Uh-Oh! This Lawsuit Could Mean the End of Legal Marijuana

Source: Flickr user Brett Levin.

This probably goes without saying, but marijuana is a controversial topic -- although opinion toward the substance, which is illegal at the moment, has been swaying toward legalization for the past decade.

On one side of the aisle the idea of legalizing marijuana and reaping tax and medical benefits could make sense. Sweeping marijuana legalization across the country, according to NerdWallet, could bring in more than $3 billion in revenue annually. While this isn't going to put a huge dent in the national deficit, it is sizable enough to potentially ensure that some state and federal employees get to keep their jobs.

In addition, marijuana is purported to have medically beneficial properties that could help treat diseases ranging from type 2 diabetes to cancer. Legalizing medical marijuana could also break down the barriers currently preventing researchers from diving head first into marijuana research.

But for each positive there are negatives as well. The long-term effects of marijuana are still being explored by researchers, and the idea of legalizing marijuana isn't a major priority for legislators, and is opposed by lawmakers in select states. Despite polls from Gallup and General Social Survey showing that more Americans are in favor of legalizing marijuana, the reality is that a nationwide legalization, or even the discussion of nationwide legalization, could be many years off.

This could be marijuana's biggest challenge yet

However, the waiting game could be the least of marijuana's concerns, as a lawsuit filed against Colorado could potentially threaten to re-prohibit all marijuana use , including medical marijuana.

Source: Drug Enforcement Agency.

According to a press release this week from the Associated Press, Colorado's neighboring states, Nebraska and Oklahoma, have filed a lawsuit against Colorado with the U.S. Supreme Court requesting that the nation's highest court invalidate recreational marijuana in Colorado. As Aaron Cooper, the spokesmen for Oklahoma's Attorney General Scott Pruitt told the Associated Press,

Source: Drug Enforcement Agency.

But here's where things get tricky: Because the Controlled Substances Act classifies marijuana as a schedule 1 drug (thus making it illegal), Colorado believes that if the Supreme Court or federal government moved to repeal recreational marijuana laws in Colorado, it would also have to enforce its federal ban on marijuana in any form, and thus ban medical marijuana too. If this were to occur, some 23 states and Washington, D.C. would suddenly see their medical marijuana laws become null and void, including the four states (plus Washington, D.C.) that have legalized recreational marijuana.

Colorado, for its part, has fired back at its neighboring states and suggested that they instead sue the federal government for not enforcing the Controlled Substances Act. Although marijuana is still illegal on the federal level in all forms, the federal government has been clear about taking a hands-off approach, allowing individual states to manage its growth and distribution. A filing with the Supreme Court on behalf of Colorado notes that,

As of right now the Supreme Court hasn't suggested whether it will review the lawsuit or not.

Two possible implications from this lawsuit

Even if Nebraska's and Oklahoma's lawsuit goes nowhere and is thrown out by the Supreme Court, I believe there could be two possible implications merely from the filing coming to light.

Source: Flickr user Niek Sprakel.

First, this lawsuit exposes the vast divide between states which have already legalized marijuana and those lawmakers opposed to it. Marijuana's piecemeal legalization on a state-by-state basis does provide an "experiment" for the federal government to gather data and assess economic, social, and health effects, but it also makes legal enforcement a serious challenge.

I believe this lawsuit exposes the reality that interstate and intrastate marijuana control may pose a serious challenge, and it could ultimately slow down recreational and perhaps medical marijuana's expansion to new states.

Also, I suspect this lawsuit could slow down or halt or at least potentially slow the possibility of a medical marijuana law being passed by the federal government anytime soon.

Source: GW Pharmaceuticals.

If you recall, last month three U.S. Senators proposed legislation that would have amended the Controlled Substances Act and made marijuana a schedule 2 drug (i.e., legal, but highly prone to abuse), thus freeing it from federal prosecution and opening new avenues for pharmaceutical companies to research marijuana in a number of therapeutic fields. However, with the Supreme Court or federal government potentially having to get into the middle of a spat between states over marijuana at some point in the future, any medical marijuana legalization could be on hold for the time being.

On one hand, delayed medical marijuana legislation could be good news for GW Pharmaceuticals since it has the most advanced cannabinoid pipeline of any large pharmaceutical company. Keeping fairly restrictive marijuana laws in place means GW Pharmaceuticals' competition stays well in the rearview mirror.

Then again, a more amicable medical marijuana policy might give GW Pharmaceuticals fewer hurdles to jump when it comes to researching new indications, or when it targets its cannabinoids at childhood-onset diseases. GW's most promising current compound is Epidiolex, a CBD-based cannabinoid designed to treat two rare forms of childhood-onset epilepsy.

Ultimately, I believe this lawsuit confirms that marijuana's expansion won't be without speed bumps, and that while legal marijuana sales might be growing, marijuana is anything but a good investment at the moment.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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