For those who want to see marijuana legalized for recreational adult use, medical purposes, or perhaps both, the past couple of years have truly been groundbreaking.
Marijuana gains steam
Marijuana's path to legalization began in 1996, when physicians in California were permitted to prescribe medical marijuana to patients facing long-term diseases like glaucoma, or a terminal illness such as cancer (note: most states have specific cancer types that qualify, meaning not all cancer types automatically qualify for medical marijuana). As of today, 23 states have legalized the use of medical marijuana, along with Washington, D.C. Florida narrowly missed out on becoming the 24th state in last year's midterm elections; the proposal received 58% of the vote, but given that it would have required an amendment to the state's constitution, it needed a 60% "Yes" vote to pass.
But it's not just medical marijuana that's gaining steam; it's the perception of marijuana as a whole. Gallup's 2013 poll showed that 58% of respondents favored legalizing the drug, marking the first time in history that more people were in favor of legalization than against it. The General Social Survey's nearly 1,700-person survey yielded similar results, with 52% in favor of legalizing marijuana compared to 42% opposing it; that majority support was also a first for the GSS poll.
Yet despite this momentum, all forms of marijuana, whether recreational or medical, are illegal in the eyes of the federal government. Fortunately for states in which the substance is legal, the federal government has taken a hands-off approach thus far, but federal law nonetheless remains an impediment to the marijuana movement.
Five major obstacles facing medical marijuana
Medical marijuana, which likely has a far better chance of national legalization than a sweeping marijuana bill that would include recreational adult-use marijuana, is currently staring down five major obstacles.
1. Unknown long-term effects of use
The 800-pound gorilla in the room is that the long-term effects of marijuana use are still admittedly unknown.
Granted, more than nine out of 10 marijuana studies in the past had examined its risks without considering whether it had beneficial medical properties, so to see studies warning of marijuana's dangers to adolescent brains or the psychology of users over the long term isn't surprising.
What marijuana advocates need are multiple definitive long-term studies that demonstrate marijuana's many benefits and minimal risks. A number of recently published studies suggest that marijuana could have beneficial properties in treating Alzheimer's, type 2 diabetes, and perhaps even aggressive gliomas (a type of brain cancer). Perhaps the most important recent study, though, is one published in Scientific Reports that notes cannabis was 114 times less deadly than alcohol based on the ratio of toxic dose to human intake.
Clearly more studies are needed, but the lack research on marijuana's long-term effects is the primary hurdle for medical marijuana.
2. DEA scheduling
Another major roadblock for medical marijuana is the fact that the federal government still views marijuana as a schedule 1 drug.
By definition, a schedule 1 drug has no medical benefits and is considered illicit, or illegal. In order for marijuana to be medically legalized on a federal level, the federal government would need to amend the Controlled Substances Act and change marijuana to a schedule 2 drug. Schedule 2 drugs are noted to have medically beneficial properties, though they're tightly regulated because of their high potential for abuse.
Just two weeks ago three U.S. Senators -- Rand Paul (R-Ky.), Cory Booker (D-N.J.), and Kirsten Gillibrand (D-N.Y.) -- introduced a bill that would end the federal ban on medical marijuana. Known as the CARERS Act, this bill marks a landmark step forward by any branch of Congress to attempt to reschedule marijuana. Whether the proposal sees the light of day in Congress remains to be seen, but it's a clear indication of the current momentum behind marijuana.
3. Political opposition
Although we're seeing support for marijuana from both political parties, there are still governors and jurisdictions within states that are opposed to the idea of legalizing marijuana.
For example, take Colorado, where both recreational and medical marijuana are currently legal. On the surface you'd probably presume that any patron can head to a licensed marijuana store in a nearby town and purchase marijuana, but this isn't the case. Within Colorado, about three-quarters of all jurisdictions still ban the substance, deeply dividing the state and potentially making enforcement of marijuana laws difficult, if not impossible.
In other words, lifting the federal ban on marijuana may not do much, if anything, to existing marijuana laws in a number of states.
4. It's a low priority
Fourth, while legalizing medical marijuana may one day be in the cards, by President Obama's own admission earlier this month in an interview with VICE News, it's simply not a priority.
Right now the federal government has to deal with militants in foreign countries, keep the economy on the right track, agree on a fiscal year 2016 budget, avert the debt-ceiling crisis, and take on a few dozen other pressing issues. Given these pressing macroeconomic issues, the medical marijuana debate will stay on the backburner for the foreseeable future.
In order for medical marijuana to have a shot at seeing its federal ban lifted, we'll need a period of economic and international stability. This will happen eventually, but it could be many years before medical marijuana moves up the list of congressional and presidential priorities.
5. Financing troubles
Lastly, because marijuana is considered a schedule 1 drug and is therefore illegal, medical marijuana dispensaries and legal grow businesses have had a difficult time arranging financing and loans with banks. Banks have generally been unwilling, even in legalized states, to finance medical marijuana businesses for fear of legal consequences from the federal government.
But even if medical marijuana is legalized nationwide, banks may still be tight with their lending, as the marijuana plant would still be illegal. Not having immediate financing available can make it tough for medical marijuana dispensaries to expand, which limits their growing capacity.
Why all this matters
These obstacles, more than any other factors, will decide the fate of cannabinoid-based drug developers like GW Pharmaceuticals (NASDAQ:GWPH) and Insys Therapeutics (NASDAQ:INSY).
Lifting the ban on medical marijuana could open the door for more cannabinoid research, considering it would remove a lot of the hurdles GW currently needs to jump over before it can begin testing its products in human clinical studies. For GW Pharmaceuticals, this would be something of a dream come true, as it could have a winner in Epidiolex, a CBD-based therapy designed to treat two rare forms of childhood-onset epilepsy, and the company would like to further examine cannabinoids' effect on a number of inflammatory and neurological diseases and disorders.
Of course, these obstacles are precisely why GW Pharmaceuticals' current valuation of close to $2 billion makes it such a scary investment -- at least for the time being. With losses expected throughout the remainder of the decade, unless the federal government shifts its view of marijuana in a notable way, GW could turn out to be nothing more than a bad gamble for investors.
I've said it before and I'll say it again: While marijuana may have loads of potential, it makes for a poor investment opportunity as long as so many unknowns remain to be addressed.