The marijuana industry has been growing like wildfire in recent years, which is a testament to the rapid changes we've witnessed in public opinion toward the drug, as well as the willingness of state governments to seek tax and licensing revenue through the legalization process.
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Today, 28 states have legalized medical cannabis while another eight have voted to legalize recreational weed for those aged 21 and up. This is all possible because of what a 2016 Gallup poll and an April 2017 CBS News poll show: both hit all-time highs in terms of support toward a nationwide legalization of marijuana. A respective 60% of Gallup survey-takers and 61% of CBS News respondents wanted to see pot legal nationally.
For select state legislatures, the proof has been in the pudding. Colorado wound up racking up more than $1.3 billion in legal weed revenue last year, a greater than 30% year-over-year increase, resulting in almost $200 million in tax and licensing fees collected. This added revenue is being used to fund Colorado's education system, as well as law enforcement and drug-abuse programs.
Federal overhang remains a serious problem for the marijuana industry
However, the marijuana industry continues to battle a federal government that hasn't changed its stance on weed. At the federal level, cannabis is still a schedule I drug (the same as LSD and heroin), meaning it has no recognized medical benefits and is entirely illegal.
Even though we've witnessed a number of individual states legalizing marijuana for medical and/or recreational purposes, it doesn't remove the federal overhang from the industry. Medical research into cannabis is practically nonexistent because of its strict scheduling. Additionally, businesses involved in the pot industry are unable to take normal corporate income-tax deductions since they're selling a federally illicit substance, leading them to pay a considerably higher tax rate on their profits than "normal" businesses. And finally, weed businesses have little or no access to basic banking services. Banks fear that providing something as simple as a checking account could, under a strict interpretation of federal law, land them with a money laundering charge and/or fine.
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Of course, the real issue is that the Controlled Substances Act along with federal law could allow the federal government to roll back its current leniencies at any time. In plainer English, if the government wanted to put the kibosh on the medical and/or recreational marijuana industries, it could at any moment. With Jeff Sessions, perhaps the most ardent opponent of marijuana's expansion, as Attorney General, anything seems possible.
Welcome back the CARERS Act
However, some lawmakers aren't sitting idly by. Six Senators, including Kirsten Gillibrand (D-NY), Cory Booker (D-NJ), Al Franken (D-MN), Rand Paul (R-KY), Mike Lee (R-UT), and Lisa Murkowski (R-AK), reintroduced the Compassionate Access, Research Expansion and Respect State (CARERS) Act last week.
For those who may not recall, the CARERS Act was the first marijuana bill to ever be introduced in the Senate back in 2015, let alone have bi-partisan support. It aims to make four major changes.
- Recognizes states' rights: The CARERS Act would amend the Controlled Substances Act to allow states the right to decide whether or not their residents should have access to medical cannabis. It would effectively end the chance of having the federal government prosecute medical pot users and businesses.
- Allows states to import CBD: It would amend the Controlled Substances Act to remove specific strains of cannabidiol (the non-psychoactive component of cannabis) oil from the federal definition of marijuana. This would allow states to import CBD oils to treat children and young adults with epilepsy.
- Provides veterans access: Thirdly, it would amend current laws denying the Department of Veterans Affairs from accessing medical cannabis. Veterans Affairs doctors would be allowed to prescribe medical marijuana in legal states if the CARERS Act became law.
- Expands medical research opportunities: Lastly, it would remove a lot of the red tape that makes it inhibitive to research cannabis as a potential medical treatment option.
One company that's likely cheering the reintroduction of the CARERS Act is Medical Marijuana, Inc. (NASDAQOTH: MJNA), the very first publicly listed marijuana stock. Medical Marijuana, Inc. is more of an investment holding company than anything, but it does have a presence selling CBD-based oils and products. Loosening federal control over the medical side of the equation would be a major bonus for a company like Medical Marijuana, Inc., as well as many of its peers.
Two very notable changes from the first version of the CARERS Act
Interestingly enough, though, the reintroduced version of the CARERS Act last week was missing two very key components of the initially introduced CARERS Act back in March 2015.
First, there was no request that marijuana be rescheduled from schedule I to schedule II, as under the original bill. Changing the scheduling of cannabis would have made researching the drug considerably easier for drug developers, albeit there would be consequences. In particular, schedule II drugs come under the strict supervision of the Food and Drug Administration, which can control marketing, packaging, and manufacturing standards for medical weed-based companies. More importantly, a schedule II status could mean medical pot companies being forced to run very costly clinical trials to confirm the benefits that have been suggested for the drug. It's possible the removal of the request for rescheduling was based on this latter possibility.
The second monumental change made between the 2015 and 2017 CARERS Act is that there's no mention in the current Act of protections for financial institutions who are working with marijuana businesses. Unlike the request to reschedule, this is a complete headscratcher. With little access to lines of credit, loans, and checking accounts, pot businesses are stuck dealing with cash and cash only, which is a growth inhibitor, a security concern, and a means to support the black market. The absence of banking protections is honestly puzzling.
Will the CARERS Act fall on deaf ears?
Now the big question is: Will the CARERS Act have an opportunity to move to vote, or will it fall on deaf ears once again?
On one hand, growing favorability toward marijuana from the public may push the Senate's hand to seriously consider the CARERS Act. A recent poll from the independent Quinnipiac University found that an overwhelming 93% of respondents favor the idea of legalizing medical cannabis nationwide. If Congress chooses to push cannabis issues under the rug, voters could demonstrate their displeasure by voting incumbents out of office.
On the other hand, the Senate is knee-deep in healthcare reform legislation and is likely to be pressured by the president to make serious efforts to pass tax reform in 2017. In other words, there's just not a lot of time on the docket for medical pot reform to be discussed, even with bipartisan support.
If my arm were twisted, I'd suggest the CARERS Act fails to leave the starting gate once again. There may come a time when lawmakers on Capitol Hill have the proper motivation to take action, but I'd opine that we're not there yet. That's bad news for marijuana stocks, medical weed patients, and pot-based businesses.
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