Please ensure Javascript is enabled for purposes of website accessibility

Here's Why 2016 Could Be Marijuana's Most Important Year Yet

By Sean Williams - Jan 2, 2016 at 11:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These critical events are shaping up to be crucial to marijuana's growing momentum in 2016.

Image source: Pixabay.

Although marijuana remains illegal at the federal level, many aspects of how marijuana is treated have changed dramatically over the past two decades.

Marijuana grows by leaps and bounds
In 1995, there wasn't a single state that allowed marijuana to be prescribed by doctors, support for marijuana's legalization stood at around 25% in Gallup's national poll, politicians avoided the topic like the plague, and the idea of recreational marijuana amounted to nothing more than a joke.

Yet, here we stand 21 years later with 23 states having legalized marijuana for medicinal purposes, more than half of all respondents in Gallup's national poll sharing a favorable view of marijuana, politicians freely taking a stance on marijuana, and four states -- Oregon, Washington, Colorado, and Alaska -- all legalizing the recreational use of marijuana since 2012. To opine that marijuana is gaining steam might be an understatement.

For marijuana supporters, access to new treatment pathways and the potential to use the drug recreationally without the fear of federal prosecution are the ultimate goals. For the states, it's all about the money. Tax revenue generated from the retail sale of marijuana can be critical to funding education, law enforcement, and even securing jobs within a state. Colorado's Proposition BB, which passed in a landslide in the November elections, secured $40 million in marijuana retail tax revenue for schools within the state.

Why 2016 could be marijuana's biggest year yet
But as exciting as marijuana's last two decades have been, the coming year could be its most important yet. The way I see it, there are three events in 2016 that could shape the future of the drug and marijuana businesses.

Image source: Disney ABC Television Group via Flickr.

1. The 2016 elections
We've had elections in the past where a populous state was trying to legalize medical marijuana or perhaps a handful of states were attempting to bring a medical marijuana initiative to the table. However, we've yet to have an instance where perhaps a dozen states are looking to legalize recreational marijuana in the same year. In 2016, we look poised to have a record number of recreational marijuana initiatives and amendments on state ballots.

At the moment, Nevada is the only state guaranteed to have a marijuana initiative on its 2016 ballot, but it likely won't be alone. Strong support has materialized in California, Vermont, Arizona, Michigan, Rhode Island, and even Ohio, where Issue 3 failed by a mile to win the support of recreational voters this past November. It's worth noting, though, that Ohio's surprisingly large medical and recreational marijuana loss appear to be more the result of how the growing contracts were being doled out than residents' actual sentiment toward the drug. These are just some of the states currently gathering signatures for a possible recreational marijuana vote in Nov. 2016.

President Obama has suggested that the best way to get Congress' attention is to continue to put the issue in front of voters and allow them to decide. The more states that legalize recreational and medical marijuana, the more an impetus there will be for Congress to consider changing the current scheduling of marijuana at the federal level. Remember, changing its scheduling status is critical for marijuana businesses as it could loosen banking standards, allowing them access basic banking services and loans. A rescheduling would also allow marijuana shops to deduct normal business expenses, which is something they can't do at the moment.

Image source: Flickr user Cannabis Culture.

2. A look back at Oregon's first year of sales
The New Year will also give us our first glimpse of how successful Oregon was following the introduction of recreational marijuana sales on Oct. 1, 2015.

Excitement is clearly high after sales in its first month topped $11 million compared to the $5 million and $2 million Colorado and Washington delivered, respectively, in their first month of recreational sales. By the end of Sept. 2016, we'll be able to get our first good look at Oregon's trailing-12-month performance, and it should have a lot of bearing on the marijuana industry.

The reason Oregon is so important is that it's arguably the most cost-competitive of the 50 states in comparison to black market operations. Prior to implementing its recreational marijuana law, Oregon had more than 250 legal medicinal dispensaries, giving it a huge network that allowed it to simply flip the switch and sell recreational marijuana. Oregon also has no cap on the number of licenses it'll issue, but there are rules permitting who can operate a store based on residency and a few other factors. There's even been talk of Oregon starting up a marijuana delivery service. It really is the most advanced "green" state in the country, and it's a model state to answer the question of whether legalized marijuana can complete against black market marijuana.

Image source: GW Pharmaceuticals.

3. Can Epidiolex deliver?
Marijuana could also be in for an exceptionally exciting year from a medical perspective.

One of the biggest reasons marijuana hasn't been given the time of day by Congress is that, in the view of lawmakers, its safety profile isn't complete. Despite examining marijuana's possible benefits for years, researchers were analyzing its possible pitfalls for decades. The fact of the matter is lawmakers won't budge on marijuana until they have more conclusive, or balanced, data suggesting the benefits of the drug outweigh its risks.

Although it represents just one of multiple pieces of the puzzle that need to be put together, GW Pharmaceuticals (GWPH) will be reporting results on experimental cannabinoid-based therapy Epidiolex (over four separate studies) in the first quarter of 2016.

GW Pharmaceuticals' Epidiolex is being targeted at two rare types of childhood onset epilepsy, known as Dravet syndrome and Lennox-Gastaut syndrome. Prior midstage studies demonstrated a better than 50% decline in seizure frequency for both diseases, thus lending plenty of hope for GW Pharmaceuticals' late-stage studies. The company should be delivering top-line data from two studies on each disease in Q1 2016.

A successful result would not only go a long way toward proving marijuana's potential medical worth, but it'd be the first real "marijuana" drug we've witnessed approved by the Food and Drug Administration in a decade. The last was Marinol, a synthetic drug that was designed to reduce nausea and vomiting. Having a drug based on cannabinoids succeed in late-stage studies would be a big victory for the marijuana industry.

Image source: National Drug and Alcohol Research Centre.

A lot riding on 2016
Long story short, marijuana has a lot riding on 2016, and it very well could go down as the most important and transformative year for the drug ever.

Does that mean it's time to throw your hard-earned cash into marijuana stocks? To that end, I'm still not certain. I believe Florida's defeat in 2014 for medical marijuana and Ohio's thumping in Nov. 2015 serve as a reminder that anything is possible when it comes to elections. By a similar token, nothing is ever guaranteed in Congress. Its makeup could have a lot of bearing on whether marijuana legalization is even on the table before the end of the decade.

Meanwhile, we wait. The problem with waiting is that marijuana businesses are facing many of those aforementioned disadvantages, including minimal banking access and unfavorable tax treatment. That, along with most marijuana stocks reporting ongoing losses, is a recipe that suggests you stay far, far away for the time being.

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.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GW Pharmaceuticals plc Stock Quote
GW Pharmaceuticals plc

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.