Ready or Not, the Federal Government Is About to Weigh in on a State Marijuana Issue

By Markets Fool.com


Source: Colorado Marijuana Enforcement Division.

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The past couple of years have led to a number of "firsts" for marijuana.

The latest poll from the General Social Survey represents the first time in history that a majority of respondents (52%) are in favor of legalizing the drug. Similar results can be viewed with the 2014 Gallup poll on marijuana, where 51% of respondents were in favor of legalization.

However, we're seeing more than just public opinion changing -- state laws are being transformed right before our eyes. In 2012 we witnessed Washington and Colorado become the first states to legalize marijuana on a recreational, adult-use basis. Since then Oregon, Alaska, and Washington, D.C. have followed suit. Additionally, the number of states that have approved medical marijuana now sits at 23 compared to zero just 20 years ago.

Source: National Institute on Drug Abuse via Facebook.

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Why legalize?
The potential legalization of marijuana has positive, but differing, implications for consumers and states. States looking to legalize marijuana are primarily focused on the tax implications of the drug. Legalizing marijuana opens legally grown product to substantial excise and local taxes which states can use to close budget deficits and retain state employees.

Consumers want to see the drug legalized because it's perceived to offer a number of medical benefits. If you examine opinion polls on marijuana, inclusive of recreation, legalization respondents are just slightly in favor of its approval. Exclude recreational use from the equation and just focus on legalizing medical marijuana and the approval rate jumps to north of 70% or even 80% based on a handful of recent polls.

Marijuana faces its first serious state challenge
Just because recent polls suggest that the American public is in favor of marijuana's legalization or decriminalization, it doesn't mean all states, governors, or even jurisdictions within legal states, support the recreational or medical legalization of marijuana.

Within Colorado, for example, around three-quarters of all jurisdictions still ban marijuana. Other states have governors politically opposed to the idea of legalization, all but cancelling the chance for legal marijuana to wind up on the ballot in these states.

Source: National Drug Abuse Research Centre via Facebook.

But what happens when you put states next to each other that have opposing political views on marijuana? You get a lawsuit.

Last month we found out that Oklahoma and Nebraska had filed a lawsuit with the U.S. Supreme Court against the state of Colorado due to alleged illegal drug flow from Colorado, a recreational and medical legal state, to Oklahoma and Nebraska, two states that prohibit all forms of marijuana.

What makes this particular lawsuit so intriguing is that if the Supreme Court were to hear this case and rule in favor of the plaintiffs, it could mean the repeal of state marijuana laws nationwide, including medical marijuana. Because marijuana remains illegal on a federal level, the Supreme Court would unlikely be able to put an asterisk next to medical marijuana and allow its continued use on a state level without the federal government's approval of marijuana as a whole.

Surprise! The federal government will weigh in
Perhaps the most interesting aspect of marijuana's expansion over the past two decades is the fact that the federal government has kept its nose out of state marijuana policy. The federal government has taken the stance that as long as states are able to effectively regulate and enforce their marijuana laws, then there's no need for federal intervention.


Source: White House on Flickr.

However, this past week the U.S. Supreme Court asked the Obama administration to weigh in with its thoughts on the lawsuit filed by Oklahoma and Nebraska. While we have heard commentary recently from President Obama while in Jamaica, we haven't heard an official take on where the Obama administration stands on marijuana in a long time!

As Reuters has suggested, the move to request the Obama administration's views could simply be buying time for the Supreme Court to decide whether or not it wants to hear this case, but it nonetheless gives the current administration its first real opportunity to publicly sound off on its views of marijuana.

Why you should care
Why should you care what the federal government thinks about marijuana and the impending lawsuit?

For starters, if the Obama administration comes out with a positive view of marijuana enforcement in recreational-legal states it could sway the Supreme Court to dismiss the case. Both President Obama and 2016 presidential candidate Hillary Clinton have recently opined that recreational-legal states serve as something of an "experiment" that the federal government can use to determine if legalizing marijuana on a larger scale, or decriminalizing the drug, makes sense. In that sense, the Obama administration may not come out in support of this lawsuit.

Source: GW Pharmaceuticals.

But, Obama hasn't exactly thrown his support behind marijuana, either. The Obama administration could ultimately suggest the Supreme Court hear this case to determine if states are holding to their end of the bargain in terms of regulating growth, labeling, and transportation of marijuana. Were this to happen it could negatively impact sales of the drug in recreation-legal states.

A lot could be riding on this for cannabinoid drug developer GW Pharmaceuticals as well. If this lawsuit were dismissed it would suggest that we're another step closer to the potential federal rescheduling of marijuana from its current schedule 1, or illicit, status to schedule 2. A schedule 2 drug has defined clinical benefits, but is considered to have abuse potential.

GW Pharmaceuticals would much prefer to see medical marijuana legalized on a federal level because it would tear down some of the high hurdles it has to overcome to conduct clinical trials involving its marijuana-based cannabinoids. Having discovered more than five dozen cannabinoids, a softening in the federal government's stance on marijuana could allow GW Pharmaceuticals to rapidly ramp up its preclinical and clinical programs.

Now it's just a matter of watching and waiting for the Obama administration to chime in. I'd strongly suggest you pay attention.

The article Ready or Not, the Federal Government Is About to Weigh in on a State Marijuana Issue 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 recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.