3 Factors That Could Change the DEA's Mind About Marijuana

Image source: Getty Images.

As we look back at 2016, pro-legalization enthusiasts, as well as hopeful investors, have every reason to smile at the progress that's been made with marijuana.

While still an illegal substance at the federal level, five new states approved cannabis for medicinal use in 2016 (two of which did so entirely through the legislative process), and residents in four states voted to legalize recreational pot. The year ends with medical marijuana legal in 28 states, and eight states having legalized adult-use recreational weed. Not bad at all considering that two decades ago just one state, California, had legalized medical cannabis, and the thought of recreational marijuana in 1996 was almost laughable, with three-quarters of all respondents in Gallup's national poll not favoring its legalization. Today, 60% of polled respondents favor legalizing pot nationally.

With the shifting trends in opinion there's also been a surge of green -- dollars, that is! Investment firm Cowen & Co.'s recent forecast suggests that legal marijuana sales could grow from $6 billion in 2016 to $50 billion by 2026, which represents a decade-long compound annual growth rate of more than 23%. Furthermore, the number of legal pot jobs is expected to double or triple in the years to come, which is equivalent to as many as 300,000 new jobs being added.

Image source: Office of Public Affairs, Flickr.

This DEA decision took center stage

Yet, what may wind up being marijuana's most memorable moment in 2016 was the U.S. Drug Enforcement Agency's decision in August to deny two petitions requesting that marijuana be rescheduled or removed from the scheduling status entirely. The DEA, which sought and considered the opinion of the Department of Health and Human Services, offered three particular reasons for declining to change marijuana's schedule 1 status.

First, the DEA and HHS evaluation both agreed that pot demonstrated a high potential for abuse. Secondly, the DEA and HHS found that medical cannabis has no acceptable medical use, at least as of now. Finally, there was a lack of safety evidence to suggest that marijuana could be used as a medical treatment, even if under medical supervision.

Considering that petitions to reschedule marijuana often take years to work their way up to the DEA, it could be a while before the regulatory agency even considers pot's medical fate once again. However, should that time come around sooner rather than later, three factors could sway the DEA's mind about marijuana.

Three factors that could change the DEA's mind about marijuana

The first thing the DEA would need to see is clear clinical evidence that marijuana provides medical benefits. Of course, this is probably the trickiest piece of evidence to provide, as the U.S. Food and Drug Administration hasn't exactly been forthcoming with requests for FDA-designed clinical trials involving pot. We've been witnessing a trend toward research leniency when it comes to cannabis, but you should also remember that clinical trials can take quite a bit of time to run and analyze.

Image source: Getty Images.

Another component that the DEA would need, which goes hand-in-hand with the first point, is clear evidence that cannabis is safe for medical patients. For both of the first two points many pro-legalization advocates will point to the millions of long-term marijuana users, as well as published clinical studies in various journals, as more than enough evidence to suggest pot is safe and effective in treating certain ailments. But the DEA and HHS would only consider the well-crafted trials of the FDA, essentially negating all other previously published studies that the FDA didn't oversee.

Finally, the DEA would need evidence that the chemistry of marijuana is better understood by the FDA and researchers. In other words, the components of cannabis aren't considered reproducible at the moment, so researchers would need to further dissect the chemistry behind the plant to understand how it positively or negative impacts the body.

If all three factors were met, it's possible the DEA could change its tune.

There's a downside, too

But it's important that potential investors and marijuana enthusiasts also understand that even if the DEA reschedules cannabis, things won't necessarily get any easier for the industry.

Image source: Getty Images.

If the DEA determines that the aforementioned factors are met in a later rescheduling analysis of pot, and the agency chooses to reschedule cannabis, the drug would then fall under the tight regulatory authority of the FDA. The FDA would have the power to approve the marketing and packaging of medical marijuana companies, and it would likely oversee the growing and processing of cannabis used for medicinal purposes. More importantly, the FDA could require additional clinical trials be run for the specific ailments that marijuana is targeting. Long story short, FDA oversight would probably mean a huge increase in expenses for the medical marijuana industry up and down the supply chain.

It's this sort of Catch-22 (patients lose out if cannabis remains a schedule 1 drug, while pot businesses could be crushed if regulated by the FDA) that makes the future of marijuana very cloudy, and which should give prospective investors reason to pause.

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