Can marijuana's expansion be stopped? The answer at the state level looks to be a resounding "No!"
Since California became the first state to legalize the use of marijuana for medicinal purposes two decades prior, a grand total of 23 states have legalized its medical use, with the latest being New York. It now appears that the 24th state to legalize marijuana could be right around the corner.
Say hello to the 24th medical marijuana state?
Earlier this month the Pennsylvania House of Representatives passed Senate Bill 3, which seeks to legalize medical marijuana in liquid, pill, and oil formulations, by a vote of 149-43. Senate Bill 3 was passed by the Pennsylvania Senate in May 2015 by a vote of 40-7, but the House vote wound up passing the bill with more than 200 amendments to the original bill.
The primary change involved the number of ailments that medical marijuana would be approved to treat. The bill approved by the House earlier this month narrowed down marijuana's potential prescription scope to just over a dozen ailments, including epilepsy, glaucoma, and cancer, three of the most common treatments marijuana is aiming to treat , as well as HIV/AIDS, Parkinson's disease, and post-traumatic stress disorder.
The next step in the process involves the Pennsylvania Senate once again passing Senate Bill 3. Should the Senate indeed vote in favor Senate Bill 3, Democratic Gov. Tom Wolf needs only to sign the bill to make it a law -- and he's previously stated that if the bill reached his desk he would do exactly that.
The importance of another possible marijuana approval
Like other medical-marijuana initiatives, Pennsylvania's law would seek to put some limitations on the number of growers and dispensaries within the state and would generate tax revenue and licensing fees along the way. The House aimed to establish a limit of 25 growers and up to 50 dispensaries (and each dispensary could have up to three locations), and the growers-processors would pay a 5% tax on gross receipts from dispensaries. Although no tax and fee revenue estimates are available, the important thing worth noting is that this additional revenue could go to fund education, law enforcement, and additional clinical research.
This isn't the first time we've seen lawmakers bypassing the typical process of bringing an issue to vote with the residents of a state. Lawmakers in Vermont have been contemplating bypassing traditional voting measures and legalizing recreational marijuana in the state legislature. Of course, it remains to be seen if Vermont's lawmakers have enough support to pass a recreational marijuana measure.
But one thing is for sure: Marijuana's expansion is precisely what the American public, as a whole, wants to see. An October Gallup poll pegged national support of the drug at 58%, up dramatically from the 25% in favor of its legalization back in the mid-1990s. Other national polls suggest similar favorability. Approval as it relates to medical marijuana is even stronger in swing states and nationally. A CBS News survey conducted nationally last year showed a whopping 84% favorability toward medical marijuana.
Is this marijuana's breakout year?
This year could prove especially important for marijuana. In addition to seeing Pennsylvania and maybe Vermont passing marijuana laws in their respective legislatures, up to a dozen states could be sending initiatives and amendments to state voters concerning marijuana this November. We know Nevada is locked in for a recreational vote come November, and I would fully expect states such as California and Ohio to join as well. Additionally, campaigning in Florida is pushing toward another run at approving medical marijuana.
State-level approvals are great because they demonstrate, in many instances, what Americans as a whole want to see. These approvals are also generating much-needed tax and licensing revenue for these select states. It's important to remember that marijuana taxes and licensing fees only affect marijuana businesses and consumers who purchase the product. Since it won't affect the vast majority of the population within approved and voting states, marijuana taxes are typically looked upon quite favorably by both lawmakers and residents.
In Colorado, recreational and medical tax revenue, as well as licensing revenue, totaled $135 million in 2015, up from around $80 million in 2014. At least $35 million of this collected revenue has been earmarked for Colorado schools, with additional funds being funneled to Colorado's law enforcement and drug abuse programs.
Marijuana's bifurcation is likely to continue
Yet for each state-level success, a brick wall continues to exist at the Congressional level. Lawmakers on Capitol Hill are in no rush to reconsider the current schedule 1 status of marijuana, which implies that it's illicit and has no medical benefits.
For starters, politics do indeed come into play. Since it's an election year, and marijuana is only now moving to a point where it's no longer considered taboo, neither President Obama nor Congress has marijuana on a "to do list" in 2016. If marijuana reform is going to happen, it's not going to be until the next president takes office.
The other issue here is that lawmakers don't feel as if they have a genuine understanding of the risks and benefits of marijuana. Research into marijuana has been focusing on its adverse effects for decades whereas its benefits have been researched only within the past decade or so. It can take time before clinical studies reveal the data that lawmakers are looking for in order to make an educated decision. In the meantime, lawmakers appear likely to sit on their hands.
This marijuana bifurcation is actually bad news for the industry as a whole. Inaction at the federal level dooms marijuana businesses into paying excessively high income taxes to the IRS since they can't write off normal business deductions, and it stymies business expansion since the vast majority of banks want nothing to do with marijuana, an illegal plant at the federal level. Without access to credit and even checking accounts, it creates an expansionary and safety concern for marijuana businesses.
Thus, while state-level expansion could continue in the near term, the investable aspect of marijuana still appears extremely risk in a best-case scenario.