The momentum behind marijuana legalization has been practically unstoppable since the beginning of 2016.
With the exception of Arizona, which narrowly voted against an initiative that would have legalized recreational pot, residents in eight other states voted in favor of legalizing medical or recreational cannabis in the November election. The year ended with 28 states having approved medical cannabis, and twice as many recreation-legal states (eight) as at the end of 2015 (four).
The dollar figures behind legal weed sales have also been enormous. The recent passage of Prop 64 in California should open the door for an additional $1 billion in annual tax and licensing revenue for the state, while in Colorado it took just 10 months for the state to record more than $1.1 billion in legal cannabis sales. By comparison, it took Colorado 12 months to generate $996.2 million in legal pot sales in 2015. According to investment firm Cowen & Co., legal marijuana sales could grow by an annual rate of 23% through 2026, eventually hitting $50 billion in annual sales.
Two groups of people who still oppose marijuana's expansion
The expansion of marijuana at the state level has all been made possible by a dramatic turnaround in consumer sentiment toward the drug. In the mid-1990s, just 25% of all respondents in Gallup's nationwide poll wanted to see marijuana legalized nationally. By 2016, this figure had jumped to 60%, representing an all-time high.
However, Gallup's national poll also highlights two groups of people that still oppose the legalization of marijuana: those affiliated with the Republican Party, and seniors aged 55 and up.
According to Gallup's 2016 survey, just 42% of adults who identified as Republican want to see marijuana legalized. It's worth noting that this is more than double the 20% of Republicans who wanted to see weed legalized nationally in 2003 and 2005, so there is some semblance of a sentiment shift underway. Nonetheless, a majority of Republicans would still prefer not to have marijuana legalized nationally.
Should this come as much of a surprise? Probably not, because if you look at the 22 states that have yet to legalize medical marijuana, quite a few are headed by Republican lawmakers who generally have a more conservative view of marijuana. And remember, marijuana is still a schedule 1, and therefore illicit, substance at the federal level.
By a similar token, just 45% of seniors aged 55 and up support the idea of nationwide legalization of cannabis. This is 16 percentage-points higher than the surveys conducted in 2003 and 2005, which demonstrates a softening in the views of the 55 and up crowd. Yet it's also a clear reminder that opposition to marijuana still exists and can play a critical role in whether or not additional states legalize pot in the years to come.
Inherent disadvantages remain a problem, too
Though the opposition to marijuana has ebbed dramatically over the past decade, it's still unlikely that the cannabis industry is going to be given a clear pathway to success. A number of inherent disadvantages continue to stand in the way, and unlike the big changes we've witnessed in the polling data, there's little likelihood of these inherent disadvantages disappearing anytime soon.
To begin with, the federal government, and more specifically the U.S. Drug Enforcement Agency, has retained the drug's schedule 1 status. The DEA had an opportunity to review two petitions on marijuana last year and chose not to alter its scheduling after careful review. The DEA cited marijuana's high potential for abuse, the lack of currently accepted medical uses, and the lack of a currently acceptable safety profile as the three reasons why it wouldn't be changing the scheduling of pot. Given how long it can take for petitions to work their way up to the DEA, it could be years before it once again considers altering the scheduling of marijuana, thus confining progress to individual state votes or legislative action.
Another problem is that two dozen states lack the initiative and referendum process. In layman's terms, this means 24 states require marijuana's expansion, either for medical or recreational purposes, to be voted upon entirely by the legislature. In other words, even though the favorability of marijuana is improving, in about half the states in the U.S. it simply doesn't matter because legislators hold the power to propose and vote on cannabis legislation.
Additionally, there are long-running issues that pot businesses will face as long as marijuana remains a schedule 1 drug. For one, since marijuana is illegal, businesses that sell marijuana aren't able to take normal tax deductions. This leaves pot businesses to pay tax on their gross profits instead of net profits, which essentially cheats them out of extra income they could use to hire, buy new products, and expand.
The other long-running issue is that access to basic banking services is almost nonexistent. Since banks answer to the federal government, any attempt to offer checking accounts or lines of credit to pot businesses could be construed as money laundering. For this reason, many cannabis dispensaries have been forced to deal solely in cash, which is a major security concern and an inhibitor of growth.
Long story short, even though opposition to marijuana still exists, it's the long-running inherent disadvantages derived from the federal government's scheduling status that are a much bigger deterrent to the industry's success.
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