The U.S. marijuana industry is enjoying some tailwinds. During the 2020 election, four states voted to legalize recreational pot use by adults -- bringing the total number with such laws to 15 (plus the District of Columbia) -- while two joined the group of states that have OK'd its use for medical purposes, bringing that total to 36.

Even before these developments, forecasts for the growth of this industry were impressive. Research firm New Frontier Data projects that the legal cannabis market in the U.S. will be worth $35 billion in 2025, up from $13.2 billion in 2019. And the trends have made many cannabis stocks into attractive investment opportunities.

Two companies that I believe could be major players and big winners in the long run are Cresco Labs (OTC:CRLBF) and Innovative Industrial Properties (NYSE:IIPR). Here's why I think  both could turn $200,000 investments into $1 million in 10 years. 

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The case for Innovative Industrial Properties

Innovative Industrial Properties is a real estate investment trust (REIT) focused entirely on the cannabis industry. But it does more than lease properties to pot growers. U.S. banks are largely unwilling to do business with cannabis companies because it would get them in trouble with the federal government. As a result, it has been difficult for these companies to access basic banking services or take out loans.

That's where Innovative Industrial Properties comes in. By buying properties (such as production facilities) from cannabis companies and leasing them back to the sellers, it frees up vital capital for pot cultivators and retailers. The list of the company's tenants includes some of the most notable multistate operators (MSOs) in the U.S., such as Cresco Labs and Trulieve Cannabis (OTC:TCNNF).

At the end of 2020, Innovative Industrial owned 66 properties in 17 states, with an average remaining lease term of about 16.6 years. Its business model has been highly successful thus far. For the first three quarters of 2020, it recorded revenue of $79.8 million, a whopping 195.6% year-over-year increase. The company's earnings per share jumped by 94.2% to $2.33 during the same period.

Two cannabis leaves on top of a $100 bill.

Image source: Getty Images.

It is worth noting that marijuana legalization at the federal level could pose problems for Innovative Industrial Properties since it would allow banks to do business with pot companies, thus creating competition for its lease-back program. However, there are at least two reasons why investors need not worry too much about this potential problem.

First, even though the more marijuana-friendly Democratic party currently occupies the White House and has control of Congress, President-elect Joseph Biden has made it clear that he does not support legalization at the federal level. Rather, he is in favor of decriminalizing and rescheduling the substance, which would not totally liberate pot companies.

Second, even if legalization were to happen, the U.S. cannabis market would reach brand new -- perhaps unforeseen -- heights. In this environment, it would still be possible for Innovative Industrial Properties' lease-back program to be successful, even in the face of new competition from banks.

Having already established itself as a leader in its field, it's set to profit from the further growth of the cannabis industry in the U.S., whether or not federal laws shift in favor of pot growers. And with the cannabis company's share price already having grown by more than 800% since its December 2016 IPO, another 400% increase by 2031 appears well within the reach.

2. Cresco Labs

Vertically integrated cannabis company Cresco Labs has a presence in nine U.S. states, including six of the 10 most populous. It entered the California market thanks to its January 2020 acquisition of Origin House in an all-stock transaction valued at $428.2 million. Origin House was one of the leaders in the cannabis sector in the Golden State, the largest regulated pot market in the world. Cresco's products are now sold in over 575 dispensaries in the state. Sales of cannabis products are forecast to keep growing in California, and the company is well-positioned to profit from this trend in the long-term.

The pot grower also has strong presences in Illinois and Pennsylvania; it holds a leading market share in both states. Cresco Labs' financial results speak for themselves. During the third quarter, the company recorded revenue of $153.3 million -- a 323.4% year-over-year increase. The company's top line also increased by 63% compared to the second quarter.

On the bottom line, Cresco Labs recorded net income of $4.9 million, which was much better than its $8.6 million net loss in the prior-year period. Cresco Labs is well-positioned to ride the growth wave currently sweeping the U.S. marijuana market.

In the long run, the company is likely to remain one of the major players in this space, thanks to its already-strong presence in some of the most lucrative U.S. markets. Those interested in profiting from the growth of the marijuana industry would do well to consider buying shares of Cresco Labs. 

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.