Marijuana and American Businesses Could Be on a Disastrous Collision Course

By Markets Fool.com


Source: Flickr user Manuel.

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Marijuana legalization has made incredible progress in a short amount of time.

Just two decades ago, not a single state had passed legislation allowing for the sale of even medical marijuana, and there certainly weren't any laws legalizing the use of marijuana for recreational purposes. Being caught with this illicit drug meant either a potentially pricey citation or incarceration.

Today, 23 states have passed laws allowing for the legal sale of marijuana for medical purposes, and four states (as well as Washington, D.C.) allow adults to purchase marijuana (up to a select limit) for their personal use, whether for medical purposes or not.

There has also been a dramatic shift in public opinion surrounding marijuana. Gallup polls indicate only a quarter of Americans viewed the prospect of legalizing marijuana favorably in 1995. Now, slightly more than half of all respondents in Gallup's latest survey said they would prefer to see marijuana legalized across the board. A number of smaller state-based polls recently showed even higher levels of support for federal approval of medical marijuana, with various polls ranging from 70% to 88% approval.

This change hasn't completely come out of the blue, either. After decades of research that primarily focused on marijuana's risks, a handful of new studies over the past year have illustrated its possible benefits, including as a treatment for aggressive brain cancer, parasites, Alzheimer's disease, and type 2 diabetes. These studies are ongoing, but the implication is that marijuana might have real-world medical applications.

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However, the rising tide of marijuana could also be putting this illicit drug on a potentially disastrous collision course with American businesses.


Source: Colorado Supreme Court via Facebook.

Marijuana and American businesses butt heads
On Monday, the Colorado Supreme Court issued its ruling on CO 44 -- 13SC394, also known as Coats v. DISH Network .

The plaintiff, Brandon Coats, is a quadriplegic who was fired in 2010 from DISH Network. The reasoning behind the firing was DISH's' zero-tolerance drug policy.

Source: StockMonkeys.com via Flickr.

Coats' doctors in Colorado, where medical marijuana has been legal since 2000, authorized him to use medical marijuana for his condition. However, Coats claims he never used the drug or was under the influence of marijuana at any point while at work with DISH. The company accepts this point, but its no-tolerance policy still cost Coats his job.

Under normal circumstances, employees are protected from being discharged unfairly for engaging in so-called "lawful activities," per the Colorado Supreme Court. However, because marijuana is still considered a schedule 1, and therefore illicit, drug on a federal level, it doesn't meet the definition of a lawful activity on the scope of a state and federal level. Long story short, the Colorado Supreme Court sided with DISH Network.

The official ruling read as follows,

The supreme court holds that under the plain language of section 24-34-402.5, C.R.S. (2014), Colorado's "lawful activities statute," the term "lawful" refers only to those activities that are lawful under both state and federal law. Therefore, employees who engage in an activity such as medical marijuana use that is permitted by state law but unlawful under federal law are not protected by the statute. We therefore affirm the court of appeals' opinion.

It should be noted that this ruling only has an immediate impact on residents of Colorado. But other courts could use Colorado's example as a precedent when future litigation works its way through the legal system.

It also sets a potential precedent for employers to maintain their zero-tolerance drug stance even if states they do business in legalize the drug for recreational or medicinal purposes. If workforce drug policies don't evolve to changing sentiment regarding marijuana (and nothing is coercing these businesses to change), a lot more jobs could be lost due to zero-tolerance policies.

Even more hurdles remain
This is just one of a number of hurdles that could keep marijuana's expansion on the back burner for years to come.

For instance, and coincidentally returning to Colorado, there has been a strange bifurcation of legalization across the state. Despite voters legalizing marijuana across the board in November 2012 and allowing legal recreational marijuana shops to open for business in 2014, three-quarters of Colorado's jurisdictions still maintain that marijuana is illegal. Policing the drug has become a logistical nightmare, with one county legalizing the drug and another immediately adjacent sticking with laws similar to those of the federal government.

Source: White House on Flickr.

Congress and the president aren't too keen on changing marijuana laws, either. While President Barack Obama has acknowledged that ongoing research into marijuana could be a good thing, and that a handful of states are acting as the experiment for the nation, he has also commented that marijuana simply isn't a high priority for him or Congress. Perhaps as more states legalize the drug that stance could change, but for now it remains something of a moot point.

Financing the marijuana business is also tricky. Until the federal government changes its stance on marijuana as a schedule 1 drug, banks will perceive the idea of lending money to the industry, even in states where the drug is legal, as illegal. This makes it difficult for marijuana licensees and growers to access credit lines in order to expand their businesses.

Finally, a mountain of negative clinical data must be overcome with new trial data. While marijuana has shown the potential to treat some serious and/or chronic conditions, much of this data isn't what researchers would consider "mature." As these studies become "long-term studies," researchers will have a better idea as to the validity of marijuana's healing prowess. But until that happens, getting the federal government to accept clinical data could prove tough.

Marijuana continues to be a dicey investment opportunity
If the Colorado Supreme Court decision has taught us anything, it's that the evolution of marijuana into the mainstream still has farto go. The hurdles noted here aren't insurmountable by any means, but they also won't evaporate overnight.

For you, the investor, this means investing in marijuana stocks is probably still dangerous. Although the industry offers plenty of room for growth, federal laws will likely act as a big cloud of uncertainty over the sector for some time to come. With uncertainty as to when Congress or the president might take up marijuana legislation, and the "experiments" of individual states expected to continue, investors would be wise to keep their money far away from marijuana stocks.

The article Marijuana and American Businesses Could Be on a Disastrous Collision Course 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 owns shares of and recommends Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.