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Legal grow marijuana in Colorado. Source: Flickr user Brett Levin.

For decades, marijuana was a drug few would have ever supported legalizing. Between the 1960s and the mid-2000s, support for marijuana's legalization ranged from the low teens to as high as 34%, according to Gallup. But the past decade has seen a major shift in momentum favoring the legalization of marijuana.

Since 1996, the number of states that have legalized medical marijuana shot from just one to 23, with Florida narrowly missing becoming the 24th state this past November.

Perhaps an even greater sign of change is the fact that four states -- Washington, Colorado, Oregon, and Alaska -- plus Washington, D.C., have legalized marijuana for recreational adult use. If the opinion of the American public wasn't clear enough in these figures, Gallup noted in 2013 that those in favor of legalization had shot up to 58%. It's the first time in history that more people were in favor of legalizing marijuana than were opposed to its approval.

Despite its clear momentum, marijuana also has a number of well-documented challenges it still has to face. This week, marijuana received its latest challenge not from a study but from a lawmaker very much in tune with the ups and downs associated with legalizing marijuana on a recreational basis.

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Colorado Gov. John Hickenlooper. Source: U.S. Dept. of Agriculture via Flickr.

"This was a bad idea"
In an interview with CNBC's Squawk Box a week ago, this Friday, Colorado's Governor John Hickenlooper stated that legalizing marijuana "was a bad idea," and that "if I could've waved a wand the day after the election, I would've reversed the election." These words shouldn't be a huge shock as Hickenlooper has long been opposed to legalizing marijuana. However, with these words coming from the governor of one of the two states that was the first to legalize marijuana it also exposes marijuana's greatest weakness: the unknown.

As Hickenlooper stated on CNBC, "You don't want to be the first person to do something like this." It can be costly to try something new, especially when the federal government doesn't have the back of Colorado, or the aforementioned three states, either. The federal government has obliged by taking a hands-off approach to marijuana, letting individual states enforce their own marijuana laws. But, it's not a far-fetched idea to assume that there could be a breakdown in production controls that could force the federal government to take a more active approach in enforcing the law. And as a reminder, the federal government still considers marijuana to be a schedule 1, illicit drug.

A sea of unknowns
Aside from the legal aspects, there are the unknowns associated with the social, economic, and health aspects of marijuana use.

As we've examined previously, marijuana has presented a mixed bag of results when its effects have been studied over the long term. Some studies have demonstrated little adverse effects on users' lungs when used in moderation over the long run. Additionally, marijuana has demonstrated clinical benefits in treating aggressive forms of brain cancer and in controlling diabetics' blood sugar.

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Source: Flickr user Michigan Municipal League.

But on the flipside, studies have shown that marijuana use has led to cognitive decline in users, especially if used heavily, can lead to a discernable increase in impaired driving, and increased the incidence of trying other illicit drugs over their lifetime for adolescent users.

Marijuana could also be a boon for state and local governments looking for ways to boost taxable revenue. But even here, there could be problems.

As ABC News reported last month, marijuana growers in Washington state are suffering substantial supply losses because there are simply too many growers and not enough demand for the product. Andrew Seitz, the general manager of Seattle's Dutch Brothers Farms, described the situation in Washington as "an economic disaster" in an interview with the Associated Press. In other words, marijuana may wind up generating far fewer jobs and tax revenue than anticipated in Washington.

Finally, there are black market concerns. The premium price point of legally purchased marijuana relative to that which is sold through black market channels could undermine its expansion into new states.

These unknowns are a problem for investors
We've all seen the estimates for marijuana -- that it could bring in more than $3 billion a year in tax revenue, or be worth as much as $35 billion if it were legalized across the board. But the reality is that marijuana's multiple unknowns spell big trouble for investors even if the drug has a high ceiling of success.

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Source: Flickr user elad abraham. 

For starters, a vast majority of marijuana-based investment are trading on the pink sheets or over-the-counter bulletin boards. The pink sheets absolve companies from paying listing fees, but it also means regular filings with the Securities and Exchange Commission aren't mandatory. To put it another way, it can be impossible to get accurate financial information on these companies, including rudimentary info on what a marijuana company actually does or what services it offers.

Another key point is that marijuana stocks are heavily reliant on emotions, much like the current momentum behind the marijuana movement. This can lead to wild and unsettling volatility for investors.

Lastly, with the exception of Insys Therapeutics (NASDAQ:INSY), there doesn't appear to be a marijuana company that's poised to turn a profit anytime soon -- and even that's sort of pushing the envelope of "marijuana stock." You see, Insys is profitable solely because of sales of Subsys, an under-the-tongue painkiller spray that accounts for 99% of its sales. Dronabinol, the company's cannabinoid-based drug that treats a severe form of epilepsy, generated around $100,000 of the $58.3 million in sales reported in Insys' third quarter.

In short, from recreational marijuana to medical marijuana, nothing is a certainty, and Gov. Hickenlooper's comments serve as a reminder to that continuing uncertainty, at least over the next couple of years. That isn't to say marijuana won't eventually be a success with regard to generating extra revenue for state and local governments, or in the medical setting in terms of helping people fight deadly diseases and disorders. However, it's probably a smarter move as an investor to let the system "work out its kinks" over the next few years and observe how well the experiment plays out in a handful of recreation-approved states than to dive in blindly and hope for the best.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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