State legalization has unsurprisingly proved a boon to the cannabis business: Legal marijuana sales in the United States are projected to reach $7.1 billion this year, and some analysts are calling weed the country’s fastest-growing industry. Still, the plant’s pesky status as a Schedule I illegal substance—heroin is federally regulated the same way—makes cannabis a risky investment. Most publicly traded, marijuana-based businesses remain wild penny stocks, but there’s a reason to be optimistic.

For one, the legal market is growing. Cannabis is recreationally legal in four states and medically in 25 states (up to 12 states could vote on legalization measures this November). Meanwhile, biopharmaceutical companies are ramping up research with the support of the federal government. The Democratic Party even wrote federal rescheduling—the potential of reclassifying cannabis—into its 2016 national platform.

Currently, the Marijuana Index series, an equity tracker for marijuana stocks, puts the U.S. market cap for publicly traded cannabis companies at...