Source: Flickr user Manuel.
The marijuana movement looks practically unstoppable at the moment, with individual states and the nation as a whole building support for the currently illicit drug.
Since 2012, we've witnessed four states legalize marijuana for recreational, adult use (Washington, Oregon, Alaska, and Colorado). There are also 23 states that currently allow marijuana to be sold for medicinal purposes to eligible individuals. It's incredible to think that just two decades ago not a single state allowed for marijuana to be dispensed legally for medical ailments.
The public has also come around in a major way. Gallup's polls show that a slight majority of respondents (51%) are in favor of marijuana being fully legalized. This same question was posed in 1996 to Americans, and just 25% were in favor of a nationwide legalization.
Marijuana's major federal roadblocks Yet, in spite of marijuana's undeniable momentum, it's facing some seemingly insurmountable hurdles that are keeping the drug firmly on the federal government's schedule 1 list (a schedule 1 drug is deemed as having no medically beneficial qualities).
Source: White House on Flickr.
For starters, the federal government is in no rush to move on legalizing the drug or decriminalizing it. President Obama has been clear in his assessment that he and Congress are anxiously watching the experiments ongoing in the aforementioned four recreation-legal states, but that the nation has more pressing issues to worry about other than marijuana.
Lawmakers are also waiting on results from clinical trials examining marijuana's potential benefits to mature. Previous decades brought a plethora of studies that examined the dangers of marijuana, with very few examining its possible benefits. Although marijuana has demonstrated benefits in select studies for conditions such as Alzheimer's disease, Parkinson's disease, and aggressive gliomas, these studies still have a ways to go before the data can be trusted.
Another big concern is financing for the marijuana industry. Although states have legalized marijuana for medicinal or recreational purposes, banks and credit unions, for the most part, still have their hands tied when it comes to lending to these businesses. The reason is that the marijuana plant is still considered illegal according to the federal government, and federal law technically supersedes state law. In short, the banking industry is afraid of either facing prosecution from the federal government for lending to legal marijuana businesses (they could be found guilty of money laundering) or of the federal government removing its hands-off approach and actively reinstating its marijuana ban. If the federal government did this, banks and credit unions could be in line to lose the entirety of their loans to marijuana-based businesses.
This historic bill could tear down a major marijuana roadblock However, a bill introduced in the Senate last week could put an end to this last major roadblock.
Senator Cory Gardner (R-Colo.). Source: Facebook.
Colorado Senators Michael Bennet (D-Colo.) and Cory Gardner (R-Colo.), and Oregon Senators Jeff Merkley (D-Ore.) and Ron Wyden (D-Ore.) introduced a bipartisan bill in the U.S. Senate that would essentially decriminalize the act of providing banking services to legal marijuana businesses and would protect banks from being penalized by the federal government.
As Gardner said in an interview withPolitico,
Based an interview with the Denver Post, Dylan Donaldson, owner of Karing Kind, a legal marijuana shop in Boulder, Colo., had this to say:
Removing this major roadblock would certainly make like easier for existing marijuana businesses as it would broaden the transaction process (credit cards would likely be accepted at nearly all legal marijuana shops), and it would open up the field for existing marijuana business owners and prospective owners to get into the business by securing loans. Being able to draw down a line of credit could be important for growers, processors, and retailers when it comes to buying product ahead of time or expanding existing facilities (with state permission).
It's also a boon for banks. After all, they would benefit from the interest on outstanding loans to the marijuana industry, which I would presume would come with a much higher lending rate than to traditional businesses due to the risk associated with it.
Could this bill be declined? On the surface, this bill looks as if it would indeed remove some the barriers in place for businesses and consumers in legal marijuana states. However, the opinion of a few Senators may ultimately not matter.
Source: Flickr user Sean MacEntee.
If you recall, three U.S. Senators introduced the CARERS Act in the Senate earlier this year. This potentially historic bill was designed to decriminalize and reschedule medical marijuana, as well as free banks from the fear of penalty or prosecution when dealing with legal marijuana businesses. It may have seemed like a great idea at the time to some, but the bill met a rather apathetic group of lawmakers in Congress, where it failed to progress. It's certainly possible the recently-introduced marijuana banking bill could meet a similar fate. Without enough tangible benefits research for most lawmakers, they'd simply rather not make a hasty decision.
For what it's worth, similar legislation that would have allowed banks to service the legal marijuana industry was introduced in the House of Representatives last year, but it failed to even make it onto the committee hearing calendar.
The prudent course of actionIt's pretty clear that we're going to continue to see proposals designed to make life easier for marijuana businesses in legal states. Let's not forget that legal marijuana businesses provide excise, sales, and local tax revenue that states can use to bridge budget gaps and support the education system. Therefore, it's in the interest of some lawmakers -- especially those in legal states -- to promote bills that would lighten the load on marijuana shops.
Source: National Institute on Drug Abuse via Facebook.
But it's also evident that Congress' apathy toward change is unlikely to coerce much in the way of change on the federal level for years to come. With President Obama in watch-and-wait mode and a majority of the presidential candidates skeptical of marijuana's benefits profile, we're probably not in line to see any major changes to the federal government's current stance on marijuana for a long time.
For investors, this is an important revelation. It probably means that we won't witness the major catalyst (legalization or decriminalization) that so many proponents are waiting for before the end of the decade -- and that's a big concern because most marijuana businesses are losing money.
Between the fact that many marijuana stocks trade on the over-the-counter exchanges where standard reporting practices aren't necessarily required and their inability to get the proper financing, the prudent course of action looks to be waiting on the sidelines until there are concrete changes in federal policy. To be clear, I personally do expect the federal government to change its stance eventually, but I believe consumers and investors are far too hopeful with their expected timeline on when that might happen.
The article This Marijuana Bill Introduced in the Senate Could Solve a Big Problem 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 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.
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