This article was updated on April 8, 2018, and originally published on Nov. 20, 2017.

The marijuana industry, and marijuana stocks for that matter, have been worth marveling at recently. A majority of marijuana stocks have doubled or tripled in value over the past year as legal weed sales in North America jumped by 33% last year to $7.7 billion, according to cannabis research firm ArcView, in partnership with BDS Analytics.

But this could be just the tip of the iceberg. ArcView is also predicting North American legal sales growth of 28% per year through 2021, yielding a market worth nearly $25 billion. The possible legalization of adult-use weed in Canada, along with the June 2017 legalization of medical cannabis in Mexico and the expectation that more U.S. states will choose to green-light recreational pot, has the industry and investors extremely excited.

A person holding cannabis leaves in their cupped hands.

Image source: Getty Images.

The first-ever marijuana ETF was introduced in Canada

Of course, investing in pot stocks isn't without its fair share of risks. After all, marijuana is still illegal for recreational use in every country except Uruguay. Within the U.S., all it would take is for the federal government to decide to reinforce its superseding law and the 30 states that have legalized medical cannabis, and nine that voted to legalize recreational weed, could see their industries go up in smoke. In other words, buying individual marijuana stocks comes with a ton of inherent risks.

Unfortunately for U.S. investors, diversified investment options, like an exchange-traded fund (ETF), haven't really been an option. In 2017, the Horizons Marijuana Life Sciences ETF (TSX:HMMJ) made its debut on the Toronto Stock Exchange, and has risen about 53% since inception. It seeks to replicate the performance of the North America Marijuana Index, net of expenses, and for a reasonably low management fee of 0.75%, plus applicable taxes, this ETF gives investors access to 36 different marijuana stocks. 

It's worth pointing out that some of the Horizons Marijuana Life Sciences ETF largest holdings are in Canadian medical cannabis growers Canopy Growth Corp., Aurora Cannabis, Aphria, and MedReleaf, which make up just over of 41% of its invested assets. Since Canada's parliament is currently reviewing a bill that'd legalize recreational pot in our neighbor to the north, this is a big reason why this ETF has done so well.

On the flipside, U.S. investors have been wondering when they might get their opportunity to invest in a marijuana-themed ETF. Well, folks, that wait has come to an end.

A cannabis bud lying atop a messy pile of hundred dollar bills.

Image source: Getty Images.

Say hello to the very first marijuana ETF for the U.S.

As reported by CNBC, on Oct. 27, ETF Managers Group filed for a new ETF, the Alternative Harvest ETF (NYSEMKT:MJ). This ETF will mimic an index as closely as possible that tracks cannabis cultivators, producers and distributors, cannabinoid drugmakers, fertilizer producers, and tobacco companies.

But there's an interesting catch behind its "inception." The Alternative Harvest ETF isn't a new ETF at all. ETF Managers Group simply switched the focus and tracking index of an existing ETF, the Tierra XP Latin America Real Estate ETF, which tracked the Solactive benchmark of real estate in Mexico and Brazil, to an ETF that predominantly follows cannabis companies.

Why make the switch? One possible theory is that the Latin American Real Estate ETF, while the only one of its kind, never quite caught on with investors. The ETF had only $6 million in assets and an average daily volume of roughly $90,000. That's not exactly going to cut it when there are countless ETFs for investors to choose from. Plus, switching to a new focus from an existing ETF, rather than bringing a new issue to market, is cheaper for ETF Managers Group.

Building on the previous point, another reason for the switch could be the first-mover advantage. Since there aren't any marijuana ETFs for U.S. investors to buy, refocusing a fund that's struggling to grow its assets would make sense. There's clearly a lot of money flowing into the weed industry, and ETF Managers Group is hoping it can capitalize on that trend by catering to this demand.

According to a Securities and Exchange Commission filing, the switch to a cannabis-based index occurred on Dec. 26, 2017. 

A person holding up a puzzle piece with a question mark drawn on it.

Image source: Getty Images.

Should you buy this new pot ETF?

But the big question is: Should you jump on this opportunity to diversify across a broader swath of marijuana stocks? My suggestion would be that you wait.

There are a lot of unknowns here, and it could adversely affect your hard-earned money if thrown into the Alternative Harvest ETF. Namely, we don't what's going to happen with Attorney General Jeff Sessions, who's been an ardent opponent of pot's expansion for a long time. Sessions hasn't minced words about cannabis, and in May 2017 tried to coerce a few of his fellow lawmakers on Capitol Hill to repeal the Rohrabacher-Farr Amendment, which protects medical marijuana businesses in legal states from federal prosecution. He also rescinded the Cole memo in January 2018, opening the door for state prosecutors to bring cannabis charges against consumers and businesses. In other words, investing in pot stocks could be downright dangerous.

This and the ongoing losses that most pot stocks are producing aside, it's also a bit unnerving, per CNBC, that neither the current ETF or Tierra Funds' website mentioned this change in focus prior to the change. It was only mentioned through a Securities and Exchange Commission filing.

While we do know the ETF holds 38 pot stocks and sports a reasonable 0.79% net expense ratio, the concerns about Sessions waging war on the cannabis industry are just too great for investors to ignore. 

For the time being, the safest place for investors is on the sidelines.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.