups seeking to establish new clinics and facilities, often in jurisdictions that have recently passed legislation concerning the availability of alternative medicines.

Medical Marijuana Inc. (OTCPK:MJNA) - Medical Marijuana Inc. ("MJNA") is the first publicly held company vested in the medical marijuana and industrial hemp markets. The company is comprised of a diversified portfolio of products, services, technology and businesses solely focused on the cannabis and hemp industries. These products range from patented and proprietary based cannabinoid products, to whole plant or isolated high value extracts specifically manufactured and formulated for the pharmaceutical, nutraceutical and cosmeceutical industries.

Cannabis Science, Inc. (OTCPK:CBIS) - Cannabis Science, Inc., is a development-stage company. The Company is engaged in the creation of cannabis-based medicines, both with and without psychoactive properties, to treat disease and the symptoms of disease, as well as for general health maintenance. The Company is engaged in medical marijuana research and development. On February 9, 2012, the Company acquired GGECO University, Inc. (GGECO). On March 21, 2012, the Company acquired Cannabis Consulting Inc. (CCI Group).

These are some of the industry upstarts - there are others. However, the play here may be with more traditional names.

Industry figures

CNBC estimates that the Marijuana industry is a $40 Billion dollar a year business, which is slightly less than American's spend on their pets. However some estimates say that it's over $120 Billion a year, making it larger potentially than the Beer market. But is it possible it's even larger?

Although Marijuana is recently being legalized, the science behind it isn't revolutionary or new. Research and Development will not likely yield ground breaking results, as it would in Nanotech or other industries. For this reason, our best is on big Tobacco.

Big Tobacco

RJ Reynolds (NYSE:RAI) had product designs in previous times when they believed Marijuana to possibly be legalized, in the 70's and 80's. They denied these claims for years, although there were reports of people actually seeing these test products.

The idea that Big Tobacco may become Big Marijuana is being considered by other industry analysts as well.

The problem that the drug industry would have, however, is that marijuana would, at its core, be a commodity item. While this could lead the real benefit to fall to generic drug companies like Israel's Teva Pharmaceuticals (NYSE: TEVA), that may not be as realistic an outcome. For starters, even generics focused companies have been migrating to branded drugs. Secondly, and perhaps more importantly, marijuana is a plant. It needs to be farmed, not created in a lab. The one industry that has a history of dealing with a commodity plant is the tobacco industry.

Companies such as Phillip Morris (NYSE:PM) and RJ Reynolds may be in a better position to capitalize on this growth industry than startups or big Pharma. Although they do have the problem of continual lawsuits from smokers since the landmark ruling, they may be able to create entire new business models in the new industry. Of course a lot of this is undocumented and is pure speculation. So a good portfolio betting on this new growth industry might combine PM and RAI, with MJNA and CBIS.

Risks involved

Of course, the risk is that there is a trend-reversal, that states considering legalization do not. And there is the possibility of a Federal crackdown, as Marijuana is still illegal on a Federal level. However indications from President Obama imply this is a low risk. He recently said that it shouldn't be the priority of the Federal government to prosecute recreational smokers. Also there are unknown risks, because it's a new industry we don't know what types of backlash might exist. But these are all risks common in any new growth industry, similar risks were seen before the .com boom. Many .com companies failed, but the ones who succeeded such as Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) have seen eye-popping returns.

Unlike other high growth new industries, the problem the Marijuana industry faces is simply legalization and regulation. It's not questionable if people will use it or not. So the difference between this and other potential high-growth industries is while there are types of risks, the risks are not in the product. Also, we have case studies like Holland showing how legalization can reduce crime, and attract tourists. So the opportunity here may be more viable than with comparable industries such as advanced tech.

We do not suggest that while evaluating this opportunity users use the substance.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.