There's no sugarcoating it: Marijuana stocks have had a bad year. It began promisingly after more than a dozen pot stocks shot higher by at least 70% during the fourth quarter, but most will end 2019 substantially lower from where they began the year.

Marijuana legalization momentum hasn't slowed in the U.S.

But while momentum has fizzled out for cannabis stocks, it hasn't done the same for the broader legalization movement. This past week we've seen Canada launch marijuana derivatives, and by no later than the end of April of next year Mexico should have passed guidelines to set up a legal retail marketplace for recreational marijuana. This would make our southerly neighbor the third country in the world to have OK'd the sale of adult-use weed, after Uruguay and Canada.

A black silhouette outline of the United States, partially filled in with baggies of dried cannabis, rolled joints, and a scale.

Image source: Getty Images.

In the United States, 2020 could prove to be another huge year for cannabis legalizations. The last time we had a presidential election year, residents in 8 out of 9 states voting on a marijuana initiative or amendment passed the issue at hand -- the lone loser being Arizona, which failed to legalize adult-use weed by a mere 2 percentage points.

If you take a closer look at polling, it's pretty clear that support for legalization is broad-based. Gallup's national poll finds that 66% of all Americans favor legalizing weed for recreational use, with a 2018 survey from the independent Quinnipiac University noting that roughly 9 out of 10 Americans believe a physician should be allowed to prescribe medical marijuana to patients. Put plainly, cannabis is no longer a taboo topic anymore, and it's even worked its way onto the presidential election scene.

While still early, nearly every remaining presidential candidate has come out in favor of reforming existing cannabis laws in the United States. With the exception of Democratic front-runner Joe Biden, new Democratic entrant Mike Bloomberg, and Republican incumbent Donald Trump, every other prospective candidate has assured voters that changes need to be made.

The only real question at this point, with a little over 10 months to go until Election Day, is what cannabis issues, initiatives, or amendments will folks be voting on in 2020? Thus far, we have only one certainty: Residents of New Jersey will be voting on whether or not to legalize adult-use weed come November.

A line of voting booths with attached pamphlets.

Image source: Getty Images.

It's official: New Jersey residents get to vote on cannabis come November

Earlier this week, New Jersey's legislature hit the required number of votes to get a constitutional amendment added to the state's ballot for the November election. The Garden State's Senate voted 24-16 on Monday, Dec. 16, in favor of putting the amendment on the upcoming ballot, while the Assembly voted 49-24 to do the same. This represented a respective three-fifths majority and simple majority for the Senate and Assembly. 

As a result, the following question will appear on the state's 2020 ballot: 

Do you approve amending the Constitution to legalize a controlled form of marijuana called "cannabis"? Only adults at least 21 years of age could use cannabis. The State commission created to oversee the State's medical cannabis program would also oversee the new, personal use cannabis market. Cannabis products would be subject to the State sales tax. If authorized by the Legislature, a municipality may pass a local ordinance to charge a local tax on cannabis products.

What's particularly noteworthy about this legalization effort is that New Jersey's legislature came extremely close to waving the green flag on recreational marijuana earlier this year. Gov. Phil Murphy, a Democrat, has been strongly in favor of legalization since taking office in January 2018. However, Murphy and the state's legislature squabbled over an appropriate tax rate on cannabis for quite some time. Once a compromise was reached, passing a cannabis bill looked to be a slam-dunk. Then, new problems cropped up.

Shortly before marijuana legislation was introduced, certain members of the New Jersey legislature pushed for the proposal to include social reforms, such as the possibility of expungement or case review for folks previously convicted of the possession or use of cannabis. This push for social reforms wound up tipping scales for lawmakers who were already on the fence, and any chance of legalization wound up being tossed out the window.

Interestingly, Illinois would wind up legalizing adult-use weed with an expungement clause a little over three months after New Jersey's debate over the same topic went up in smoke.

A marijuana dispensary sign in front of a retail store.

Image source: Getty Images.

Legalization is a likely outcome

However, the bad memories of cannabis legislation dying in the Garden State's legislature could all be put in the rearview mirror in November. According to a February 2019 survey from Monmouth University, 62% of New Jerseyans favored the idea of recreational pot being legal, which compared to just 32% who opposed the idea. Even taking into account the small survey sample size and margin of error, this is a pretty overwhelming amount of support, and it strongly suggests that legalization is likely.

The thing for investors to realize is that New Jersey could very well become a top-tier cannabis state. According to the "State of the Legal Cannabis Markets" report from Arcview Market Research and BDS Analytics, 13 states are expected to be generating more than $1 billion in annual sales by 2024, with New Jersey chiming in as No. 11, with an estimated $1.04 billion in sales.

Although New Jersey is still a developing market, there is one well-known vertically integrated multistate operator (MSO) that already has a cultivation and retail presence in the state: Curaleaf (OTC:CURLF). Few MSOs are spread as thin as Curaleaf, with the company having a presence in 19 states on a pro forma basis (i.e., assuming all of its acquisitions are closed). Despite Curaleaf having only 50 operational retail locations in the U.S., the closure of the Grassroots deal in 2020 should boost its open dispensaries to closer to six dozen. If New Jersey winds up legalizing adult-use cannabis, it wouldn't be in the least surprising if Curaleaf aims to bolster its presence in the state.

Considering that New Jersey has billion-dollar potential, look for other MSOs to establish a presence by mid-2020, if not sooner.