2018 demonstrated a considerable amount of progress in the legal marijuana market. Investors in this market had front row seats for the historical movement of marijuana stocks relegated to OTC upwards and into legitimate stock exchanges. States have fallen in line with making medical marijuana available for citizens in need and the state of Vermont made adult-use marijuana legal. Things are looking sky high for the green, and, yet, Congress appears to have stalled out on progress with making changes to the legal aspects and schedule designation of marijuana.
As marijuana stocks legitimize and the legal marijuana market booms, what would keep Congress from moving forward with legalization?
The state of Vermont made history with its legalization efforts for marijuana and at least 30 American states are on board with medical marijuana in some capacity. In spite of how the people of this democracy have spoken about the benefits and uses of marijuana, the plant remains on the Schedule I DEA shelf with the likes of heroin and ecstasy.
This distinction insinuates the federal government does not recognize any medical benefits to marijuana use. This is contradictory to the U.S. Food and Drug Administration June 25th approval of the cannabidiol-based Epidiolex drug created by GW Pharmaceuticals (NASDAQ:GWPH). Staring the government in the face are multiple clinical-stage trials demonstrating a remarkable decrease in seizure frequency for Dravet syndrome and Lennox-Gastaut syndrome patients against placebo groups.
The democratic system is failing when it comes to pubic opinion about marijuana. Five national American polls demonstrate widespread favor for legalizing marijuana. According to one survey, 9 out of 10 American adults believe marijuana should be legalized; that’s a whopping 85%.
In spite of the success of marijuana stocks and markets in the United States and the progressive efforts of cannabis legalization in Canada, the echoes of Prohibition are witnessed.
During the beginning of Prohibition in 1920, it took the span on only one year for Nevada’s population of 90K residents to have 10K prescriptions of “medicinal alcohol” dispensed. Sounds a bit familiar when you look at what’s happening with marijuana in the U.S.
Some federal arguments claim legalizing marijuana would have a detrimental impact on teenagers. This assumption implies adolescents would have access to marijuana via older relatives or friends. According to some studies, there is a non-conclusive chance regular marijuana use during adolescence may damage long-term memory. Likewise, legislators are under the impression marijuana will impact motorists behind the wheel. Of course, there are laws regarding alcohol use and driving, so, this particular “concern” as an obstacle between legalization and regulation is somewhat lacking. Guidelines for cannabis use would be required just as they are in place for the use of alcohol; for example, as one’s blood alcohol content may be tested, a similar precaution for levels of THC would need to be determined.
Moreover, those in charge of writing the rules have the marijuana stocks industry in a headlock. There is a strong-willed call for comprehensive clinical data to evaluate the risks and benefits of cannabis; however, the process to receive the go-ahead for these studies is arduous and there is only one grow farm in America with testing supply at the University of Mississippi.
It may interest marijuana stocks businesses and investors to consider the actual obstacle in the pathway of legalized cannabis in America is all about tax dollars.
The idea of maintaining Schedule I status for marijuana for tax purposes probably sounds confusing. It would stand to reason the government could tax the legal product and watch the money roll in. As it turns out, the federal government may actually make more money by maintaining their current position on weed rather than acknowledging the desires and preoccupations of the people.
Per section 280E of the U.S. tax code, businesses selling a Schedule I drug or a restricted, yet, legal Schedule II chemical or drug, are not permitted to take out the standard corporate tax deductions. The tax rate for these kinds of business skyrockets to 70% – 90%. Keeping marijuana popular, but, illegal, provides a heavy dose of tax revenue.
One senator, Cory Gardner of Colorado, stuck his neck out during the revision of the Tax Cuts and Jobs Act in December of 2017. The senator from a state which has legalized marijuana proposed an amendment to permit marijuana-based companies to take out normal tax deductions provided they complied with state law. Allowing for this amendment could cost the Feds approximately $5 billion dollars in tax revenue.
The future for marijuana stocks is uncertain in the current political climate; there is, however, some surprisingly good news.
President Trump has, thus far, appeared to take a positive stance on legal pot. When asked about his thoughts on Senator Gardner’s proposal, he indicated he was likely to support it. This statement took the wind out of Jeff Sessions’ sales as he prepared for his crusade on cannabis in America. It remains to be seen who will win this fight – the people, or government tax money.