The marijuana movement has been practically unstoppable for two decades now. Since 1996, nearly two dozen states have legalized the use of marijuana for medicinal purposes, and four states (along with Washington D.C.) now allow adults over the age of 21 to purchase marijuana for recreational purposes in licensed dispensaries. The thought of this would have been nothing short of laughable even as recently as a decade ago.
Access to medical marijuana means new potential treatment pathways for patients with glaucoma and certain types of terminal cancers. For states legalizing retail marijuana, it means added revenue that's primarily being used to fund education, bolster law enforcement, and go toward drug awareness programs.
This state is blazing its own trail
But 2016 is looking as if it'll be marijuana's most important year yet. Recreational marijuana initiatives could find their way onto as many as a dozen state ballots, with Nevada being the first state already confirmed to have an initiative on its November ballot. However, one state appears ready to blaze its own trail when it comes to legalizing recreational marijuana.
According to a recent article from The Washington Post, Vermont is angling to become the first state to legalize recreational marijuana without putting it to vote on a ballot initiative or referendum. In other words, Vermont's Governor, Peter Shumlin (D), could be looking for legislators within the state to legalize recreational marijuana without voters having their say.
The move shouldn't come as too much of a surprise, since Vermont decriminalized marijuana in 2013. Decriminalizing marijuana doesn't mean smoking or possessing marijuana is legal -- law enforcement can still fine adults over age 21 caught in possession of marijuana and seize the drug, as well as arrest those with excessive amounts of marijuana or persons under the age of 21 caught in possession of the drug. However, decriminalization is typically viewed as the telltale step prior to a recreational marijuana initiative.
Vermont's pathway to legalization could become a model for other states
However, some of the key requirements that Shumlin wants to outline in any passed marijuana laws are unique.
For example, recreational legalization in Vermont wouldn't include marijuana edibles. The concern with marijuana edibles is that they're incredibly difficult to regulate. It's tough to ensure the quality and content of THC in edibles remains consistent, it's difficult for law enforcement officers to do their job if they can't tell what foods do and do not contain marijuana, and it's much easier for edibles to fall into the hands of adolescents. Another of Shumlin's key points is that recreational marijuana laws need to be designed to keep adolescents from purchasing marijuana.
Another interesting point is that Vermont would look to strength its existing DUI laws. One of the biggest issues with marijuana's legalization is the potential effect THC can have on a driver's impairment. As we examined last week, Hound Labs is in the process of testing a breathalyzer that can measure THC content in a user, which, if approved, could wind up helping law enforcement in a big way by getting impaired drivers off the roads and ensuring law enforcement doesn't arrest non-impaired drivers. Vermont could be a model for other states by setting harsh DUI laws with the assistance of Hound Labs' devices.
Lastly, it's interesting that Shumlin's focus will only be on taxing marijuana at "modest" levels, as opposed to Colorado and Washington, which are taxing the product fairly aggressively. Oregon is probably the best model when it comes to competing against the black market because of the infrastructure that was in place well before voters chose to legalize recreational marijuana in 2014. However, Shumlin believes that keeping taxes low could drive a stake through the heart of the black market by making the legal product more cost-competitive.
Little victories don't guarantee a big reward
Unfortunately for potential investors, regardless of what Vermont's legislators choose to do in 2016, it doesn't look as if marijuana legislation at the federal level will be changing much if at all.
One key victory for marijuana supporters in 2015 was the Obama administration loosening the regulations tied to medical marijuana research. Beyond this, though, marijuana regulations at the federal level have been at a veritable standstill.
The big worry for Congress remains the overall safety profile of marijuana. There's seemingly no end to the conflicting reports of marijuana's risks and benefits, and lawmakers want to ensure they have as encompassing a view of the drug as possible before they decide its fate at the federal level. Let's also mention that we're in the midst of an election cycle, and few politicians are likely willing to go out on a limb when it comes to marijuana legislation until after the elections are over.
What this means is more hardship for marijuana-based businesses, and thus few growth opportunities for investors. As it stands now, federal law still views the marijuana plant as illegal. This view generally keeps banking institutions on the sidelines for fear of federal prosecution, meaning marijuana businesses have minimal access to credit lines or even basic banking functions. It also means that marijuana-based businesses can't take normal business deductions on their taxes since they're selling a federally illegal substance. Altogether these challenges could be bad news for investors looking to profit from marijuana in 2016.
It's always possible that the marijuana industry could come through in a big way for individual investors, but the first step would be some form of decriminalization or rescheduling of marijuana at the federal level. Until we see signs that Capitol Hill is ready to change its stance, it's probably in your best interests to keep your money far away from marijuana stocks.