A new federal legalization bill has been introduced in the House of Representatives called the States Reform Act. It would treat marijuana like alcohol and allow states to decide how best to regulate it. What's unique about the legislation is that it was introduced by Republicans, which gives decriminalization proponents hope that a bipartisan solution can be achieved.

That could give the pot sector fresh potential by opening new avenues of growth. Yet regardless of whether the current patchwork of state-by-state legalization stands or a new federal mandate comes into play, Curaleaf (CURLF -3.12%) and Innovative Industrial Properties (IIPR -1.29%) represent unique opportunities for investors to profit from their individual strengths.

Which is the better buy now? Here are the cases for why the multi-state operator (MSO) and the marijuana-focused real estate investment trust (REIT) are the best places for your money.

A close-up of a marijuana plant in a facility.

Image source: Getty Images.

The case for Innovative Industrial Properties

Rich Duprey: Innovative Industrial Properties was the first REIT targeting the ownership, management, and leasing of marijuana cultivation and processing properties, and it remains the leading one today. It owns 76 properties across 19 states, equal to some 7.5 million square feet, and all leased to state-licensed marijuana growers for an average period of 16.7 years.

That means that even if marijuana is legalized at the federal level -- and the forces pushing pot stocks to partner with Innovative Industrial dry up -- it will still have a steady stream of income for years to come.

Yet there's no reason to think legalization will negatively impact the REIT. Although many marijuana companies enter into sale-leaseback arrangements for their properties with IIP because access to financing through traditional financial institutions is unavailable because of federal regulations, IIP will still be able to make deals. It has long-standing relationships with many of the largest MSOs that won't be fractured by legalization and small cannabis companies will still need money beyond what they can qualify for from traditional institutions.

Just look at the REITs targeting the casino industry. They thrive today even though casinos are fully able to tap financing from banks. It will be the same with pot companies because they will be able to focus on growing their specialty marijuana strains, which is really their reason for existing, and not have to worry about being a property manager.

Like all REITs, Innovative Industrial is obligated to return 90% of its profits back to its shareholders, meaning investors can juice their returns through dividend payments. Since going public in 2016, the REIT has raised the payout 11 times and the dividend has since quadrupled in size.

Innovative Industrial's dividend yields just under 2% annually, well ahead of the S&P 500's 1.3% annual yield, making this REIT a strong candidate for any marijuana investor's portfolio.

Customers in a marijuana dispensary.

Image source: Getty Images.

The case for Curaleaf

Keith Speights: Curaleaf's revenue growth slowed and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were weaker than expected in the third quarter. However, the multi-state cannabis operator -- and the cannabis industry, in general -- faced some temporary headwinds with consumers spending less. Curaleaf still has great growth prospects ahead.

In particular, Curaleaf is well positioned in two key states that recently legalized recreational marijuana -- New Jersey and New York. The company holds one of 12 licenses in New Jersey and already operates four dispensaries in New York. Connecticut also presents a solid opportunity for Curaleaf. It's one of four licensed cannabis producers in the state.

Curaleaf's acquisitions should drive growth as well. Earlier this month, the company announced it was buying Tryke for $286 million. This deal was cheered by investors. The addition of Tryke will expand Curaleaf's position in the Arizona, Nevada, and Utah cannabis markets.

The U.S. cannabis market continues to grow. There's a possibility that federal cannabis reform could be on the way. Curaleaf stands as one of the market leaders and claims one of the strongest balance sheets in the industry. It's poised to be a big winner over the long run. 

Which is the better buy?

Investors have toned down their enthusiasm for marijuana stocks since the early days when cannabis was being legalized in Canada. They all seemed to rocket to new heights before quickly burning out.

Over the past three years, though, both Curaleaf and Innovative Industrial Properties have outpaced the benchmark index even as it continuously hits new record highs. That suggests an investor would do well with either the MSO or the REIT taking up residence in their portfolios.