The relationship between the U.S. presidency and various state electoral officials has been fraught with lawsuits and rancor…to say the least! Observing the fierce legal battles over the November 3 election, I’ve been reminded of the genius of federalism.

What does all this mean for marijuana and the people who invest in it? As I explain below, federalism continues to work to the great advantage of the marijuana industry, providing a sustained tailwind for pot stocks. You can thank the Founding Fathers.

As I learned in eighth-grade civics class, “federalism” is a mixed mode of government that combines a federal government with state governments into a single political system. Federalism is embodied in the Constitution of the United States and it ensures a system of checks and balances that has helped our democratic republic keep authoritarianism at bay for more than 240 years.

I think it would be a good idea to re-institute the largely abandoned tradition of teaching civics courses in our schools. As recent news events have sadly demonstrated, many people in high positions of political power in the U.S. have forgotten (or never knew) how the Constitution is supposed to work.

The 10^th Amendment declares: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This amendment conveys what’s broadly known as “states’ rights.” Regrettably, those who often extol states’ rights end up ignoring or trying to usurp those rights, when they don’t like the outcome (for example, supporting states’ rights when it comes to anti-discrimination laws but opposing it when it comes to environmental laws).

At the state level, policies regarding the medical and recreational use of cannabis vary greatly, and in many states conflict significantly with federal law that bans cannabis.

But Mary Jane is gaining greater freedom, no matter what Uncle Sam does.

If a federal and state law contradict, then when you’re in the state you can follow the state law, but the feds can decide to stop you. Here’s the key: the Department of Justice in 2013 ruled that it wouldn’t interfere with state marijuana laws, a decision that opened the floodgates for state legalization.

Let’s look at the latest developments on the federal and state levels concerning marijuana laws and why pot stocks are poised to surge this year.

Tough luck, Al Capone…

The sheer sense of momentum toward full federal normalization of marijuana must have been how the public felt in the run-up to the repeal of alcohol prohibition in 1933. Repeal of the Volstead Act was bad news for gangsters and bootleggers. The same will be true for modern-day illicit drug dealers when the federal ban on marijuana gets lifted.

Legal inevitability is in the air…and it carries the pungent aroma of marijuana.

With the Democratic takeover of the U.S. Senate this year, the federal prohibition of marijuana is (in my opinion) as doomed as a speakeasy. When the federal ban gets removed, remaining state prohibitions would either get rescinded by their respective governments or get challenged by the feds in court (and the states would likely lose). To completely unify federal and state laws on marijuana would take a constitutional amendment (as it did with alcohol under FDR).

Read This Story: Politics and Pot: Red, Blue…and Green

But the states aren’t waiting around for the feds to get their act together. During the November 3 general election, one of the biggest winners was marijuana. Legalization measures passed in Arizona, Montana, Missouri, New Jersey and South Dakota. More than one-third of the country (over 111 million people) currently live in a state with legal recreational cannabis.

As of this writing on January 14, a total of 36 states and the District of Columbia have approved comprehensive, publicly available medical marijuana programs. The recreational use of cannabis is legalized in 15 states, including DC. Another 16 states have decriminalized its use.

Another quick civics lesson:

Decriminalization stops short of outright legalization; it means taking an act that is illegal and removing criminal penalties. Legalization means taking an act that is illegal and making it legal.

The list of states loosening marijuana restrictions continues to get longer, with or without federal action.

Virginia Ralph Northam (D) and top lawmakers introduced a bill on January 13 that would legalize marijuana in the Commonwealth. Legislators in the Old Dominion state have signaled that they intend to move quickly to advance the bill.

The proposal would allow adults 21 and older to buy and possess up to one ounce of marijuana and cultivate up to four plants for personal use. The bill enjoys bipartisan support. The Virginia legislature last year decriminalized simple cannabis possession, but advocates have stayed focused on broader reform.

Also on January 13, New Mexico Governor Michelle Lujan Grisham (D) announced support of marijuana legalization in her state. She released her agenda for this year’s legislative session and part of her strategy to strengthen the state economy and increase tax revenue is to facilitate the creation of a legal cannabis market (see the following tweet):

Normalization of marijuana laws equals industry growth. According to a new report from the marijuana research firm New Frontier Data, the legal cannabis market was worth an estimated $13.2 billion in 2019, and is expected to reach $20.1 billion in annual sales for 2020.

Fueled by strong consumer demand, annual legal marijuana sales are projected to grow at a compound annual growth rate (CAGR) of 21%, to reach more than $41 billion by 2025.

In states where marijuana is currently legal, annual sales of medical cannabis are projected to grow at a 19% CAGR through 2025, from $5.9 billion in 2019 to an estimated $16.3 billion by 2025. During the same period, adult-use sales are projected to grow at a 23% CAGR, from $7.4 billion to $25.1 billion.

According to New Frontier, the marijuana industry’s expansion is propeled by several interrelated forces, including: The emergence of new legal markets as more states reform their cannabis laws; steady growth in demand in legal states as consumers leave unregulated markets to embrace legal and regulated ones; and increased cannabis consumption as the public comes to recognize the medical benefits of marijuana.

Get ready for MORE…

The Marijuana Opportunity Reinvestment and Expungement Act of 2019, aka the MORE Act, passed the U.S. House last month and now awaits action in the U.S. Senate. MORE is the “Holy Grail” for the marijuana industry, because it would finally decriminalize marijuana on the federal level.

MORE this year faces excellent odds of passage in a Senate that will be run by Sen. Chuck Schumer (D-NY), who strongly favors marijuana decriminalization. President-elect Joe Biden is fully on board.

Our team of analysts just uncovered a well-positioned pot company that would skyrocket after the Senate vote occurs. The time to buy this weed stock is now, ahead of the news. Click here for details.

John Persinos is the editorial director of Investing Daily. He also writes the twice-weekly e-letter, Marijuana Investing Daily. You can reach him at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.