Cannabis stocks flew higher in reaction to the legalization of recreational weed in Canada and the legalization of hemp in the U.S. as part of the 2018 Farm Bill.
In the time since those milestones, it's become apparent investors have "unrealistic expectations" that are negatively impacting the industry, according to CNBC's Jim Cramer.
What He Said
Many investors are working under the assumption that cannabis will be legalized at the federal level in the near-term, Cramer said during his daily "Mad Money" show Thursday.
To those investors assuming the U.S. Congress will soon take action, Cramer's message is simple: "don't hold your breath."
Recent advancements in the broader cannabis space haven't been the "slam dunk" many had hoped for, the CNBC host said.
The approval of CBD products as part of the Farm Bill is "less generous than it sounds," and companies need to sell products that are consistent with what the Department of Agriculture "tells you to or it is still off limits," he said.
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Why It's Important
A disconnect exists between what many cannabis companies are promising investors versus the reality on the ground, Cramer said.
Even investors who are believers in the long-term potential of the cannabis space need to be "wary of some of the wilder promises" executives are making, he said.
For the first time, investors are "starting to care about the actual results" companies are showing, Cramer said.
The "paradigm has now shifted," which creates a "much more rigorous" setting for the space moving forward, the CNBC host said.
"Without the promise of legalization here in the U.S., you have to make decisions on the cannabis stocks based on the numbers, no longer optimistic promises," he said. "And the actual numbers are complicated, to put it diplomatically."
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