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Mike Gorenstein, marijuana firm Cronos Group's founder and CEO, poses following an interview in New York, U.S., Feb. 27, 2018.BRENDAN MCDERMID

For the first time ever, shares of a Canadian cannabis producer started trading on the Nasdaq, in a move that could help validate the young sector in a major equities market.

After getting approved to list its stock on the index last week, Cronos Group Inc. made its debut on the U.S. venue on Tuesday, falling 2 per cent in midday trading to US$7.62. Its shares are also listed on the TSX Venture Exchange, where the price rose 11 per cent on Monday, as investors geared up for the launch.

The laws governing cannabis in the United States are murky. While the drug is legal in some U.S. states, it remains prohibited under federal law. This dynamic has kept many U.S. investors on the sidelines as they grapple with the uncertainty that shrouds the industry south of the border.

That doubt has also stopped Americans from investing in Cronos even though it doesn't do business in the United States, says Michael Gorenstein, the company's chief executive officer. He says the prestige and credibility that comes with a Nasdaq listing should quell those fears and help set Cronos apart from other Canadian growers.

"This does help provide a lot of comfort and clarity," he said. "If it were illegal, the Nasdaq wouldn't list it. By being listed on the Nasdaq, it removes that doubt from their mind."

It also gives Cronos wider access to U.S. investors that chose not to buy into the company through its ticker on the over-the-counter market, which is how most large Canadian cannabis companies try to reach American investors. That's because most U.S. discount brokers don't offer clients the ability to buy and sell Canadian shares on their platforms.

He expects other cannabis companies will follow suit should they qualify to list on Nasdaq. To do so, they have to operate in countries where cannabis use is federally legal.

Nasdaq Global Market is already home to several public issuers that make and research medicines that employ parts of the marijuana plant to treat certain health conditions.

One is British-based GW Pharmaceuticals PLC, which is developing a cannabinoid product for epilepsy. Another is Scythian Biosciences Corp., which is researching how marijuana can treat concussions. The Toronto-based company, which is also listed on the TSXV, started trading on the Nasdaq last week. In January, Aphria Inc. of Leamington, Ont., acquired a stake in Scythian and its CEO, Vic Neufeld, is a director.

These companies, as with all others in the pharma space, must conduct clinical trials and meet standards set by the U.S. Food and Drug Administration.

Canadian growers aren't held to the same bar. Health Canada has handed out 90 licences to cultivate cannabis under the medical regime. Dozens of these firms have already gone public in Canada, selling shares in order to raise cash to construct and expand their facilities. For most, accessing cheap debt hasn't been an option.

Since the rules around marketing are strict, many are using their stock listing to pump their brands, plans and products in a deluge of news releases.

"We care more about making sure that we have controls and a process behind everything we do rather than having a press release every week," Mr. Gorenstein added. "We want to operate in a way that makes investors feel comfortable about cannabis as a legitimate industry."

To prepare for its Nasdaq listing, Cronos added 100 new control points related to financial reporting, including how it verifies invoices to ensure it pays the right amount. It also made moves to improve its governance and tightened its internal policies around insider trading and cybersecurity.

Last week, Kingsdale Advisors called on cannabis companies to beef up their governance as a way to protect themselves against activists and hostile bidders.

Cronos is a small company. During the past year of results to Sept. 30, it posted product sales of just $2.6-million. Most of the income it has recorded has been from the sale of shares in other marijuana stocks, including ABcann Global Corp. and The Hydropothecary Corp. Yet, the company has a market cap of $1.5-billion.

Cronos holds two licences in Canada to grow and sell dried marijuana flower. It serves the medical market with a brand called Peace Naturals, which has a facility not far from Barrie, Ont. It says that it's going to target the Canadian recreational market with its Original B.C. brand, which is based in the province's Okanagan Valley.

The company is also pushing into the medical cannabis markets in Israel, Germany and Australia.

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