If 2018 was the year of Canadian cannabis, 2019 will be America’s time in the marijuana spotlight.

Since Canada legalized recreational pot in October, investor interest has been rapidly shifting south of the border on the expectation that it won’t be long before the U.S. follows suit. Currently, recreational marijuana is legal in 10 states, plus Washington D.C., but remains banned at the federal level.

“Investors’ imagination is being captured more by what’s possible in the U.S.,” said Alfred Avanessy, managing director of investment banking at Cormark Securities Inc., which counts cannabis as its biggest source of business in Canada. “The U.S. is a couple years behind us from a regulatory perspective and it’s also by definition 10 times larger than we are.”

U.S. consumer spending on legal cannabis is expected to reach US$20.9 billion by 2021 compared with US$4.5 billion in Canada, according to a June report from Arcview Market Research and BDS Analytics.

In the first 10 months of the year, U.S.-based cannabis issuers raised $1.5 billion (US$1.1 billion) on the CSE, or about 60 per cent of the total raised by all pot firms, according to data provided by the exchange. By comparison, there was one U.S. cannabis listing on the CSE in all of 2017 which raised $145,000.

The trend has only accelerated since October, with notable listings from Acreage Holdings Inc., Harvest Health & Recreation Inc., MJardin Group Inc. and Cresco Labs Inc. — and more to come.

“We have applications in hand from a number of significantly sized U.S. issuers and we’ve been talking to a number of folks who don’t have applications in yet but it seems a certainty that they will be showing up on our doorstep at some point in the first or second quarter of next year,” said Richard Carleton, chief executive officer of the CSE.

The U.S. issuers are also providing a more compelling story to investors, coming to market with “a significant operating history, revenue in place and a significantly higher degree of maturity than we saw from the Canadian producers back in the day,” Carleton said.

The sense from investors is that the Canadian growth story is flattening amid supply shortages and disappointing earnings, while the U.S. is accelerating as more states legalize and the federal government shows growing acceptance of cannabis, including legalization of hemp and its extracts in its farm bill. The Horizons Marijuana Life Sciences Index ETF has lost about 38 per cent since the day before Canada legalized pot.

“There are hundreds of businesses in the United States that are just getting their act together relative to accessing the capital markets and building their business plans, so there’s a lot of runway left for the U.S. industry,” said Steve Winokur, managing director and head banker for the cannabis sector at Canaccord Genuity Group Inc., one of the leading investment bankers in the industry.

U.S. investors are also playing a bigger role, becoming the second-largest funding source for CSE-listed cannabis companies behind those from Ontario, Canada’s most populous province. Americans invested $417.4 million in the first 10 months of the year and new U.S. cannabis listings have also attracted investors from Europe and Asia, according to Carleton.

This presents a challenge to the Canadian licensed producers, or LPs, who are just coming to market now, said Avanessy at Cormark.

“As a new Canadian LP trying to go public now, you need to offer a differentiated story to attract that new capital, otherwise it’s always safer for an investor to just put money to work with someone that’s already public,” he said.