It's incredible to think about the progress the cannabis movement has made in what amounts to a generation. At the turn of the century, 31% of respondents polled by Gallup were in favor of legalizing marijuana nationally, while just a small handful of states, including California, had given the OK for physicians to prescribe medical cannabis. The sheer idea of recreational legalization would have been laughable at this point. 

Today, an all-time record 2 out of 3 Americans surveyed by Gallup favor legalizing marijuana. Further, 33 states have OK'd the medical use of cannabis for specific ailments (which can vary by state), with 10 of these states also allowing adult consumption. With the exception of Vermont, 9 out of 10 allow for the retail sale of adult-use weed.

In a generation, we've seen marijuana go from a completely taboo topic to a mainstream product in two-thirds of all U.S. states.

Vermont Senator and Democratic presidential candidate Bernie Sanders giving a speech.

Vermont Senator and Democratic presidential candidate Bernie Sanders giving a speech. Image source: Bernie Sanders' Senate website.

You can't spell "politics" without "pot"

It's a change that we're not just witnessing at the state level. Capitol Hill has gotten wind of the public's support for cannabis, and Democratic contenders for the presidency aren't being bashful about demonstrating favorability toward legislation that would legalize marijuana at the federal level. Although there are still expected to be new entrants into the field, six notable Democrats have already put their support behind recreational legalization:

  • Cory Booker, D-N.J.
  • Bernie Sanders, I-Vt.
  • Kamala Harris, D-Calif.
  • Amy Klobuchar, D-Minn.
  • Kirsten Gillibrand, D-N.Y.
  • Elizabeth Warren, D-Mass.

You'll note I've included Vermont Sen. Bernie Sanders here, even though he identifies as an Independent. Sanders has previously run for president under the Democratic ticket and has noted his intention to do so once again in 2020. 

Most notably, New Jersey Sen. Cory Booker recently reintroduced the Marijuana Justice Act. The bill, which first found its way to the Senate floor in August 2017, aimed to de-schedule cannabis at the federal level, as well as expunge prior federal convictions for possession and use. The Marijuana Justice Act would also withhold 10% of federal funding for prisons in states where cannabis laws were shown to have disproportionately incarcerated minorities.

A judge's gavel next to a book on federal and state marijuana laws.

Image source: Getty Images.

Although Booker's bill found negligible support in 2017, he reintroduced the measure in the new Congress with co-sponsors that include Senators Sanders, Harris, Warren, and Gillibrand. The only major Democratic presidential candidate to not sign on as a co-sponsor was Sen. Klobuchar, although Klobuchar has expressed support for a nationwide legalization effort before.

With an all-time record 75% of self-identified Democrats in favor of legalization, per Gallup's newest poll this past October, along with 71% of self-identified Independents, Democratic presidential candidates understand that siding with the majority could be a major positive come election time in 2020.

Even with growing support, legalization is still unlikely

Despite the cannabis industry firmly stepping out of the shadows, there remain significant hurdles to any changes in federal policy. As a refresher, marijuana is a Schedule I substance, which means that it's entirely illegal, prone to abuse, and has no recognized medical benefits.

The first issue Democratic contenders to the presidency will run into is that they're probably going to need a unified government to pass any sort of decriminalization or de-scheduling measure. That's because self-identified Republicans traditionally have a more negative view of pot, relative to Democrats or Independents.

Even though the GOP's stance toward cannabis has softened considerably over the past two decades, senior legislators of the GOP have regularly blocked amendments or stand-alone legislation pertaining to the cannabis industry. In other words, as long as Republicans control at least one branch of the legislative government, passing marijuana reform is virtually impossible.

A second problem these half-dozen Democratic presidential candidates could contend with is the fact that while the public supports legalization, people don't particularly care if their politicians do. Last April, the independent Quinnipiac University asked respondents whether they could still vote for a candidate if that candidate shared their views on everything except marijuana. Only around 1 in 8 respondents said they couldn't, with 82% of respondents suggesting they'd still vote for the candidate. This implies that marijuana simply isn't polarizing enough of an issue to cause politicians to lose their elected seats if they go against the majority.

Dried cannabis buds lying atop a messy pile of cash bills.

Image source: Getty Images.

Finally, it remains a money problem for the presidential candidates. As things stand now, profitable U.S. cannabis businesses are subject to Section 280E of the U.S. tax code. In simple terms, this section disallows businesses that sell a federally illicit substance from taking normal corporate income tax deductions, save for cost of goods sold. This often leads to very high effective tax rates, but it keeps the federal government happy.

However, legalizing weed would mean no longer subjecting pot companies to Section 280E. It's been estimated that doing so would cost the federal government $5 billion in revenue over the next decade. With the federal government already running a steep annual deficit, cutting revenue is going to be a tough sell on Capitol Hill.

It's for these reasons that I wouldn't be counting on change, even with Democrats making a hard push for legalization or reform.

It's "game on" for this industry

Then again, it shouldn't be a total loss for investors. Regardless of what happens in November 2020, the hemp industry looks ready to thrive.

Recently signed into law by President Trump with bipartisan support, the Farm Bill legalized the production of hemp and hemp-derived products. This includes cannabidiol (CBD) oil derived from hemp plants. CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits.

Four vials of cannabidiol oil lined up on a counter.

Image source: Getty Images.

Prior to being signed into law, hemp-derived CBD oil products were already doing quite well throughout much of the United States. Charlotte's Web Holdings (OTC:CWBHF) was manufacturing and distributing its branded hemp-derived CBD products in more than 3,600 retailers toward the end of last year. With the product now legal in all 50 states, Charlotte's Web will, presumably, have easier access to new retail markets. Considering that Charlotte's Web is one of a very select group of pot stocks to be profitable on a recurring basis, it's clear just how popular CBD-based products have become.

We're also witnessing Canadian pot producers enter the U.S. market with the intention of infiltrating the hemp market. Earlier this year, Canopy Growth (NASDAQ:CGC), the largest publicly traded marijuana stock in the world, was awarded a hemp production and processing license in New York State. Canopy plans to invest between $100 million and $150 million into developing this facility, which'll be used in the processing of CBD-based oils, among other things. Beyond just a means to diversify its revenue channel and take part in the fast-growing U.S. hemp industry, it also allows Canopy Growth to make connections in the U.S. now should the federal government ever change its tune on cannabis.

In other words, even with little progress being made at the federal level, it still promises to be an exciting 2019 and election year.

Check out the latest earnings call transcript for Canopy Growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.