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What Investors Need to Know: Marijuana Decriminalization vs. Legalization

By Eric Volkman - Jan 26, 2021 at 3:00PM

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There is a world of difference between the two seemingly similar concepts.

One word that is prominent in the minds of every marijuana investor, decriminalization, isn't the same as legalization, although the two terms are often used interchangeably. That's a mistake.

In this video segment from Motley Fool Live, longtime Fool contributor Eric Volkman and healthcare and cannabis bureau chief Corinne Cardina dive into what precisely decriminalization means in relation to legalization, and why the distinction matters. This clip was recorded on Dec. 22, 2020.

 

[Editor's note: The original recording contains an error. At 0:36, Eric Volkman says, "Decriminalization means it would move off that schedule." He should have said, "Legalization means it would move off that schedule."]

Corinne Cardina: Could you explain the difference between decriminalization and full federal legalization?

Eric Volkman: Yeah, there's a big difference. Decriminalization generally means that the authorities will ignore your marijuana convictions, essentially you won't be busted for possession up to a certain amount. That doesn't make it legal, it's still technically illegal. It's still a Schedule 1 drug according to [U.S.] federal law.

Decriminalization means it would move off that schedule, and that has a lot of knock-on effects. First of all, you can grow it and smoke it, and eat it, and throw it around to your heart's content. On top of that, companies that sell marijuana, any company involved in the marijuana business, would likely have access to financial services. They also would not be subject to the heavy restrictions on their accounting and their taxation as it stands now, because marijuana is scheduled the way it is.

[Now], companies involved in marijuana cannot take standard corporate tax deductions, which is a killer. That's how any kind of company in this country, how they reduce their tax burden and make it more or less manageable. Marijuana companies don't have recourse to that. In addition to all their other difficulties with finances, they have this heavy tax burden which there is almost no way to get away from. Those are some big differences between the two, legalization and decriminalization.

 

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