In case you haven't noticed, the marijuana industry is growing like a weed. Last year, sales of the legal pot industry soared to $12.2 billion globally, and if estimates from Arcview Market Research and BDS Analytics prove accurate, they could hit $31.3 billion by 2022.
On top of rapid sales growth is a dramatic shift in the way the general public views cannabis. Whereas only a quarter of all respondents in Gallup's national polling supported a broad-based legalization of marijuana back in 1995, an all-time record 66% favored legalization as of October 2018. It probably comes as no surprise, then, that 33 U.S. states have given the green light to medical marijuana in some capacity, with 10 of those states also allowing adult consumption.
You'd think with cannabis expanding throughout North America that businesses would be positioning themselves for this potentially once-in-a-generation growth opportunity. But that's not necessarily the case.
Image source: Getty Images.
Google quells the buzz surrounding cannabis
Last week, search engine giant Google, which is a subsidiary of Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), announced that it would be banning marijuana apps in its Google Play store. As first reported by online publication Marijuana Moment, Alphabet's subsidiary updated its policy on marijuana to include the following language:
We don't allow apps that facilitate the sale of marijuana or marijuana products, regardless of legality.
Here are some examples of common violations:
Allowing users to order marijuana through an in-app shopping cart feature.
Assisting users in arranging delivery or pick up of marijuana.
Facilitating the sale of products containing THC [tetrahydrocannabinol].
According to a Google spokesperson who spoke with Marijuana Moment, "These apps simply need to move the shopping cart flow outside of the app itself to be compliant with this new policy." While this workaround sounds easy enough, it's nevertheless a step backwards for a number of cannabis middlemen services.
For instance, Weedmaps, which allows medical and recreational users to review cannabis strains and find local dispensaries, has been downloaded more than 1 million times in the Google Play store, while the Eaze cannabis delivery app, which is popular in California, has been downloaded in excess of 50,000 times. Both of these sites could be viewed as facilitating the sale of cannabis products, and would therefore be forced to change their strategy, at least with regard to the Google Play store.
With Google's app store being hit with a Federal Trade Commission complaint over its marketing practices to kids this past December, Marijuana Moment opines that this move by Alphabet's subsidiary was made to shore up its image in light of tighter regulations.
Image source: Facebook.
Google isn't alone in banning cannabis products
As much as we'd like to view Google's decision to ban marijuana apps from its Play store as a one-off move, it's far from it. There have been a number of brand-name companies that have "banned the bud."
Social media giant Facebook (NASDAQ: FB) also decided last week that, after multiple months of internal debates, it would keep in place a ban on cannabis ads. The company determined that it would be difficult to roll out any policy allowing the advertisement or sale of cannabis given the different laws concerning marijuana in each country and/or U.S. state. Additionally, if Facebook had decided to give weed ads the thumbs-up, it would have needed a surefire way to vet legitimate operators across numerous countries, states, and locales, which would have been a logistical nightmare.
However, Facebook does allow for advertisements pushing the sale of cannabidiol (CBD), the nonpsychoactive cannabinoid best known for its perceived medical benefits. As a refresher, industrial hemp production and hemp-derived CBD were legalized in December with the signing of the farm bill by President Trump.
In addition to Facebook putting its foot down on cannabis ads, popular online marketplace eBay (NASDAQ: EBAY) has kept its ban on CBD product sales in place. In a tweet issued by "AskeBay"on May 23 in response to a consumer question as to why the company had taken CBD oils off its marketplace, eBay responded:
The sale of CBD products is highly regulated in many countries. While they may be legal to buy and sell in some countries, they are regulated by the FDA [Food and Drug Administration] and enforced by some law agencies. For this reason, we have decided to prohibit the items globally.
Even before Google, eBay, and Facebook put their collective feet down on marijuana, Apple (NASDAQ: AAPL) had banned marijuana apps in its App Store. Officially, Apple bans "facilitating the sale of marijuana, tobacco, or controlled substances" through its App Store.
However, Apple has previously had changes of heart, with the company banning cannabis content platform MassRoots from the App Store, only to lift the ban in early 2015 in states that had legalized medical pot in some capacity. Still, Apple's app policy remains, like Google's, decidedly anti-cannabis.
Image source: Getty Images.
Barring federal rescheduling, it's hard to see these views changing
Perhaps the most disappointing news is that even if additional states continue to legalize medical or recreational pot, the chances of Google, Facebook, eBay, or Apple changing their policy in the U.S. is pretty slim. That's because federal law dictates their governance, and cannabis remains an illicit drug on Capitol Hill.
Even with support for legalization growing among the public, shifting views in Congress is a lot tougher. For instance, Republicans have a decidedly more negative view on marijuana than either Democrats or Independents, meaning Democrats would likely need to control all aspects of the legislative branch of government in order to enact reform.
Furthermore, as a Schedule I drug, U.S. cannabis businesses are subject to Section 280E of the U.S. tax code. This tax law disallows businesses that sell Schedule I or II substances from taking normal corporate income tax deductions. For profitable weed businesses, this can lead to an effective tax rate of 70% or higher. Therefore, rescheduling cannabis would mean costing the federal government billions of dollars over the next decade.
Even though Apple has shown some ability to adapt to changing laws, at least relative to Google, Facebook, and eBay, there's simply no incentive to adjust their policies that outweighs the legal risk they'd be exposing themselves to if they allowed cannabis advertising or sales on their respective platforms. Unless federal policy shifts, marijuana will remain taboo with the top social media platforms and app stores.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.