There is no industry anywhere in the United States that is growing faster and more consistently than legalized cannabis. There never has been, and the future will tell if there ever will be. Colorado, the first state to sell recreational weed and one of just eight states to legalize both adult use and medical pot, saw legal sales soar by over 30 percent in 2016 alone, to well over $1.3 billion.
The reason for Colorado’s high growth curve is organic interest in recreational consumption and a mirroring increase in tourists visiting the state. Marijuana Business Daily’s latest report, titled “Marijuana Business Factbook 2017,” gives a broader analysis and predicts staggering growth rates for the industry over the next few years.
The report predicts that legal marijuana sales throughout the United States will grow by 45 percent next year alone, as it continues to confirm the aggregate 300 percent growth expected between 2016 and 2021. The market should reach $17 billion by then, and with advocates of legalization rallying around the country for the 2018 elections, the likelihood of legalization spreading remains existentially high.
The Problem of Capitol Hill
However, the federal government remains the only real and major obstacle to legalization at the national level. Capitol Hill makes marijuana as illegal as heroin and LSD, classifying it as a Schedule 1 drug under the Controlled Substances Act of 1970. Capitol Hill also refuses to recognize the medicinal value of marijuana, despite many studies proving its benefits beyond any doubt.
One such example by GW Pharmaceuticals (NASDAQ:GWPH) provides a clear evidence of this. The U.K.-based drug manufacturing company utilizes cannabinoids to force positive changes in biologic. In multiple phase three studies, the company demonstrated that Epidiolex, its cannabidiol-based oral medication, reduces seizure frequency significantly.
GW Pharmaceuticals noted that Epidiolex proved effective in reducing the incidences of seizures among patients with two forms of rare childhood-onset epilepsy: Lennox-Gastaut syndrome and Dravet syndrome. Along with the refusal of Washington to acknowledge the results of such studies comes several major disadvantage for cannabis-based businesses.
Because of its illegal status, everyone involved in the marijuana industry faces severe limitations. They cannot access basic financial services, such as opening a checking account, and if they are profitable, they must pay taxes on their gross profits instead of their net profits, because U.S. tax code 280E prohibits businesses selling federally illegal substances from taking normal deductions on corporate income tax.
Despite these hassles, this bifurcation between the federal government and states wishing to legalize marijuana highlights an even more interesting factor at play: People are siding with states. A poll released recently by Gallup finds 64 percent of the United States population wanting marijuana legal and accessible across the country.
Another survey, released in April and conducted by the independent Quinnipiac University, found support for medical marijuana legalization at the national level even stronger. In its survey, Quinnipiac found only five percent of participants against the legalization of medical marijuana, with a whopping 94 percent of respondents in favor of it.
Republicans Want to Legalize Marijuana: True or False?
Why is Capitol Hill stalling? Those pointing fingers are quick to blame Republicans for sabotaging the expansion of legal marijuana across the country, likely because they, along with senior citizens, are the two groups historically most opposed to its legalization. However, now that it is 2017, Gallup’s survey shows some entirely different facts.
Those participating in the national pollster’s survey had to give their opinion on legalization, as well as their political affiliations. The results were nothing short of groundbreaking and destructive of past stereotypes. The poll found 51 percent of Republican participants supportive of legalization, which is the first time in history that more Republicans are for it than against.
It is important to note, though, that at 51 percent in favor, the margin for error in this poll is still within range to lower the figure to below 50 percent, but it is an impressive record nonetheless. Support for legalization in the GOP has been rising very slowly, from just 20 percent back in 2003 to only 37 percent in 2015. However, the last two years have seen support in the GOP exploding.
This surge in support is perhaps a result of shifting perceptions among their constituents. After all, if lawmakers to do not serve their constituents and abide by their desires, they risk voters booting them out of office. Although support for weed is growing among Republicans, there is still a few standing in the way of progress.
Of course, not every Republican favors legalization or its rapid expansion, even if they have no moral grounds to object. Governor Phil Scott, a Republican from Vermont, is but one example. Earlier this year, Scott vetoed Vermont’s recreational marijuana bill, despite overwhelming approval for it in both the state’s Senate and House.
As reason for his vetoing the legislation, Scott cited overly weak penalties for offenders caught driving under the influence of marijuana. However, he did not shut the door on approving future legislation, providing lawmakers address his concerns. Scott is a small fish in the pond, though. It is another Republican altogether responsible for much of the stubbornness on Capitol Hill.
Attorney General Jeff Sessions is the real obstacle to progress. On several occasions, he has been very outspoken about his views on legalizing marijuana. He is quick to inform the populace that federal law still applies in all 50 states, and he frequently implies that the Justice Department is working hard to crackdown even harder on marijuana businesses operating in states that have legalized.
Sessions even wrote a letter in May to some of his colleagues in Congress, requesting them to repeal the Rohrabacher-Farr Amendment, which specifically prohibits the Justice Department from using federal funds to harass, persecute, and prosecute operators in marijuana-friendly states. His insistence on removing this protection for states is a clear indication of his intent to wage war with the pot industry.
Even with perception shifting among the populace and within the Republican Party itself, it is not easy to see how any real progress can happen at the federal level while Sessions remains at the helm as attorney general. The problem on Capitol Hill is choking the marijuana industry and preventing it from reaching its full potential, and it is crimping potential returns for those investing in cannabis stocks.