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Timeline for Marijuana Legalization in the United States: How the Dominoes Are Falling

Keith Speights, The Motley Fool

Going green has taken on a new meaning in the United States. Less than two decades ago, marijuana was illegal in all 50 U.S. states. With Oklahoma passing a ballot initiative in June 2018 to legalize medical marijuana, 30 U.S. states now have broad legislation in place that allows of the use of marijuana.

Think of the states as dominoes lined up one by one. When the first domino topples, it leads to a chain reaction that causes most, if not all, of the others to fall. That's what has happened, and continues to happen, with state legalization of marijuana. The timeline for marijuana legalization in the U.S. shows how those dominoes keep falling.

Marijuana plant in front of U.S. flag

Image source: Getty Images.

Decriminalization vs. legalization

Let's first differentiate two actions states have taken with respect to marijuana. Decriminalization refers to the relaxation of criminal penalties associated with personal marijuana use. Oregon was the first state to decriminalize marijuana in 1973. The state imposed just a $100 fine for possession of up to an ounce.

Over the next 15 years following Oregon's legal change, at least a dozen other states decriminalized marijuana. But decriminalization merely lowered or removed the sting from anti-marijuana laws. Manufacturing and selling marijuana remained illegal.

Legalization, on the other hand, not only allows individual marijuana possession, but in most cases it also permits the legal production and sale of the drug. There are two types of marijuana legalization: the legalization of medical cannabis and the legalization of recreational marijuana.

All but four U.S. states have some form of medical marijuana law. However, 16 states only allow legal use of cannabidiol (CBD) or medical cannabis that has a low tetrahydrocannabinol (THC) content. CBD is a chemical ingredient of the cannabis plant that isn't psychoactive, while THC is the primary psychoactive ingredient in cannabis. These 16  states usually aren't included in the number of states that have legalized medical marijuana, because their laws place strict limitations on the form and manner of medical marijuana use. Thirty states, however, allow broad access to marijuana for medical purposes for patients.

Nine states plus the District of Columbia have cannabis laws in place that allow the legal use of marijuana for both medical and recreational purposes. No prescription is required for individuals to use marijuana in these jurisdictions. Some of the laws regulating marijuana are quite unusual, however. For example, the District of Columbia allows the legal use of recreational marijuana but technically still bans the buying and selling of the drug. 

Key marijuana legalization milestones

While the decriminalization of marijuana in the U.S. began in 1973, it wasn't until 1996 that the march toward legalization began. Here are the key milestones for U.S. marijuana legalization.

Year 

Milestone 

1996

  • California voters pass Proposition 215, legalizing medical marijuana in the state.
  • Arizona voters pass a ballot initiative legalizing medical marijuana. However, the initiative is found to be invalid because of its wording related to marijuana prescriptions, which remained illegal under federal law.

1998

  • Alaska voters pass Measure 8, to allow medical use of marijuana.
  • District of Columbia (D.C.) voters pass Ballot Initiative 59, which permitted patients who were seriously ill to use medical marijuana when recommended by a licensed physician. However, the U.S. Congress voted to prevent the initiative from being enacted.
  • Oregon passes the Oregon Medical Marijuana Act.
  • Washington voters pass Initiative 692, legalizing medical marijuana.

1999

  • Alaska legislature passes SB 94, amending previous provisions related to medical marijuana.
  • Maine voters pass Question 2, a ballot initiative legalizing medical marijuana.

2000

  • Colorado voters pass Ballot Amendment 20, to allow the legal use of medical marijuana.
  • Hawaii legislature passes SB862, legalizing the medical use of cannabis.
  • Nevada voters pass Question 9, to amend the state's constitution to allow medical marijuana.

2002

  • Maine legislature passes LD 611, to create a nonprofit marijuana distribution center in the state.

2003

  • California legislature passes SB 420, which prohibits physicians from being punished for recommending medical marijuana to patients.

2004

  • Montana voters pass Initiative 148, allowing the legal use of medical marijuana for patients with debilitating conditions.
  • Vermont legislature passes SB 76, which legalizes the use of medical marijuana for patients with specified serious illnesses.

2007

  • New Mexico legislature passes SB 523, legalizing medical marijuana for compassionate use.
  • Oregon legislature passes SB 161, amending certain provisions and creating new provisions related to the use of medical marijuana in the state.
  • Rhode Island's General Assembly passes SB 791, to allow the legal use of medical marijuana for certain debilitating medical conditions.
  • Vermont legislature passes SB 7, expanding the use of medical marijuana to more conditions.

2008

  • Michigan voters pass Proposal 1, which legalizes the medical use of marijuana in the state.

2009

  • U.S. Congress reverses its blocking of the District of Columbia's Initiative 59 that voters passed in 1998.
  • The Obama administration issues a memo to federal prosecutors, encouraging them to refrain from prosecuting people who distribute medical marijuana in compliance with state laws.
  • Maine voters pass the Question 5 ballot initiative to create nonprofit medical cannabis dispensaries and to establish a statewide system for identification cards to protect patients who use medical marijuana from being arrested. 
  • New Jersey legislature passes SB 119, legalizing medical marijuana.
  • Rhode Island General Assembly passes SB 185, amending its medical marijuana laws to establish compassion centers for the distribution of medical marijuana.

2010

  • Arizona voters pass Proposition 203, legalizing medical marijuana.
  • District of Columba council passes L18-2010, legalizing medical marijuana.
  • Maine legislature passes LD 1811, amending the state's medical marijuana laws to, among other things, establish a medical advisory board for adding new conditions for which medical marijuana could legally be used.
  • Washington state legislature passes SB 5798, to allow authorized healthcare professionals other than physicians to recommend medical marijuana for patients.

2011

  • Delaware General Assembly passes SB 217, legalizing medical marijuana.
  • Montana legislature passes SB 423, expanding the state's medical marijuana laws.
  • Vermont legislature passes SB 17, registering nonprofit organizations for distributing medical marijuana.
  • Washington state legislature passes SB 5073, further relaxing limitations on its medical marijuana laws.

2012

  • Colorado voters pass Amendment 64, legalizing the use of recreational marijuana.
  • Massachusetts voters pass the Question 3 ballot initiative, allowing the legal use of medical marijuana.
  • Washington state voters approve Initiative 502, legalizing recreational marijuana.

2013

  • The Obama administration issues the "Cole memo" to federal prosecutors to limit intervention in states that have legalized marijuana.
  • Illinois legislature passes HB 1, to allow the compassionate use of medical marijuana.
  • New Hampshire legislature passes HB 573, legalizing the use of medical cannabis.

2014

  • Alaska voters pass Ballot Measure 2, legalizing recreational marijuana.
  • District of Columbia voters pass Initiative 71, legalizing recreational marijuana.
  • Minnesota legislature passes SF 2470, allowing the legal use of medical marijuana.  
  • New York state assembly passes A6357, legalizing medical marijuana.
  • Oregon voters pass Measure 91, legalizing recreational marijuana.

2016

  • Arkansas voters pass Issue 6 to amend the state constitution to legalize medical marijuana.
  • California voters pass Proposition 64, legalizing recreational marijuana.
  • Florida voters pass Amendment 2, legalizing medical marijuana.
  • Massachusetts voters pass the Question 4 ballot initiative, legalizing recreational marijuana.
  • Nevada voters pass the Question 2 ballot initiative, legalizing recreational marijuana.
  • North Dakota voters pass Measure 5, legalizing medical marijuana.
  • Ohio legislature passes HB 523, legalizing medical marijuana.
  • Pennsylvania legislature passes SB 3, legalizing medical marijuana.

2017

  • West Virginia legislature passes SB 386, legalizing medical marijuana.

2018

  • U.S. Attorney General Jeff Sessions rescinds the Cole memo and other Obama administration policies related to enforcement of federal marijuana laws in states that have legalized marijuana.
  • Oklahoma voters pass Question 788 to legalize medical marijuana.
  • Vermont legislature passes H. 511 bill, to allow the legal use of recreational marijuana in limited quantities.

Data sources: National Conference of State Legislatures, CNN. 

Most important laws passed

There has been quite a lot of activity in recent years to promote the legal use of marijuana for either medical or recreational purposes. Five of these laws especially stand out because of their significant impact.

  1. California's Proposition 215 (1996). With this ballot initiative, California became the first state to legalize medical marijuana. California was the first domino to fall and gave organizers outside the state the confidence to push for the legalization of medical marijuana in their states.
  2. Colorado's Amendment 64 (2012). Colorado became one of the first two states to legalize recreational marijuana through a ballot initiative. The state also set the standard for others in how to regulate recreational marijuana, with sales of both medical and recreational cannabis of $1.5 billion in 2017.
  3. Washington's Initiative 502 (2012). Washington state residents voted to legalize recreational marijuana at the same time Colorado did. While Washington's recreational cannabis market hasn't been quite as large as in its fellow pioneer state, total marijuana spending last year in the state was $934 million.  
  4. California's Proposition 64 (2016). California's passage of a ballot initiative to legalize recreational marijuana is important because of the state's size. The medical marijuana market in California was nearly $3 billion last year, roughly twice the size of Colorado's total marijuana market. By 2022, California's total marijuana market could be in the ballpark of $7.7 billion, according to projections from Arcview Market Research and BDS Analytics.
  5. Vermont's H. 511 (2018). Tiny Vermont deserves distinction as the first state to legalize recreational marijuana by way of the state legislature rather than through a ballot initiative. However, there was a twist with Vermont's law. While the use of recreational marijuana up to an ounce is allowed, the sale of recreational marijuana is still illegal, for now.

Significant proponents and opponents 

As you might expect, the legalization of marijuana has attracted both vocal supporters and opponents. Several groups have formed on both sides of the question. Here are four of the most influential.

National Organization for the Reform of Marijuana Laws. Founded in 1970, NORML is probably the most influential marijuana advocacy group. The organization championed early marijuana decriminalization efforts and remains active in working to legalize both medical and recreational marijuana across the nation. NORML's advisory board includes quite a few celebrities, including comedian Bill Maher, actor Woody Harrelson, actor Tommy Chong, and singer Willie Nelson.

Marijuana Policy Project. Founded in 1995, MPP lobbies the U.S. Congress and state legislatures with a special focus on decriminalizing marijuana and changing laws to make medical marijuana available to patients. The organization was active publicly and behind the scenes on many of the marijuana legalization milestones mentioned earlier. 

Drug Policy Alliance. DPA's roots date to 1987, when American University professor Arnold Trebach and attorney Kevin Zeese, who had previously worked with NORML, founded the Drug Policy Foundation. In 2000, DPF merged with The Lindesmith Center, another organization focused on changing U.S. drug policy, and adopted its current name. The organization has been front and center in several victories, including the legalization of recreational marijuana in California and Colorado. 

Smart Approaches to Marijuana (SAM). On the other side of the fence are several prominent organizations opposing marijuana legalization. Former Obama administration drug policy advisor Kevin Sabet and former Rep. Patrick Kennedy (D-R.I.) started SAM, one of the top anti-marijuana groups, in 2013. SAM's primary focus is to prevent a "Big Marijuana" equivalent to the "Big Tobacco" group of large tobacco makers that exert significant influence nationally. 

Drug Free America Foundation. Former U.S. ambassador to Italy Mel Sembler and his wife, Betty, started DFAF in 1976. DFAF promotes national and state policies to reduce drug use and addiction.   

Corporate Advocacy. Some companies have also fought against marijuana legalization. For example, Insys Therapeutics (NASDAQ: INSY) donated $500,000 in 2016 to help defeat a ballot initiative to legalize recreational marijuana in Arizona. Not so coincidentally, Insys markets a cannabinoid drug, Syndros, which launched last year for treating anorexia in people with AIDS and for treating chemotherapy-induced nausea and vomiting.

Barriers to legalization

Despite the number of states that have legalized marijuana, the drug remains illegal at the federal level. Marijuana is a controlled substance under federal law, and the U.S. Supreme Court has ruled that the federal government can prosecute violations of applicable federal laws even in states that have legalized marijuana. 

Nevertheless, 30 states have elected to legalize marijuana despite federal laws to the contrary. Why haven't the other states moved forward with legalization? The biggest reason is probably concern about the potential for abuse of marijuana and the societal problems to which this abuse might contribute.

It didn't help that a 2017 report from the National Academies of Science, Engineering, and Medicine stated that "conclusive evidence regarding the short- and long-term health effects -- both harms and benefits -- of cannabis use remains elusive." Marijuana opponents use this report to question the wisdom of legalizing a product for which uncertainties regarding safety exist.

These concerns are a major factor holding back states from legalizing recreational marijuana. Many Americans continue to oppose any use of narcotic drugs for recreational purposes. Even among those who do support legalization of marijuana, it's often not a top priority. These factors make it easy for some politicians to oppose legalization or simply ignore the topic.  

The future of U.S. marijuana legalization

It seems likely that more states will legalize marijuana. Michigan residents vote on legalizing recreational marijuana in November 2018, and several states, including New Jersey and New York, might not be far away from legalizing the use of recreational marijuana as well. It's also possible that some of the states that have highly restrictive medical marijuana laws could relax their laws to allow broader access.

One big factor driving this trend is that states need additional revenue. Just as most states legalized lotteries to generate revenue, many states could find legalizing marijuana as a way to boost their revenue without making unpopular moves such as raising income or sales taxes.

Could U.S. federal laws be changed to ease restrictions against the use and sale of marijuana? It's not out of the question. President Trump signaled his support earlier this year for efforts led by Sen. Cory Gardner (R.-Colo.) to pass legislation to allow state marijuana laws to effectively supersede federal laws. 

Public support among Americans for legalizing marijuana is at an all-time high, and Americans support the rights of states to make and enforce their own marijuana laws. However, a majority of older U.S. citizens, who traditionally vote in high numbers, still oppose legalization. Most Americans indicate that they would vote for a candidate with whom they disagreed on marijuana policy. Senators and representatives who want to play it safe could remain opposed to federal legalization of marijuana.

Implications for investors

Marijuana is already a large industry, with U.S. sales last year estimated to be between $5.8 billion and $6.6 billion. By 2022, U.S. marijuana sales could top $22 billion. Investors won't find too many industries that more than triple in size in five years.

A big challenge, though, is that there are few really good investing alternatives among U.S. stocks. Most of the ones available are relatively small and trade over-the-counter rather than on major stock exchanges. They also tend to sport astronomical valuations.

MariMed (NASDAQOTH: MRMD), for example, is one of the hottest marijuana stocks so far in 2018. The company provides professional management services to marijuana growers in several states. But MariMed claims a market cap of over $500 million, with 2017 revenue of only $6.1 million. It's not yet profitable and could have to raise cash soon to fund operations. 

One exception among U.S. marijuana stocks, though, is Scotts Miracle-Gro (NYSE: SMG). The company is the go-to supplier of hydroponics products for marijuana growers. Scotts is profitable. Its valuation isn't outrageous, and the company even pays a dividend. The catch, however, is that Scotts Miracle-Gro makes less than 10% of its total revenue from sales to the cannabis industry. Most of Scotts' money is made from selling consumer lawn and garden products.

The fortunes of both MariMed and Scotts Miracle-Gro, as well as other U.S. marijuana stocks, will be greatly affected by what happens with marijuana legalization in the United States. If more states legalize marijuana and/or the federal government relaxes its cannabis laws, these stocks could soar. But as long as the threat exists that the feds could crack down on the marijuana industry, buying these stocks will come with an added level of risk.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.