Two MIT Sloan Master of Finance alumni are entering the burgeoning hemp industry with an electronic trading platform for emerging markets.

Brian Liston and Edward Woodford co-founded Seed CX, which is awaiting regulatory approval from the U.S. Commodity Futures Trading Commission. The company’s goal is to provide a sophisticated trading infrastructure for emerging commodities that have recently become more accessible due to dramatic market restructuring, regulatory change, or societal shift. Seed CX will provide a derivatives trading platform, a wholesale marketplace, and a pricing data feed for participants in commodity markets to hedge, trade the underlying product, and access economic information for decision making. Seed’s first commodity is industrial hemp, a plant that is grown for an array of uses including building materials, batteries, paper, biofuel, clothing, makeup, and food.

Recent changes to U.S. law have made it legal to cultivate hemp for the first time in decades. The U.S. Agriculture Act of 2014 federally legalized the cultivation of hemp in states that will allow it. Now, 29 states permit cultivation of the plant, and more are expected to pass resolutions supporting industrial hemp, according to Liston and Woodford. Processing and selling hemp goods is legal in all 50 states. Seed CX has estimated that the value of hemp produced in the United States will be $8 billion by 2020.

Liston and Woodford, both Master of Finance class of 2015, saw business opportunities in the law change. The two created Seed’s business plan while still students at MIT Sloan and have raised $3.5 million for their startup so far. “I was looking at things more from a trading perspective, and Edward had spent a lot of time doing research into new commodity markets,” Liston said. “We realized that the lack of data and the lack of a consolidated market was actually a big opportunity.” Liston said that if the platform is approved, it will be the only exchange providing these type of agricultural contracts.

Liston and Woodford recently discussed their plans for Seed CX, which is based in Chicago and has eight additional employees, including two other MIT alumni. Pending approval from the CFTC, Seed CX plans to launch its trading platform in September, in time for the beginning of this year’s hemp harvest, which typically runs to October.

Three things to know about Seed CX and the industrial hemp industry:

Seed CX is confronting the “stigma” of hemp.

“We had a lot of questions when we were raising money and when we first started pitching it. Most people really weren’t sure what hemp was,” Liston said.

Because hemp, like marijuana, is a variety of the cannabis sativa plant, the two are often confused. However, hemp has a much lower level of THC content, the psychoactive chemical that provides a recreational high. The confusion between the two means hemp cultivation is still controversial, according to Liston and Woodford. “We wanted to take on that stigma risk and we came into the industry quite early to help accelerate its growth,” Liston said. “We can change perceptions … and we can do it by running an ethical business with a core understanding of the financial markets, which are obviously highly regulated. We are working with a highly regulated commodity in a highly regulated industry.”

Hemp cultivation offers opportunity for U.S. tobacco farmers.

From an agricultural perspective, certain types of hemp and tobacco are similar products grown in comparable conditions. Both crops are harvested using the same tools and share a related supply chain. Farmers in Kentucky are considering hemp as a potential alternative to tobacco, as that market shrinks.

Seed CX will have multiple revenue streams.

As an exchange, Seed CX will charge an access fee per participant. People can trade through Seed’s web-based portal or they can connect directly to matching engines through an API. Every time a trade is executed on the platform, Seed will take a fixed fee. The company will also make money by selling aggregated data to analysts, vendors, and traders.

Andrei Kirilenko, who taught Woodford and Liston at MIT Sloan and is now the director of the Centre for Global Finance and Technology at the Imperial College Business School in London, said the two discussed the business idea, in particular the matching engine, with him.

“I encouraged them to put together a strong team to deal with legal and regulatory risks, which are their main risks,” said Kirilenko, who is also the former chief economist at the CFTC. “Can they succeed? Well, legal and regulatory risks were also the main risks for Uber—which is also a matching engine—and look at it now.”

The founders also plan to move beyond hemp. “We define ourselves as an emerging commodities exchange,” said Liston. Once the platform is operational, the company will explore new products in the emerging agricultural space.