MassRoots, a social network for cannabis users that wants to become the Nasdaq's first marijuana stock, had its listing application rejected for the second time on Monday.
The exchange first said no in August, when MassRoots lacked a bank underwriter. This time however, the exchange has a very different justification.
"The direct quote from the Nasdaq over the phone yesterday was, 'We are unwilling to move forward with MassRoots' application as its business model may be deemed as aiding and abetting the distribution of an illegal substance,'" MassRoots CEO Isaac Dietrich told Fortune.
"With this decision, we believe that the Nasdaq has set a dangerous precedent that could prevent nearly every company in the regulated cannabis industry from listing on a national exchange. This will have ripple effects across the entire industry, making it more difficult for cannabis entrepreneurs to raise capital and slow the progression of cannabis legalization in the United States," Dietrich said.
MassRoots will appeal. The social network has also requested the exchange's denial letter in writing and plans to notify the Securities and Exchange Commission about the Nasdaq’s decision.
The social network is currently listed on OTC Markets, a less prestigious stock exchange, under the symbol MSRT. The stock is currently trading at 74 cents a share.
It's not the first time MassRoots has run into obstacles stemming from the U.S.’s discrepant laws regarding marijuana, even as the industry continues to gain legitimacy. Medical marijuana is legal in 24 states and the District of Columbia, while recreational use has been allowed in four states and the District of Columbia. Laws regarding the transportation of marijuana are even murkier.
In February, Apple lifted a ban blocking cannabis-focused social apps, including MassRoots, from its App Store just three months after putting the restrictions in place. Apple had MassRoots because its guidelines reject "apps that encourage excessive consumption of alcohol or illegal substances."
To overcome the problem, MassRoots made its app available only to the states in which medical marijuana had been legalized.
Nasdaq does not comment on listing applications, a representative for Nasdaq told Fortune.