Credit: With the exception of 1996, when California first legalized medical cannabis, or 2012, when Colorado and Washington became the first states to legalize recreational pot, 2016 was probably marijuana's best year ever.
With the exception of 1996, when California first legalized medical cannabis, or 2012, when Colorado and Washington became the first states to legalize recreational pot, 2016 was probably marijuana's best year ever.
When 2016 began, medical marijuana was legal in 23 states, and recreational weed could be purchased legally by adults 21 and up in four states. By year's end, 28 states had legalized medicinal cannabis (two of which did so entirely through the legislative process), while the number of recreation-legal states had doubled to eight. Among those was California, which on its own is one of the largest economies in the world. Once the recreational business is ramped up, California is expected to generate $1 billion or more in added annual tax and licensing revenue from marijuana.
Changing perceptions of pot among the public is a big reason marijuana has flourished in recent years. Gallup, which conducts somewhat regular surveys on the public's opinion of weed, has shown that in roughly 20 years, the percentage of respondents who want to see marijuana legalized nationally has more than doubled to 60% from 25%.
What's next for marijuana with Sessions as attorney general?
The industry is facing a brand-new challenge in 2017: the appointment of Senator Jeff Sessions (R-Al.) as the nation's next Attorney General.
Image source: Getty Images.
Banning new states from legalizing pot would be a modest win for Sessions, but I don't believe he could convince Congress or Trump to disallow the state-level legalization of medical marijuana in any of the remaining 22 states that haven't legalized (should they decide to do so). Even though the Food and Drug Administration and Drug Enforcement Agency don't recognize cannabis as having medically beneficial qualities, a number of university research studies have observed benefits from either marijuana itself or its cannabinoids. Plus, with so many people favoring the legalization of medical cannabis, cutting off access to medical pot could be negative publicity that Trump and his cabinet simply don't need.
Third most likely: Recreational pot legalization is taken off the table at the state level
Aside from Sessions likely looking to scale back the marijuana industry by any means possible, pot businesses are set to face ongoing inherent disadvantages. For example, marijuana companies have limited access to basic banking services since most banks fear federal prosecution at some point in the future for dealing with pot businesses. Being forced to deal solely with cash is a security concern and an expansion inhibitor.
Additionally, marijuana businesses are stuck paying tax on their gross profits instead of net profits because they're disallowed from taking normal corporate income tax deductions. Neither of these disadvantages is expected to change with Sessions as attorney general.
Long story short, the uncertainty of having Sessions as attorney general means investors should keep their distance from marijuana stocks and monitor them from afar.
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