Legal marijuana is among the buzziest investments on Wall Street today. Over the trailing-two-year period, nearly all of the largest pot stocks by market cap have delivered triple- or quadruple-digit percentage gains for marijuana investors, handily outpacing a strong bull market.

In recent months, excitement has begun to build as our neighbor to the north prepares to legalize recreational cannabis. In Canada, medicinal marijuana has been legal since 2001, and Prime Minister Justin Trudeau has intimated for years that he'd like to see adult-use cannabis made legal during his term. With the Cannabis Act presented and prepared for vote in June, it looks to be simply a matter of time before adults over the age of 18 are legally allowed to buy weed in Canada.

A man smelling the cannabis leaves of a potted plant.

Image source: Getty Images.

Has support for legal marijuana in the U.S. peaked?

Meanwhile, progress in the U.S. has been at a snail's pace. Even though 29 states have broad-sweeping medical marijuana laws on their books and nine states have OK'd the use of recreational pot, the federal government has stood by its Schedule I classification. As a Schedule I drug, marijuana is wholly illegal, considered to be highly prone to abuse, and has no recognized medical benefits.

Yet we know from countless national surveys undertaken from the likes of Gallup, Pew Research Center, and Fox News that the American public favors the idea of legalization. Between 1995, the year prior to California becoming the first state to legalize medical marijuana for compassionate-use patients, and 2017, Gallup finds that support for legalization soared from 25% to 64%. Similar favorability is seen in the other polls, as well.

However, a newly released survey from CBS News on Friday, April 20 delivered a bit of a surprise. After polling around 1,000 adults across the country in April 2017, CBS News found that 61% supported legalizing pot. But in the April 2018 poll, this figure had fallen 2 percentage points, to 59%, with 36% opposed (up 3% from the previous year). Keep in mind that the margin of error for this survey was plus-or-minus 4%, so this 2% drop from the previous year still falls within that range.

Nevertheless, it's the first time CBS News has reported a year-on-year decline in support of legalizing cannabis, and it certainly makes one wonder whether support for the legal cannabis movement is plateauing. If the industry has any hope for a rescheduling or descheduling of cannabis, it will need favorability to continue marching higher. 

A potted cannabis plant next to a bottle of wine.

Image source: Getty Images.

A few things to keep in mind

Personally, I believe it's a bit early to suggest that favorability has peaked, albeit it's not out of the question. Here are a few reasons to believe that support could climb once again.

To begin with, Gallup has reported some fairly wild vacillations in nationwide legalization support in recent years. After reporting 50% support in 2011 relative to 46% against the idea, the November 2012 poll reversed, with 48% in support and 50% against legalization. Once more, Gallup's poll showed a regression from support of 58% in 2013 to just 51% support the following year. Yet as noted, support for legalization hit an all-time high of 64% in its October 2017 survey. One down year doesn't negate this trend, which I believe is important for investors to keep in mind. 

Next, the CBS News poll data shows pretty clearly that Americans view marijuana as a far less dangerous drug than alcohol and other drugs. When cannabis was compared to most other drugs, 63% of respondents believed that it was "less dangerous," while another 28% viewed it as "just as dangerous." Similarly 51% chose alcohol as more dangerous than marijuana, with just 9% suggesting that cannabis is more dangerous than alcohol.

Lastly, the CBS News survey revealed that respondents favored the idea of state governments determining pot's legality relative to the federal government by a nearly two-to-one margin (61% vs. 33%). All of these statistics would suggest that favorability does have an opportunity to head higher in the years to come.

Cannabis leaves next to biotech lab equipment.

Image source: GW Pharmaceuticals.

A more important question

The bigger question is: Will it matter if favorability pushes higher? To that end, I'm not entirely certain.

At the federal level, lawmakers have mostly swept cannabis legislation under the rug. What's more, Republicans are firmly in control of the legislative branch -- at least until midterm elections roll around later this year and the new Congress takes shape in January 2019. The GOP has historically had a more negative view of cannabis than Democrats and Independents. This likely means little expectation for change in the interim.

Perhaps an under-the-radar catalyst for the marijuana industry that's being overlooked is the review of GW Pharmaceuticals' (NASDAQ:GWPH) lead drug Epidiolex by the U.S. Food and Drug Administration (FDA) for the treatment of two rare types of childhood-onset epilepsy. Epidiolex is a cannabidiol (CBD)-based compound -- the non-psychoactive component of cannabis -- and no cannabinoid-based drug has ever previously been approved by the FDA. GW Pharmaceuticals recently received unanimous support for approval from the FDA's panel for Dravet syndrome and Lennox-Gastaut syndrome, and it's looking like a better than 50-50 shot that the company's lead drug will be approved on or before its June 27 decision date. 

Why does this matter? Simple: if the FDA says a CBD-based drug has medical benefits, then it could lead to sweeping reforms for CBD use at the federal level. If CBD laws are changed, it could open the door for broader medical cannabis laws, inclusive of THC -- tetrahydrocannabinol, the psychoactive ingredient of cannabis that gets the user "high" -- to be reviewed. In effect, GW Pharmaceuticals' Epidiolex could be a major catalyst for change in Washington.

Still, I wouldn't risk putting your money behind U.S. pot stocks until we see material changes at the federal level.