Image source: Pixabay.
Continue Reading Below
This is shaping up to be a monumental year for the marijuana industry, and it just happens to be a coincidence that it comes 20 years after California became the first state to legalize the drug for medicinal purposes.
Marijuana readies for a big year
There have certainly been a few bumps over the last two decades for the marijuana industry, but as a whole its expansion persists at a steady pace. There are currently 23 states that have legalized marijuana for medical use, with a possible 24th on the way if Pennsylvania's state Senate passes a bill just approved by the state's House of Representatives. There are also four states (Washington, Colorado, Oregon, and Alaska) that have legalized the use of recreational marijuana for adults ages 21 and up.
Colorado has been a shining example of how medical and recreational marijuana can contribute economically. Sales of medical and recreational marijuana combined to come ever-so-close to tipping the scales at $1 billion last year and managed to grow by 42% year-over-year. Tax revenue and licensing fees generated in Colorado totaled approximately $135 million. This $135 million may not be the glue that holds a big budget together, but it does provide extra capital to schools, law enforcement, and drug abuse programs within the state
And this year could be even bigger. It's an election year, and it's possible that a dozen or more states could put medical, recreational, or medical and recreational initiatives (looking at you Ohio) in front of voters. President Obama has suggested that the best way to get Congress's attention is to keep passing marijuana laws at the state level, and this would certainly fit that bill.
Image source: Cannabis Culture via Flickr.
Continue Reading Below
Long-term marijuana use is bad news, study shows
Arguably the only thing holding marijuana back from taking a step to the next level is Congress. And the only thing holding Congress back from considering marijuana for nationwide approval is the absence of a clear and concise group of studies suggesting marijuana is safe for long-term users. Unfortunately for marijuana supporters, that's not the headline of a recently released study from the University of California, Davis and Duke University.
The study, conducted by researchers at both universities, sought to establish whether cannabis was safer than alcohol.
Previous studies have demonstrated that marijuana is substantially "safer" than alcohol when it comes to overdoses. More specifically, there were no marijuana overdoses leading to deaths in 2014. By contrast, the Centers for Disease Control and Prevention notes, via a Vital Signs report, that there are more than 2,200 alcohol poisoning deaths in the United States per year. Presumably, this also means medical care tied to marijuana is likely cheaper than medical care tied to alcohol.
Image source: Pixabay.
However, researchers from UC Davis and Duke University discovered something truly unique in their findings. After following a group of children born in Dunedin, New Zealand from their birth in 1972-1973 through age 38, and assessing their changes in health over their lifetime, researchers made a shocking discovery: heavy and persistent cannabis use had negative repercussions on people socially and financially.
Even after accounting for a number of factors which could have swayed the results, such as childhood socioeconomic problems, lower IQ, antisocial behavior, depression, and a host of other factors, researchers came to the same results over and over. As noted in the report:
The team found that regular cannabis users experienced downward social mobility and more financial problems such as troubles with debt and cash flow than those who did not report such persistent use. They also had more antisocial behaviors at work, such as stealing money or lying to get a job, and experienced more relationship problems, such as intimate partner violence and controlling abuse.
In fact, in some aspects -- downward social mobility, antisocial behaviors in the workplace, and relationship conflict -- researchers found heavy and persistent marijuana use to be more dangerous than alcohol dependence.
Study leader Magdalena Cerda had this to say,
"This is an important finding, given the common conception that cannabis is safer than alcohol. Alcohol is still a bigger problem than cannabis because alcohol use is more prevalent than cannabis use. But, as the legalization of cannabis increases around the world, the economic and social burden posed by regular cannabis use could increase as well."
Highlighting marijuana's many obstacles ahead
If this study from UC Davis and Duke University demonstrates anything, it's that nationwide approval of marijuana at the federal level is still likely to be a long ways off (if it ever occurs).
The good news for marijuana legalization supporters is that one study alone isn't going to define marijuana's safety profile. The downside to this is lawmakers are going to want to see a compendium of long-term safety studies on marijuana before they even consider changing their stance on the drug. In sum, it probably means many more years of the marijuana plant remaining a schedule 1 substance (i.e., illicit, and with no medical benefits) at the federal level.
For marijuana legalization supporters that's disappointing, but for marijuana businesses it could mean the difference between surviving or not. You see, inaction at the federal level has two dire consequences on the marijuana industry.
Image source: Pixabay.
First, even though the marijuana plant remains illegal at the federal level, the federal government still expects companies within the industry (growers, processors, and retailers) to pay corporate income taxes. As a further jab, businesses that sell substances that are considered to be illicit by the federal government aren't allowed to take normal business deductions. It ultimately means that marijuana businesses are brutally overtaxed.
The other issue is that banks generally want nothing to do with marijuana-based companies. Although state-level legalizations have allowed for some workarounds for banks should they want to offer basic banking services, such as a checking account or line of credit, to marijuana companies, most banks (about 97%) have chosen to avoid the industry altogether. This leaves marijuana businesses stuck with cash as their only mode of currency in many instances, which isn't all too secure.
Some investors view marijuana's growth opportunity as the greatest thing since sliced bread, but I view it as a dangerous opportunity at present. Without access to capital, and while paying a burdensome tax rate, it's going to make survival that much tougher for marijuana businesses. Until we see real change at the federal level, marijuana isn't worth your investment. And unfortunately, it could be a long time before that happens.
The article Marijuana Use May Be a One-Way Ticket to Socioeconomic Problems, Study Shows 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 name TrackUltraLong, 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 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.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.