As we barrel headlong into 2016, one issue that promises to take center stage, especially with elections just 10 months away, is marijuana.
Marijuana expands, but roadblocks remain
Over the previous two decades marijuana has been practically unstoppable. With the exception of a few notable defeats -- the defeat two months ago of Issue 3 in Ohio, which attempted to approve medical and recreational marijuana at the same time, and Florida's medical marijuana defeat in 2014 -- marijuana's expansion continues.
In two decades, 23 states have approved the use of marijuana for select medical ailments, and since 2012 four states (along with Washington, D.C.) now allow for the sale of marijuana to adults for recreational use. Medical marijuana opens new treatment avenues for select patients dealing with chronic or terminal illnesses, while for states the retail sale of marijuana provides another source of revenue that can help fill relatively small budget gaps.
Yet in spite of marijuana's triumphs at the state level, its progress at the federal level needs to be measured with a magnifying glass. With the exception of loosened standards concerning clinical research, marijuana remains just as illegal on the federal level now as it was two decades ago. The only difference today is the federal government has taken a hands-off approach to enforcing federal laws, and is instead allowing the states to regulate the drug.
There are a lot of potential roadblocks for marijuana, and most of them revolve around its safety profile. Lawmakers are concerned about what long-term use might do to a person's body or psyche; they're worried about the consistency of the product being developed (especially as it relates to edible products); and they're worried about potentially adverse societal impacts such as an increase in crime rates or instances of driving while under the influence of marijuana.
This invention could address a major marijuana concern
In many instances these concerns are not easily addressable with the flip of a switch. However, a new invention that's currently in clinical testing could resolve the ongoing concern about marijuana users driving under the influence.
As announced in early December, Oakland-based Hound Labs, in collaboration with scientists at the University of California, Berkeley, have invented a portable breathalyzer that can detect and measure the level of tetrahydrocannabinol, or THC, in an individual's breath. THC is the psychoactive component of marijuana that can lead to impairment. Not only does the breathalyzer detect THC, but it also functions as an alcohol detector, allowing law enforcement on-the-spot readings that could aid in the determination of whether or not a driver is impaired.
The current standard for determining whether or not an individual is driving under the influence of marijuana involves a blood test. This isn't necessarily the best test because THC can remain in a person's bloodstream long after they've smoked marijuana, and it doesn't necessarily demonstrate whether or not a driver is impaired. Having an on-the-spot device handy will allow law enforcement to remove impaired drivers from the roadway while also ensuring that drivers who aren't impaired aren't unreasonably prosecuted. Realistically, it's a device that could potentially save lives (and save the legal system a lot of money).
Though Hound Labs' devices are undergoing clinical testing in the first quarter of this year, if all goes well (which is the expectation of its CEO Mike Lynn), they'll be in the hands of law enforcement and interested consumers by late 2016. Clinical testing will involve legal medical marijuana patients at the University of California, Berkeley's campus, and the tests will look to replicate readings from traditional intoxication readouts. Lynn has suggested that the units could price under $1,000 for law enforcement and should be less expensive in a less durable form for consumers.
One problem potentially addressed, quite a few to go
Hound Labs' innovation could go a long way to addressing one of the primary concerns of lawmakers, but it still doesn't answer the basic question of whether or not marijuana is safe to be used over the long-term.
You'll get no shortage of longtime users who'll suggest that marijuana has next to no long-term effects -- and that very well may be the case. For instance, marijuana overdoses in 2015 totaled exactly zero, as compared to an estimated 46 people who die daily from prescription opioid overdoses. Another study conducted in Australia earlier this decade on nearly 2,000 young adult marijuana smokers between the ages of 20 and 24 discovered that marijuana has little to no long-term effect on cognition.
But for each positive finding, there are even more negative clinical studies. For decades researchers focused almost exclusively on the dangers of marijuana. Only within the past decade have they really turned their attention to examining the potential benefits of marijuana. Developing a balanced profile of marijuana's benefits and risks is going to take time, and regulators simply don't want to make a hasty decision on possibly rescheduling the drug before a fuller safety picture is available.
While we wait for Congress to act (which is in itself not guaranteed), existing marijuana businesses continue to face extraordinarily tough challenges. For example, marijuana-based businesses have practically no access to basic banking services. From a line of credit to something as simple as a checking account, banks are simply unwilling to risk potential federal prosecution. Regardless of whether or not marijuana is legal within a state, federal law rules the roost with banks, and marijuana the plant is still illegal on the federal level. Marijuana businesses are also dealing with higher taxes than normal businesses because they're unable to take business-related deductions.
For prospective investors, this translates into major concerns. There's no denying that marijuana has an extremely high ceiling of potential if approved, but Congress's impetus to act simply isn't there. For marijuana stocks it means the likelihood of ongoing losses. What investors need to ask themselves is whether or not the company they're buying has a strong enough cash runway to survive until Congress (potentially) changes its tune. My guess is there may not be many investable businesses left by that time.