Why Federal Marijuana Legalization in America is Inevitable: Top 5 Reasons

In the infographic below we present the 5 most compelling reasons why federal marijuana legalization in the United States of America is inevitable. The tide has turned — fundamental shifts are happening in American society and politics to make national legalization by 2020 a  reality.

Marijuana Legalization is Closer in the US Than You Think

After Canada voted last month to legalize recreational marijuana by October 17, on the surface it looks like the US is far behind on the regulatory path.

However, looks can be deceiving, and even with conflicting state and federal marijuana laws the pendulum of US decriminalization is swinging faster than ever toward the legalization of pot nationwide.

Looking at hard political data, national security concerns and popular support, federal marijuana legalization could be less than 3 years away.

Three years may seem soon but regulations could move even faster with legalization in Canada having unintended consequences for the US marijuana market, forcing federal decriminalization as early as 2019.

 

Decriminalization of Marijuana is Gaining Steam

The turning point may already be upon us with two bills introduced recently in the Senate to decriminalize marijuana at the federal level.

Marijuana may be completely legal according to eight US states, but with the federal government classifying marijuana as a schedule 1 drug with no health benefits, the industry is not able to reach its true potential.

The tides may finally be changing according to recent data from GovTrack and illustrated by Cannabis Business Daily.

The 115th session of Congress, which began in January 2017 and will run until January of 2019, has seen a 40% increase in marijuana-related bills compared to the prior two-year period.

The Senate in particular has seen more bills in in the last 18 months than the prior 17 years.

Source: GovTrack, Copyright 2018 Marijuana Business Daily.

One of the two bills recently introduced has a Republican co-sponsor which indicates bipartisan support, an important feature increasing the chances of a yes vote from both sides.

The Republican-sponsored bill looks especially promising as it only seeks to make one amendment to the Controlled Substances Act and doesn’t include extra funding or law changes that could antagonize Democrats or conservative Republicans.

The second bill sponsored by Democratic Senator Chuck Schumer is much more ambitious and includes millions in funding for marijuana initiatives related to public safety, public health, and arrests. It’s unlikely to make it to the Senate for a vote in our view.

Chances of a Bill Making it Through the House are Slim Unless the Midterm Elections Lead to a Republican Shakeup

Realistically, as long as Pete Sessions (R-TX), a staunch prohibitionist, is Chairman of the House Rules Committee, a body that chooses which bills reach the house floor, it’s unlikely any of the house legalization bills will become law.

Sessions’ congressional seat is up for grabs in November and marijuana advocates may have some hope as his district has been one of the fastest shifting districts in the country in favour of Democrats. It still leans Republican, however, in the state of Texas, a stronghold for Republican candidates.

Source: The Cook Political Report

The Senate Chances Look Slightly Better, but Still Tough

Republican Senator Mitch McConnell, another prohibitionist, serves as the Senate majority leader. The majority leader has broad powers to set the agenda, determine how long a bill can be debated, and even has the right to go first when proposing amendments, substitutions, and motions.

Political change is not going to come from politicians, it’s going to come from citizens making their voices heard and forcing the hands of elected leaders, which is now happening.

 

States are Pushing Ahead With or Without the Government’s Permission

Marijuana may be completely illegal at the federal level, but states don’t seem to care.

Looking at the chart below, it’s clear that legalization of both medical and recreational use is marching forward with or without the federal government’s consent.

29 out of 50 states have legalized marijuana for medical use and 9 out of 50 for recreational. 58% of US states now allow some form of marijuana use.

With majority voting support for medical marijuana in the House and Senate, it’s inevitable that a bill will be approved to first decriminalize and then legalize marijuana federally.

If we look at the number of elected officials in the Senate and House of Representatives from each state that legalized medical marijuana, voting support for a federal law supporting pot should easily pass if it can make it to a vote past Pete Sessions and Mitch McConnell, the two anti-pot gatekeepers.

60% and 64% of the Senate and the House technically support legal medical marijuana.

Implied voting support for recreational marijuana still has a long road ahead with representatives from recreational marijuana states making up only 18% and 19% of the House and Senate votes respectively.

Implied Voting Support for Marijuana in the Senate and House

Implied Senate Support for Marijuana

Implied House Support for Marijuana

Public Acceptance is Already Here, Politicians Will Follow

From a public opinion perspective, a majority of US citizens support the full legalization of marijuana according to a October 2017 Gallup poll.

If the majority of citizens are in support, it’s only a matter of time before enough pressure is brought to bear on elected officials for a countrywide legalization bill to appear in either the House or Senate.

In our view, the first step to legalization will be decriminalizing marijuana as a schedule 1 drug, with large-scale state medical and recreational legalization to follow.

Source: Gallup

The Millennial Political Shift is Already Taking Place

Our economist Chris Wood highlighted an important trend earlier this year in his Macro Battleship column — ‘millennials’ in the United States are now a larger (85 million) demographic cohort than the baby boomers (73.8 million).

U.S. Population by Age Chart

Source: U.S. Census Bureau

And millennials matter a lot when it comes to the legalization of recreational marijuana. A whopping 70% of millennials believe pot should be legalized versus 56% of boomers.

The millennial political left in the US has already embedded legalization as an important platform issue.

Alexandria Ocasio-Cortez, the 28-year-old ‘Democratic Socialist’, unseated a 10-term incumbent in Rep. Joe Crowley on the back of a very progressive radical platform.

It was a bitter defeat for establishment ‘boomer’ Democrats that now are clearly feeling the impact of a politically emboldened demographic.

She and her Democratic millennial contemporaries support legal recreational marijuana and addressing the related criminal injustices by the war on drugs.

On the other end of the millennial political spectrum the ‘alt-right’ vehemently opposes nearly all of the issues championed by the Democratic left — with the exception of pot.

Marijuana is the one issue that has been met with political indifference by the ‘alt-right’.

The challenge for the most influential voices on the ‘alt-right’ (Gavin McInnes and Richard Spencer) is that they present their hard right views in a hipster package.

Taking a strong position against pot simply doesn’t mesh with the millennial demographic they’re trying to win.

 

Trump’s Pro Pot, Jeff Sessions is Not

Donald Trump is on record stating that he would likely support Congress to end the federal ban on marijuana.

This is Trump at his politically astute best. He knows he won’t be penalized by his ‘bible and guns’ base on this issue as he hasn’t wavered on immigration control and gun rights.

By vocalizing support for marijuana, Trump has also taken a strong jab at his Republican nemesis —Attorney General Jeff Sessions — the man who didn’t shut down the Russian investigation.

Sessions is as bible-belt anti-marijuana as they come and he continues to wage an ideological war on drugs.

Trump’s open embrace of ending the federal ban is at direct odds with Sessions’ push for direct confrontation with legal states.

Another important side note is that important figures of the Republican establishment have moved to the pro-legalization side of the debate.

Charles Koch is championing criminal justice reform and pot decriminalization and former Republican speaker John Boehner has joined the advisory board of a cannabis company (Acreage Holdings).

Grizzle - horizontal rule

Marijuana May be the Solution to the Opioid Crisis

Excessive prescribing of opioids by the medical community in the past decade led to a spike in opioid-related deaths in America.

Opioid related deaths are up 4x in the last 16 years and are killing over 40,000 Americans each year.

The opioid crisis is a scourge that is literally killing America and marijuana is a critical medical tool to stem addiction.

Recent studies show that opioid overdose deaths were 25% lower in states that had a medical marijuana program compared to those that didn’t.

Additional studies show that states that have legalized marijuana for recreational use saw a 6% drop in opioid prescriptions, a first step in the fight to limit addiction.

This early data vindicates the use of marijuana as a safer alternative to traditional pain medicine and will make it very difficult politically and medically to continue to classify marijuana as a schedule 1 drug with no known medical benefits.

Clinical Trials Create Another Avenue to Legalization

The catch-22 keeping marijuana from being classified as a schedule 2 or 3 drug is the lack of clinical trial data.

US law states that cannabis as a schedule 1 drug has no known medical purpose, just like heroin or cocaine. The government will not change their opinion without clinical trial data showing that marijuana has medical uses.

However, obtaining samples to conduct studies is exceedingly hard because of the drug’s classification. Herein lies the catch-22.

There is a light at the end of the tunnel and it will come from outside the US.

The legalization of marijuana in Canada and the approval of clinical trials in Europe and Israel will eventually provide a mass of evidence supporting the medical efficacy of marijuana.

The tide is already turning with the US Food and Drug Administration (FDA) approval on June 25 of the first drug synthesized from marijuana.

The FDA is a department of the federal government and this approval technically implies that the federal government approved a marijuana-based medicine, contradicting their stance on the marijuana plant as an illegal schedule 1 drug.

Grizzle - horizontal rule

Canadian Marijuana is a National Security and Economic Concern for the U.S. and Could Force U.S. Legalization

The Canadian border is twice as long as the Mexican border, yet the US spends 5 times more money policing the Mexican border.

According to the Canadian government, the marijuana black market is worth C$5.6 billion in Canada with exports, mainly to the US, making up 20% of the total or C$1 billion.

Shutting down the black market was a cornerstone of the government’s argument for marijuana legalization. If they do their job correctly the black market will be forced to find new customers as legal producers steal them all away.

The US presents a perfect target for a flood of Canadian pot with loose northern borders, 10 times the population, higher prices and legal markets that allow easy integration of black market supply into the legal pipeline.

Oregon is a case study in how porous US state borders can be with the local oversupply making its way all over the country to both legal and illegal neighbouring states.

Legalization Only Works if Everyone Does It

The US faces a problem. Marijuana is a global market and legalization only works to kill off the black market if every country does it at the same time. Otherwise the underground economy just shifts focus to a new market.

As black market growers in Canada turn their sights to the US we expect to see further retail and wholesale pricing pressure in legal US markets like Colorado, Oregon, California, and Nevada.

The Black Market Could Force Legalization

If the Canadian black market makes enough of a splash in the US it could force federal legalization as way to retain tax revenue and protect the industry.

The Canadian black market will undercut legal prices in the US because of their production cost advantage and with the benefit of a currency across the border that trades at a 30% premium to the Canadian dollar, juicing their take-home profits.

The Government loses their tax revenue, US licensed producers feel the cashflow squeeze as dispensaries would rather buy on the illicit market to save 25% than stick with legal suppliers just to stay on the right side of lightly policed marijuana laws.

What comes next is a Federal government besieged by complaints from local law enforcement, congressmen from legalized states, and the lobby groups.

If the Canadian black market makes enough of a splash in the US it could end up forcing the government’s hand, leading to federal marijuana legalization as a way to retain tax revenue and protect the fledgling industry from unfair competition.

 

The Tide has Turned

When a clear majority of the population support an initiative, it’s inevitable that politicians will vote in line with their constituents shortly after.

Mainstream Republican ideology is shifting markedly, the only hurdle left to widespread marijuana legalization in the US are two Republican prohibitionists with strategically important positions in the House and Senate.

Legalization in Canada will ultimately accelerate the pro-marijuana political momentum already established within America. Fighting a costly ‘war on drugs’ on both borders is an economic non-starter for a highly indebted country.

We believe there’s a high likelihood that marijuana will be legal at a recreational level nationwide by 2020 in the US.

The opioid crisis is a scourge that is literally killing America and marijuana is a critical medical tool to stem addiction.

The mainstream acceptance of the medical benefits of marijuana will present a legal conundrum for the government to continue to classify it as a schedule 1 drug (the most dangerous and addictive category).

We believe there’s a high likelihood that marijuana will be legal at a recreational level nationwide by 2020 in the US. The importance of this dramatic shift simply cannot be understated from both an impact on society and investment.

Investing on the frontier of massive trends is where real money is made, and it doesn’t get any bigger than the legalization of marijuana in America. Growth investors are best positioned for significant capital appreciation 2-3 years prior to inflections in parabolic growth. We’re squarely in that window now for marijuana in America.