Canadian ETF issuer Purpose Investments and HANetf have removed a holding from Europe’s first cannabis ETF after the firm no longer met the index methodology’s criteria.

Namaste Technologies was removed from the Medical Cannabis and Wellness UCITS ETF (CBDX) following the announcement Choklat, a firm Namaste holds a 49% equity position, received a processing license from Health Canada to produce a line of cannabis-infused chocolate bars, drink mixes and infused sugar.

The sale of cannabis-infused edible products will generate revenue in the adult-use cannabis market, outside the scope of the index methodology.

The removal of Namaste highlights the strict rules CBDX must comply with considering some European jurisdictions do not allow recreational use of cannabis.

Product Panel: Purpose’s medical cannabis ETF

Nawan Butt, portfolio manager at Purpose Investments, commented: “Namaste’s entry into the crowded recreational market is contradictory with the index’s overall thesis in identifying long term value trends in the medical and wellness space.

“Although we believe this could be positive for those focused on near term monetisation of the Canadian adult use cannabis industry, the long-term value is still within the scientific medical approach.”

CBDX was unveiled via white-label platform HANetf last month and has gathered $7m assets since launch.

Physically replicated, CBSX tracks the Medical Cannabis and Wellness Equity index provided by Solactive, which consists of companies with legal business activities in medical cannabis, hemp and the CBD industry.