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

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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
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

1998

1999

2000

2002

2003

2004

2007

2008

2009

2010

2011

2012

2013

2014

2016

2017

2018

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.