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17 States Where Marijuana Remains Illegal

For the past couple of years, the marijuana industry and cannabis stocks, in general, have been on fire. Even though that fire has cooled off significantly in recent months, there remains high hopes (pardon the pun) that legal cannabis will be among the fastest growing industries on the planet over the next decade.

At the heart of this growth is the United States. Despite estimates varying wildly, as we'd expect from an industry that has no legal precedent in the modern era prior to Canada giving the green light to recreational pot in October 2018, the U.S. is forecast to account for anywhere from a third to more than half of all global marijuana revenue. This could mean anywhere from $50 billion to $100 billion in annual sales being generated from the U.S. by 2030.

Image source: Getty Images.

A third of the U.S. has yet to legalize cannabis

Yet, here's something you might find interesting: The path to legalization in the U.S. remains elusive, despite the fact that two-thirds of Americans favor legalization. Cannabis has been and will continue to be a Schedule I drug at the federal level for the foreseeable future. This means it's entirely illegal, prone to abuse, and doesn't have any recognized medical benefits.

However, this hasn't stopped individual states from giving marijuana the green light. Since 1996, when California became the first state to OK medical marijuana, we've seen a grand total of 33 states greenlight the use of medical cannabis. Of these 33 states, a third (11) also allow for adult-use consumption and/or retail sales.

But that leaves quite a few states -- 17 to be exact -- on the other side of the aisle. In alphabetical order, here are the 17 states where the green rush currently remains off-limits.

  • Alabama
  • Georgia
  • Idaho
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Mississippi
  • Nebraska
  • North Carolina
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Virginia
  • Wisconsin
  • Wyoming

Image source: Getty Images.

Why these states?

You're probably wondering why these 17 states continue to seemingly ignore what seems to be the overwhelmingly popular opinion that cannabis should be legalized. I suspect there are two primary reasons.

First of all, you'll note that a majority of these states tend to be led by Republican lawmakers. According to annual surveys from Gallup, even though Republicans have softened their opinions of cannabis considerably in recent decades (i.e., self-identified Republicans are far more likely to be in favor of legalization than ever before), favorability toward pot among members of the GOP is still markedly lower than that of self-identified Democrats or Independents.

For instance, Senate Majority Leader Mitch McConnell (R-KY) has played a pivotal role in ensuring that no cannabis legislation reaches the Senate floor for vote. McConnell has rejected all attempts to attach riders to bills thus far, so you can imagine what lengths he's potentially gone to in order to keep cannabis from being legalized in his home state of Kentucky.

The second consideration here is that almost half the country doesn't have what's known as the initiative and referendum (I&R) process at their disposal. The I&R process allows ideas to be introduced and potentially put on a ballot for vote by a state's residents. States without the I&R process have to rely on their respective legislatures to introduce bills and pass laws. Therefore, a state without the I&R process could have overwhelming support for legalization but no viable means of getting any sort of legislation to ballot.

Of the above-listed states, just Idaho, Mississippi, Nebraska, South Dakota, and Wyoming have some form of initiated statutes or amendments process. Perhaps unsurprisingly, each of these five states, save for Wyoming, has a state-initiated medical or recreational pot bill that may wind up on the 2020 ballot.

Image source: Getty Images.

Here's what would need to happen for these 17 states to legalize

So, what's the easiest path to legalization for these 17 states? More than likely, the only way some of these Republican-led states would ever turn green would be if the federal government legalized marijuana. This would mean rescheduling or de-scheduling the drug.

How does that happen? The most likely scenario would involve a change of the majority party in the Senate. However, that's not even possible until the November 2020 election, with the new congress not taking shape until January 2021. There are a number of variables that remain unknown, such as whether Democrats can unseat incumbent Republicans in the upper house of Congress and if the president would even approve of legislation to reform cannabis laws in the United States.

Keep in mind that it's not just these 17 states that have been kept on the outside looking in. Canadian cannabis companies are ready to offer their products and/or services to the U.S. market but have been unable to enter the United States because they'd lose their listing status on major U.S. exchanges. Since marijuana is illicit at the federal level, no companies that operate in the U.S. pot industry are allowed to list their shares on the New York Stock Exchange or Nasdaq exchange.

Nevertheless, this hasn't stopped pot stocks from positioning themselves for success if and when the federal government changes its tune. For instance, Canopy Growth (NYSE: CGC), the largest marijuana stock in the world by market cap, was awarded a hemp processing contract in New York State in January and has plans to offer cannabidiol (CBD)-based products in around a half-dozen U.S. states. This is noteworthy, given that industrial hemp production and hemp-derived CBD was legalized in December 2018. Canopy Growth aims to establish what could be key infrastructure on U.S. soil and would be thrilled to see the federal government change its stance on pot.

But as of right now, hope and reality appear miles apart. This makes it highly unlikely that many (if any) of these 17 states will legalize cannabis anytime soon.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.


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