Back in August, The Financial Industry Regulatory Authority warned investors about marijuana stocks: "The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success."

The FIRA was referring to pump-and-dump schemes where fraudsters lure investors with aggressive, optimistic, and misleading information to create demand for shares of a small, thinly traded company with no history of financial success. Once share prices and volumes reach a peak, the con artists behind the scam sell off their shares at a profit, leaving investors with worthless stock.

Similarly, Mark A.R. Kleiman, professor of public policy at the University of Southern California at Los Angeles, has said he doesn't "see how there's money to be made producing an agricultural commodity," because once the market becomes competitive, prices will fall. He might be right, and many investors are finding it hard to weed out the good companies from the garbage ones.

USA Today reports, "Marijuana mania is fading as investors realize there's more smoke than fire at many companies, which show "pot-tential" but little actual revenue. CannaVest, which specializes in industrial hemp production, had climbed to $201 a share last month. It closed up 11% to $68.10 Friday, but it's lost nearly two-thirds of its market value."

Nonetheless, millions of investors and dollars have flowed into burgeoning companies on all corners of the marijuana industry. Back in January 2014, marijuana industry stocks surged anywhere from 20 to 1,700 percent. Marijuana sales reportedly averaged nearly $1 million per day in the first five days of legalization in Colorado. Policymakers expect sales in 2014 to top $600 million and the market in Washington state is projected to be at least as large. Studies predict a $10 billion market in the U.S. by 2018. Hundreds of websites and forums have popped up to discuss marijuana stocks and investing tips and there is even a Reddit forum dedicated to it.

Forbes describes how eager investors from all types of industries have moved into the fledgling pot stock market, with about as much legitimacy as a home grown poker game: "With Colorado and Washington now permitting the sale of marijuana for recreational use, and 20 states allowing it medically, some 60 publicly traded outfits, many snarled in a tangled, difficult-to-track web of interconnections, have popped up, claiming to be pot and hemp stocks. Almost none, mind you, emerged via an IPO and all the pesky disclosure and scrutiny that come with that path. Instead, real estate, marketing and oil outfits have miraculously morphed into medical marijuana and hemp companies, either through reverse mergers or simply changing their declared line of business. And just about every single one is thinly traded on the over-the-counter bulletin board, or Pink Sheets, where promoters can push them with the enthusiasm of a campus dealer."

Currently only very few states have a legal marijuana industry and it is still federally illegal and prosecutable. While enthusiasts and potential investors in states where cannabis is so far illegal may prepare for when their state does legalize the plant, that day is still far in the future. "You can't have an industry where they say, 'We can put you in jail for the rest of your life, but we probably won't today,'?" says Sam Kamin, a University of Denver law professor. "Who would invest in that? Who would put their money in that in terms of raising capital?"

And that represents the problem of the marijuana stock market today, which is that it lacks investor confidence and legitimacy. Everyone in it is in it to get rich quick and it doesn't help the investing public and many of those initial CEOs and major players are out to make a quick buck. Still, that doesn't mean there are companies that are being run correctly and have solid business plans and the assets and know-how to back them up.

The green rush is not limited to the United States; mining and resource exploration companies in Canada are taking notice. Companies that previously were chasing big gold discoveries are now seeking joint ventures with pot producers. Next Gen CEO Harry Barr says that the medical marijuana business is "slowly recapitalizing the junior mining industry" in Canada. "Who better to build the infrastructure of this new industry than a group of savvy mining execs? That's right, mining execs."

According to MSN Money, here are some of the companies to watch out for as the market heats up:

  • Medbox: A company which makes automated dispensing solutions for marijuana medications.
  • AVT Inc.: Used to produce vending machines, but has now transitioned to automated retail machines. Medbox announced a purchasing agreement and now spends half a million dollars a year buying dispensary units from AVT.
  • Advanced Cannabis Solutions: Advanced Cannabis Solutions (CANN) buys growing facilities and leases them to growers and is also looking to build a consulting and other marijuana-related businesses.
  • CannaVest: One of the bigger players in the industry, the company produces Cannabidiol, a marijuana concentrate, from hemp.
  • Cannabis Sciences: One of the most followed marijuana stocks, Cannabis Sciences (CBIS) is staffed with PhDs and the company is a leader in THC product research for medicinal markets, two of which focus on HIV and cancer.
  • Fusion Pharm: Fusion Pharm's (FSPM) PharmPod product is a "plug-and-grow" hydroponics solution and the company looks to capitalize on commercial growers and small operations with its scaleable product.
  • GW Pharma: GW Pharma (GWPRF) is one of the few cannabis stocks that trades on a major exchange (Nasdaq), meaning its financial information is much more closely regulated. The company is a biotech based in the U.K. developing cannabinoid medications for multiple sclerosis and cancer.
  • Hemp Inc.: Using hemp as a key ingredient, Hemp's (HEMP) supplements seem to fall in three key categories: protein, sexual performance and general nutrition. Hemp does not file with the SEC.
  • mCig: mCig's (MCIG) product is a $10 mini-vaporizer for bud and wax measuring just over 5 inches long and offering three different heat settings. The first generation of its product launched at the end of last year and sold out in several days.
  • Medical Marijuana: Medical Marijuana (MJNA) produces a series of cannabinoid oil products including a chewing gum, shampoo and lotion, and liquid CBD oil. The company recently had a lawsuit filed against it, however, suggesting potential fraud.
  • Nuvilex: Nuvilex (NVLX) shares gained 258 percent in 2013. Nuvilex is a biotech company with research focused on a process to protect healthy cells from disease, which it hopes to use to fight breast cancer, pancreatic cancer and diabetes.
  • GrowLife: GrowLife (PHOT) makes equipment for growing cannabis and has sold 150,000 units over 25 years. The Phototron system, is advertised to speed up harvesting by three to four times.
  • Vape Holdings: Vape Holdings (VAPE) produces a ceramic nail for dabbing which is superior to the glass or titanium because it is easier to clean, more durable and lasts longer.
  • Terra Tech: Terra Tech (TRTC) uses hydroponics to grow vegetables and herbs but plans to focus on marijuana or hemp when legally feasible. The company's produce is currently available in markets in New Jersey, Connecticut and New York.