Marijuana had an incredible 2016, and the fast-growing pot industry is looking to continue building on that momentum in 2017.
After beginning 2016 with cannabis legal in 23 states for medical purposes, and four states for adult use, the year closed with 28 states having legalized medical marijuana and residents in eight states having legalized recreational weed. Most notably, legislatures in Pennsylvania and Ohio passed medical marijuana laws without bringing votes to the people, while residents in California overwhelmingly passed Prop 64 (recreational legalization), which could add $1 billion, or more, in annual tax and licensing revenue to the state.
The dollar figures surrounding the legal pot industry are truly mind-blowing. Cannabis research firm ArcView has predicted that legal marijuana sales could grow by 30% annually through the remainder of this decade, while investment firm Cowen & Co. went a step further and forecast legal sales growth from $6 billion to $50 billion over the next decade, or more than a 23% compound annual return per year.
Safety continues to be a priority for regulators
However, even these dollar figures aren't enough to sway the federal government, which maintain's the drug's schedule 1 status. As a schedule 1 drug, marijuana is deemed illegal and defined as not having any medically beneficial qualities. In August, the U.S. Drug Enforcement Agency denied petitions that requested the rescheduling or de-scheduling of cannabis.
Safety remains the primary reason why the DEA and lawmakers on Capitol Hill have held off on rescheduling marijuana for medical purposes. Aside from a lack of approved clinical trial data -- the Food and Drug Administration hasn't exactly been forthcoming with trials designed to test the medical capabilities of cannabis -- regulators have been concerned with the possibility of pot falling into the hands of adolescents, or what might happen if an impaired individual gets behind the wheel of a vehicle.
For example, Sen. Jeff Sessions (R-Al.), Donald Trump's appointee for U.S. Attorney General, stated in a Senate drug hearing this past April that there's been a 20% increase in traffic-related deaths caused by marijuana in select states. As an ardent opponent of marijuana's expansion, demonstrating the safety of pot could prove difficult.
But what if Sessions has it all wrong?
Shocking new findings suggest this worry could be overstated
According to a new study published online in the American Journal of Public Health in November by a team of nine researchers, a surprising trend emerged in medical marijuana legal states.
After the team of researchers reviewed U.S. traffic fatalities between 1985 and 2014 using the Fatality Analysis Reporting System, the data showed that, on average, medical marijuana legal states had lower traffic fatality rates than non-medical marijuana legal states. This paralleled a 2013 study from three researchers that was published in the Journal of Law and Economics, which showed an 8% to 11% decline in traffic fatalities in the year immediately following the legalization of marijuana.
As stated in the abstract of the recently released study published in AJPH,
"Medical marijuana laws were associated with immediate reductions in traffic fatalities in those aged 15 to 24 and 25 to 44 years, and with additional yearly gradual reductions in those aged 25 to 44 years. However, state-specific results showed that only seven states experienced post-MML (medical marijuana legal) reductions. Dispensaries were also associated with traffic fatality reductions in those aged 25 to 44 years."
For instance, both California and New Mexico saw their traffic deaths fall by 16% and 17%, respectively, immediately following the passage of medical marijuana laws in the states. However, traffic deaths have gradually increased since this immediate drop.
It's also important to note that researchers are pretty clear on two things. First, marijuana does indeed impair drivers, but certain hypotheses suggest that marijuana users may be more "aware" of their impairment than drivers who've consumed too much alcohol. Another possibility is simply that drivers have completely substituted marijuana for alcohol and stayed off the roads.
Secondly, researchers are crystal clear that while the data demonstrates an association between medical marijuana legal states and reduced traffic deaths, it can't prove cause and effect. Further studies with more defined variables would be needed to do that.
Still much to be done
Perhaps the biggest hurdle standing in the way of defining pot's safety as it pertains to driving is a way to measure how much of an impact it has on a driver's ability to react and make decisions. With alcohol there's a pretty simple line in the sand: if you're above a blood-alcohol content of 0.08%, you're considered legally impaired. There is no such scale for measuring how impaired a driver is who's used marijuana, and determining this scale could take countless studies and years to develop.
Making matters more difficult, THC, the psychoactive component of marijuana, can stay in an individual's system for many days after use, whereas alcohol metabolizes through the body much faster. This can make it doubly difficult for conventional tests to determine impairment levels.
This isn't to say there aren't a handful of companies pushing the envelope of innovation. Both Hound Labs and Cannabix Technologies are testing their versions of marijuana breathalyzers that they believe could make law enforcement's job a lot easier. But once again, without a concrete scale to determine what level of impairment is unacceptable, these technologies could struggle to find buyers.
Long story short, there's still a lot left to be done in demonstrating to lawmakers on Capitol Hill that marijuana use won't lead to a catastrophe on the roadways if legalized nationally. This uncertainty, along with a number of inherent disadvantages faced by cannabis businesses, is exactly why investors should be monitoring pot's progress from the safety of the sidelines.