Altered states

Once considered a criminal enterprise, the cannabis landscape continues to evolve rapidly, as a growing number of nations1 and US states move to legalize the mind-altering2 drug for medicinal and recreational purposes. However, within the US, despite the many states that have decriminalized marijuana, the drug remains federally illegal. Under the Controlled Substances Act, marijuana is currently classified as a Schedule 1 drug—deemed to have no accepted medical applications3. Its status as a controlled substance at the federal level poses the primary headwind for emergent business models within the industry for both recreational and medicinal players. However, momentum is building in Washington DC, as US lawmakers consider easing federal regulations and allowing financial institutions to offer services to the cannabis industry without the risk of repercussions. While the emerging legal landscape of the cannabis industry faces a unique set of challenges, it also presents a myriad of opportunities. Research efforts are under way to provide health care providers and payers with data sets supporting the efficacy of medical marijuana products, which could transform the industry. Whether for medicinal or recreational purposes, cannabis is becoming increasingly mainstream4 as more people are finding ways to incorporate it into their everyday lives.

Raphael J. Lewis and Jack Encarnacao, research analysts at Newton Investment Management

¹BBC News. Why are so many countries now saying cannabis is OK? December 11, 2018.
²Department of Justice/Drug Enforcement Administration. Drug fact sheet. Marijuana/cannabis. April 2020.
³Ibid.
⁴Gallup. Nearly half of US adults have tried marijuana. August 17, 2021.

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