Canada “blew it” on cannabis legalization and is rapidly losing ground to the U.S. as a result, according to the founder of one of the top investment banks to the industry.

A lack of policy innovation, a messy patchwork of provincial regulations and severe restrictions on marketing and branding have left Canadian pot companies eating the Americans’ dust, according to Neil Selfe, founder and chief executive officer of Infor Financial Group Inc.

“I think we had a real chance to be global leaders,” Selfe said in an interview at Bloomberg’s Toronto office. Yet eight months after Canada legalized recreational cannabis, Selfe sees Canopy Growth Corp. as the only Canadian pot company he would classify as a global leader, with big U.S.-focused firms outpacing the rest even though marijuana is still illegal at the federal level.

“It’s a real consumer product in big U.S. states where it’s legal, and it isn’t that way yet in Canada despite the fact that we were first,” he said.

States like California sell multiple products, have well-known brands and even allow home delivery,but Canada’s market is restricted to dried flower and oils and branding essentially “doesn’t exist,” Selfe said.

“It’s almost like you’re buying something dirty in brown paper bags,” he said. “It’s like liquor in the ’60s.”

The non-intoxicating cannabis compound CBD is a case in point. Even though marijuana is still classified alongside heroin as one of the most harmful drugs in the U.S., the federal government legalized hemp-derived CBD in December. Big U.S. retailers like CVS Health Corp. and Walgreens Boots Alliance Inc. already sell CBD products like lotions and topicals but those aren’t yet legal in Canada. Legal CBD products such as oil and dried flower can only be sold in dispensaries.

“It’s a mess,” Selfe said.

New Listings

One of the oldest cannabis companies in California will go public in Canada on Monday, leveraging its exposure to a potentially massive but struggling legal marijuana market.

Harborside Inc. will list on the Canadian Securities Exchange under the ticker HBOR after closing a reverse takeover of another cannabis company called Lineage Grow Co. Its initial market cap will be about C$300 million ($226 million).

Co-founded by pioneering pot entrepreneur Steve DeAngelo, Harborside received its first retail license in Oakland, California in 2006.

“California is this big hairy beast to a lot of people but we grew up in it,” Chief Executive Officer Andy Berman said in an interview in Toronto ahead of the listing. “It’s this place that everybody would like to be in but it’s a gnarly, tough place to come into from the outside.”

Medical cannabis has been legal in California since 1996 and the state legalized recreational use on Jan. 1, 2018. However, the state still has a thriving black market and legal sales actually shrunk in 2018 from 2017 amid a confusing patchwork of municipal regulations, high taxes and a surplus of pot.

“I think we’re in for another year of figuring this out,” Berman said. “We just hope the market in ’19 is the size the market was in ’17.”

Berman believes Harborside has an advantage with its 34 licenses in the state that’s estimated to be about a third of the total U.S. cannabis market. He expects Harborside to reach C$80 million to C$100 million in revenue this year and to generate positive earnings before interest, taxes, depreciation and amortization.

Jushi Inc., another U.S. pot company with operations in California, Colorado, New York and Florida, is also expected to begin trading Monday. The company will list on Toronto’s Neo Exchange under the ticker JUSH after raising $68.2 million in a private placement and will have a market value of about $370 million. Jushi’s founder and President Erich Mauff is Deutsche Bank’s former chairman of corporate finance for North America.