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As we look back on the year, 2016 may very well go down as the greatest year ever for marijuana and the cannabis industry. Over the past 12 months we've watched the industry evolve before our eyes, and in some cases seen legal marijuana spread to new states.

Of course, there were also some setbacks, as would be expected for a substance still considered illegal at the federal level. Let's have a brief look at some of the highlights and lowlights marijuana endured in 2016.

Marijuana's greatest highlights in 2016

Unquestionably, the greatest achievement for cannabis in 2016 was its overwhelming success on Election Day. Residents in nine states went to the polls on Nov. 8 to decide the fate of their respective marijuana initiatives and amendments, and pot only failed to receive a "yes" in one state (sorry Arizona). On Election Day, residents in four states wound up legalizing recreational marijuana (California, Maine, Massachusetts, and Nevada), while three additional states (North Dakota, Arkansas, and Florida) legalized medical cannabis. Montana also passed its pot provision, which was designed to roll back laws that were impeding its already legal medical marijuana business.

However, it wasn't just voters who did the talking in 2016. Interestingly enough, the legislatures of both Ohio and Pennsylvania legalized medical pot. The legislative process is the only process available to legalize medical or recreational cannabis in about two dozen states, so to see legislatures stepping up and making progressive changes certainly puts some wind in the sails (and sales) of medical marijuana businesses.

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Legal marijuana users were also afforded some extra protections in 2016. In August, the Ninth Circuit Court of Appeals ruled in unanimous favor (3-0) to prevent the federal government from providing funding for the prosecution of recreational or medical marijuana users in states that have chosen to legalize pot. It's always possible the Court could change its mind in the future, but for now it would appear the federal government's hands-off approach to marijuana at the state level will persist.

It was also an encouraging year for marijuana based on a few key studies that were released. In June, a team of 10 researchers from New Zealand, the University of California, Davis, Duke University, Arizona State University, and King's College London published a 20-year study examining the effects of cannabis on 12 common health measures. More than 1,000 adults from Dunedin, New Zealand were studied at multiple intervals over this 20-year period, with 95% of participants being retained. The results showed that marijuana use only had a statistically significant adverse impact on periodontal disease, which isn't so bad when potentially more serious factors such as lung function were considered.

Lastly, the election of Donald Trump as the 45th president could be viewed as a positive for the industry. Though Trump hasn't come out in favor of recreational marijuana, he was quoted as being "100 percent" behind the idea of legalizing medical marijuana during his campaign. It's unclear if that'll lead to real change on Capitol Hill, but it certainly can't hurt the industry if the president favors legalizing medical cannabis.

You could certainly say a lot went right for marijuana in 2016 -- and based on investment firm Cowen & Co's target of $50 billion in legal sales by 2026, a lot more is expected to go right in 2017 and beyond.

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Yet, while the year was arguably cannabis' best ever thanks to its Election Day surge, it also wasn't perfect.

Marijuana's defining moment in 2016

The defining moment for marijuana in 2016 just might be the August decision from the U.S. Drug Enforcement Agency to deny petitions requesting marijuana be rescheduled. As a schedule 1 drug, marijuana is considered to be illegal and have no medical benefits. The DEA determined that it made sense to leave pot's scheduling unchanged given a lack of clinical efficacy and safety data, as well as a minimal understanding of the chemical composition of cannabis.

Choosing to keep pot as a schedule 1 substance allows two of the most pervasive disadvantages for the cannabis industry to continue. For starters, banks are still keeping their distance from marijuana businesses for fear of federal prosecution at some point in the future. With most cannabis businesses being unable to secure basic banking services, they're left many to deal solely in cash, which is a major security concern and a growth inhibitor.

Also, businesses that sell schedule 1 substances are disallowed from taking normal corporate tax deductions. Having to pay taxes on their gross profits instead of net profits leaves even less in the kettle for pot companies to expand and hire with at the end of the year.

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However, this wasn't the only unnerving moment for those who supported the legalization of pot in 2016. Perhaps even scarier were the September findings out of Colorado that, based on wholesale cost data from Tradiv, pot costs have fallen from $2,400 to $2,600 per pound in October 2015 to just $1,400 to $1,600 per pound in August 2016.

On the surface, lower marijuana costs might be viewed as a positive, but the reason behind the drop is what's worrisome. In Colorado, larger businesses have gobbled up what few licenses have been sold, and they've taken advantage of the fact that there's no limit on the number of plants a facility can grow in Colorado to flood the market with marijuana. In other words, an oligopoly of marijuana players in Colorado appears to be driving down margins with the intent of pushing small businesses out of the picture. This is noteworthy because many marijuana supporters favor small business over big business and would prefer to keep it that way. On the other hand, bigger players could give investors their first real shot at investing in the pot industry.

It's anyone's guess what 2017 holds for the cannabis industry, but I'd be willing to bet on yet another volatile up and down year.