The marijuana industry is red hot, and it has the rapidly changing views of the public to thank.
In 1995, just prior to California becoming the first state to legalize medical cannabis for compassionate use, only 25% of respondents in Gallup's national poll wanted to see pot legalized nationally. That was essentially unchanged since 1980. However, since 1995 we've seen a steady uptick in support for weed. By 2005, 36% approved of its nationwide legalization. In 2011, marijuana's approval hit 50% for the first time ever. Finally, in 2016 it topped 60%, logging an all-time high. It's this rapid shift of opinion that's allowed marijuana to expand so quickly at the state level.
Last year, residents in nine states voted on marijuana initiatives, and eight were approved. The lone outlier, Arizona, narrowly missed out on making it a clean sweep for cannabis by only 2% of the vote. The year ended with 28 states having approved medical cannabis, and eight states having legalized recreational, adult-use pot. We also witnessed two states in 2016 (Pennsylvania and Ohio) legalizing medical cannabis entirely through the legislative process. In other words, it wasn't even put to on a ballot for state residents to vote on. This push from legislators to legalize pot adds an entirely new dimension to marijuana's momentum.
The result for the industry has been an exceptionally fast growth rate. Cannabis research firm ArcView estimates that compound annual growth for the legal marijuana industry could be 30% through the end of the decade, whereas investment firm Cowen & Co. is calling for $50 billion in legal sales by 2026, which is good enough for a compound annual growth rate of nearly 24%.
You'll never guess who wants to see cannabis legalized
Marijuana's expansion is incredible. Still, it may not be as jaw-dropping and surprising as the study released by the Pew Research Center last month that showed a surprising group of individuals who want to see marijuana legalized on a national scale.
Between May and August of 2016, Pew interviewed a national sample of more than 7,900 police officers in local police and sheriff departments with at least 100 sworn officers to get their opinion on whether or not marijuana should be legalized nationally. Pew's findings showed that:
- 32% of the police officers believe cannabis should be legal for recreational and medical purposes nationally.
- 37% of police officers want to see marijuana legalized nationally for medical use only.
- 30% of police officers believe pot should remain illegal nationally.
You'll note that rounding keeps the figures from adding perfectly to 100%, but that by more than a two-to-one margin police officers around the country would prefer to see marijuana at least legalized for medical use. Though within the margin of error of two to three percentage points, fully legalizing the drug is also slightly more popular than keeping it entirely illegal. Consistent with other previous studies, younger police officers are considerably more likely to favor some form of legalization than older police officers (ages 50 and up).
It's worth pointing out that police officers were still notably more conservative in their views than the general public. Pew questioned more than 4,500 adults between August and September 2016 and found that 49% wanted to see cannabis legalized for recreational and medical purpose; 35% wanted to see it legalized for medical use only; and just 15% opposed its national legalization. Once again, rounding keeps these figures from adding to 100%.
Even with the support of police, cannabis remains a dicey investment
However, even with the surprising support of law enforcement, it's unlikely that we're going to see any changes to the scheduling of cannabis at the federal level anytime soon.
For those who may not recall, the U.S. Drug Enforcement Agency had the opportunity to review two petitions to reschedule marijuana last summer, ultimately choosing to leave the current scheduling untouched. The DEA deemed that there was insufficient safety and efficacy data available for review, and thus decided to leave pot as an illegal substance. Considering how long it can take for petitions to make their way to the DEA, it's unlikely the regulatory agency will be revisiting pot's status in the near future.
Interestingly enough, the DEA's ruling also exposed perhaps the greatest irony of the debate surrounding whether or not marijuana should be legalized nationally. Both the DEA and lawmakers in Washington want more safety and efficacy data that they can comb through to make a smart decision on marijuana's future. Yet this data is extremely hard to come by as long as access to cannabis remains highly restricted by the DEA's schedule 1 status. Though we've witnessed some easing of the research restrictions of marijuana at the federal level, it's still far from being considered open clinical research.
In short, it means the marijuana industry should expect to continue dealing with the burdens of a schedule 1 status for some time to come. This means accepting the fact that access to basic banking services, such as a checking account and lines of credit, will remain limited at best, and coming to terms with the fact that normal business deductions will remain out of reach as long as businesses are selling a federally illegal substance. For the investor, these two inherent disadvantages could be enough to stay on the sidelines until big changes are made at the federal level.
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