The Approach to U.S. Marijuana Legalization That We May Be Missing—& Could Send Pot Stocks Soaring

Is This the Best Shot for U.S. Pot Legalization in the Near Future?

I’ve written a lot about U.S. marijuana legalization over the past few years. After all, federal U.S. pot legalization would almost certainly be the single biggest driver of marijuana stock growth in the entirety of the industry’s existence.

So the faster we see federal marijuana legalization in the U.S., the faster we’ll likely see the long-term buy-and-hold strategy I’ve been advocating for years reap its full rewards. It has already, by and large, been quite successful, but federal legalization would take the gains to an entirely new level.

In the hundreds of thousands (probably nearing a million at this point) of words I’ve dedicated to the subject, there’s one crucial factor I’ve just come to realize I’ve been missing: the Supreme Court.

What does the Supreme Court have to do with weed? Well, quite a lot, actually.

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In all the articles I’ve written about U.S. marijuana legalization, I’ve almost always looked at the topic from the legislative side of things: can a bill to legalize the drug get passed by Congress?

That did seem to me to be the most likely path. And we’ve seen several bills introduced in Congress that would legalize marijuana. But in our gridlocked legislative branch—where the two parties can’t agree on the color of the sky, let alone major legislation—that’s a long and hard trek.

Another possible way toward pot legalization in the U.S. showed itself in the last presidential election.

With the majority of the Democratic Party presidential hopefuls being pro-marijuana-legalization to one degree or another, an executive order (a tool of the president that requires no Congressional approval) could effectively decriminalize marijuana by removing it as a Schedule I narcotic (a designation it shares with the likes of meth and heroin).

Back in 2020, before the Democrats chose their presidential nominee, it looked like it was possible that we would get a president with a marijuana-legalization agenda (or at least a president who was supportive of the legalization movement).

What ended up happening was that the one major Democratic candidate who didn’t support legalization emerged victorious: President Joe Biden.

Whatever your thoughts are on politics, as a marijuana investor, this was not a great outcome.

That isn’t to say if one of the rival candidates had won, they would have definitely worked to legalize marijuana in America (politicians are a famously fickle breed, with campaign promises having a tendency to go unfulfilled), but there at least would have been some hope.

What we’re left with now is wondering whether Biden can evolve on the issue as we’ve seen with politicians in the past on other issues that had popular support.

I’ve written before about the potential for Biden to change his position on pot legalization, something that was made far more likely with the selection of Kamala Harris as his vice-president, due to Harris being pro-marijuana legalization (although she’s by no means a fervent legalization warrior).

But that’s still a long shot, so that leaves the U.S. presidency likely closed to the idea of pot legalization, at least in the next three years or so.

To everyone who remembers their civics lessons, that leaves us with one final branch of government: the judiciary.

The U.S. Supreme Court doesn’t make laws, of course—it merely determines if they’re constitutional—but it can have an impact on the enforcement and application of laws.

Take, for instance, gay marriage.

While the issue failed to gain traction in Congress or at the presidential level, the Supreme Court ruled about six years ago that same-sex marriage bans were unenforceable. That essentially legalized gay marriage with a single ruling (helped by many states legalizing the practice first).

Marijuana finds itself in a somewhat similar situation. With pot legal in many states across the Union but banned federally, this situation is ridiculous and untenable.

And at least one member of the Supreme Court agrees with me: Justice Clarence Thomas.

Standing Akimbo v. United States

In a recent case, Standing Akimbo v. United States, there was the potential for the marijuana legalization issue to come to a head. Standing Akimbo is a medical marijuana dispensary in Denver that operates legally under Colorado law, but, of course, operates illegally under federal law.

That puts the company at odds with many federal agencies, like the Internal Revenue Service, over whether “their intrastate marijuana operations will be treated like any other enterprise that is legal under state law.” (Source: “Clarence Thomas Blasts the ‘Contradictory and Unstable’ Federal Marijuana Ban,” Reason, June 28, 2021.)

Had the case gone to the Supreme Court, that could have done wonders for the issue of pot legalization in the U.S. Unfortunately, the court declined to hear the case, eliciting some harsh criticism from Thomas.

“Many marijuana-related businesses operate entirely in cash because federal law prohibits certain financial institutions from knowingly accepting deposits from or providing other bank services to businesses that violate federal law,” said Thomas.

He added,

Cash-based operations are understandably enticing to burglars and robbers. But, if marijuana-related businesses, in recognition of this, hire armed guards for protection, the owners and the guards might run afoul of a federal law that imposes harsh penalties for using a firearm in furtherance of a ‘drug trafficking crime.’…A marijuana user similarly can find himself a federal felon if he just possesses a firearm.

(Source: Ibid.)

This is the kind of thing I’ve been saying for years, and I’m glad that someone with legal influence feels the same.

More importantly, that means we ought to watch the Supreme Court as a potential player in the legalization of the marijuana market in the U.S.

While Thomas is only one justice, if a marijuana case calls into question the legality of the federal-state divide we currently exist in, there’s a chance the court could strike it down. If it did so, that alone could be enough to send marijuana stock prices soaring.

To be fair, the Supreme Court has heard cases on marijuana before, but each case is unique, and every new one offers the opportunity to put an end to marijuana prohibition once and for all—something that marijuana stock investors have been eagerly awaiting for years.

Analyst Take

Pot stock bulls who want to time their investments just right in order to maximize their returns ought to watch the U.S. Supreme Court in addition to Congress and the White House.

That way, they can get out ahead of marijuana legalization in the U.S. and maximize their profits from marijuana stocks.