7 States That Would Benefit Most From Legal Marijuana

By Markets Fool.com


Source: Flickr user Free Photos

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Last year was another remarkable year for the legal marijuana movement -- but remarkable doesn't mean perfect.

On the bright side for supporters of the legal marijuana movement, residents of Oregon and Alaska voted to become the third and fourth states to legalize recreational, adult-use marijuana, joining Washington and Colorado. Although the industry is still highly regulated with regard to how much one person can buy and possess, as well as how the product is grown and tracked from its place of origin, the taxes generated from legal marijuana sales are expected to help reduce or eliminate budget deficits in these states.

Source: Flickr user Danny Birchall

One major setback for the movement in 2014, however, was its defeat in Florida. Florida was looking to become the 24th state to legalize marijuana for medical purposes, but because the amendment would have required a change in Florida's constitution, the vote required 60% of residents to be in its favor instead of a straight majority. The amendment wound up getting 58% "Yes" votes, falling just short of approval.

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But one thing remains abundantly clear: legal or not, the public's opinion surrounding marijuana and its use is rapidly changing. Whereas a decade ago a mere 34% of respondents were in favor of legalizing marijuana, according to Gallup, in 2013 a record-high 58% were in favor of legalization.

Survey says
We can also see this changing landscape playing out in data released by the National Survey on Drug Use and Health, or NSDUH. NSDUH recently examined marijuana use statistics for all 50 states and various age groups utilizing data from 2011 to 2012. It then aggregated those stats into an easy-to-understand list of which states tend to have the most active marijuana users and which have the fewest.

Across the United States, 7.13% of the population aged 12 and up had used marijuana at least once within the past month. In the 18-25 year-old category this figure jumped to 18.89%, while in the 26 and up crowd it stood at only 5.05% nationally. However, seven states stand out in NSDUH's listing as having a high proportion of monthly marijuana users age 12 and up. These states are:

  1. Rhode Island: 13%
  2. Alaska: 12.97%
  3. Vermont 12.86%
  4. Oregon 12.16%
  5. Montana 10.45%
  6. Colorado 10.41%
  7. Washington 10.21%


Marijuana use in the past month, people aged 12 and up. Source: SAMHSA, Center for Behavioral Health Statistics and Quality, NSDUH, 2011 and 2012

These are the only seven states where marijuana use as an average among all age groups hits a double-digit percentile. These also, I would argue, are the seven states that would benefit the most from the legalization of marijuana (note that Alaska, Oregon, Colorado and Washington have already legalized adult-use marijuana).

Legal and medical marijuana can play an important role in closing budget gaps, and states with high user rates can expect greater revenue from legalization. Based on data from the Kaiser Family Foundation which examined each states' 2013 budget, Colorado was staring down a $148 million budget shortfall, Washington state a $3.1 billion shortfall, and Oregon a $2 billion shortfall. Recreational and medical marijuana tax revenue aren't going to single-handedly eliminate budget gaps this large, but it's a low cost and quick method of adding extra revenue into a state's coffers.

Source: GW Pharmaceuticals

In addition to the financial benefits of taxing marijuana, there are clinical studies under way signaling that it could provide a number of medical benefits as well. As we've looked at in recent weeks, marijuana may hold certain properties that help with the treatment of aggressive brain cancer as well as type 2 diabetes. On top of studying the role that cannabinoids may have in reducing cancer pain, GW Pharmaceuticalsis in the process of analyzing their role in treating adult and childhood epilepsy, type 2 diabetes, and gliomas.

Even now two major hurdles remain
But just because the public's perception of marijuana is changing doesn't guarantee that marijuana will ever realize its full market potential.

First, marijuana remains a schedule 1 drug according to the federal government, which is unlikely to change its stance anytime soon. You could certainly argue that the federal government has already softened its stance by allowing individual states to regulate their own recreational and/or medical marijuana industry. However, a full-blown departure from the federal stance on marijuana as an illicit substance still seems very unlikely in my opinion.

Secondly, we're still dealing with a myriad of abstracts and studies that view marijuana as a potentially dangerous drug. To be fair, more than 90% of all studies undertaken to this point have examined the risks rather than benefits of marijuana, so finding positive studies can be difficult. Still, a number of studies have cautioned that there is a link between reduced cognitive ability and marijuana use for adolescents.


Marijuana use in the past month, youths aged 12 to 17. Source: SAMHSA, Center for Behavioral Health Statistics and Quality, NSDUH, 2011 and 2012

This is a bit concerning considering that NSDUH's data shows that 7.55% of the U.S. population between the ages of 12 and 17 use marijuana monthly, with Vermont and Rhode Island boasting the two highest monthly use rates in this age range at 13.36% and 12.44%, respectively. Until we have more balanced study data on its benefits and risks, the expansion of marijuana into a more mainstream status for both medical and recreational purposes could be difficult.

This is still a dangerous investment
It's these two hurdles that continue to keep me on the outside looking in when it comes to investing in marijuana stocks. While marijuana's potential is certainly there, and public perception would imply an easing of the current restrictions on marijuana's use in many states, the chances of any viable investment opportunities popping up any time soon seem slim. Plus, the federal government seems pretty set in its ways at the moment.

You can rest assured I'm monitoring practically every new clinical study that is published, but it's going to take time to build a solid long-term case for or against the use of marijuana. In the meantime, expect emotions and volatility to reign supreme.

The article 7 States That Would Benefit Most From Legal Marijuana originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.