Cannabis legalization in the United States is continuing to sweep across the country at a breakneck pace. Even amidst a pandemic, a shaky economy, and historically unprecedented division and partisan rancor, ballot measures and legislation to legalize marijuana continue to enjoy widespread bipartisan support. Arizona, Montana, New Jersey, and South Dakota all approved ballot initiatives in November 2020 to legalize adult-use marijuana, joining 11 other states that had already legalized it
Less than a decade after Colorado and Washington became the first states to legalize it, Virginia will become the 16th state to legalize adult-use cannabis. In total, thirty-six states (nearly three quarters) have legalized marijuana for medical and/or adult use, and that number is certain to increase, with another dozen States considering adult-use legalization measures in 2021. While not all of these states will enact legalization measures this year, at least five states (New Mexico, New York, Connecticut, Pennsylvania, and Florida) appear likely to do so.
Yet, regardless of how many states enact permissive cannabis laws, antiquated and scientifically unsupported federal policy continues to stymie industry growth. Perhaps the biggest hurdle for the industry is that marijuana remains classified as a schedule I substance under federal law. Schedule I substances are defined as having a high potential for abuse and no accepted medical use. The impact of that designation, from a legal and business perspective, is difficult to overstate. It outlaws the interstate transport of marijuana, bans banks from doing business with legitimate marijuana businesses, and generally prohibits federally funded institutions from conducting marijuana research, among many other restrictions. Predictably, descheduling marijuana is at the top of the agenda for those who support legalization.
Achieving that goal has proved exceedingly difficult, despite the unsupportable designation of marijuana as a schedule I substance and the widespread national support for legalization. According to a recent Gallup Poll, nearly 70% of Americans support legalization. This is more than at any point in the past five decades. Last year, every state that held a legalization referendum approved it. Despite the widespread support, however, Congressional Republicans remain largely opposed to legalization. As a result, efforts to enact reform have languished in Congress, and key hurdles remain in place.
The lack of reform is not due to a lack of legislation. Last September, the Secure and Fair Enforcement Banking Act (“SAFE Act”), the first version of which was drafted in 2013, passed the House with 76% support. It was the first time a stand-alone cannabis law was voted on by the full House. The SAFE Act would not legalize cannabis, but it would allow financial institutions and insurance companies to provide financial services to cannabis businesses, opening up an ability to secure commercial loans and access credit transactions. The bill stalled however, because Senate Majority Leader Mitch McConnell (R-Ky.) refused to bring it up for a vote in the Senate.
In December 2020, the House of Representatives made history again when it passed comprehensive legislation that would federally legalize cannabis. The Marijuana Opportunity Reinvestment and Expungement Act (“MORE Act”) would transform U.S. cannabis law and fundamentally expand the opportunities available to cannabis businesses.
Specifically, the law would remove marijuana from the list of scheduled substances under the Controlled Substances Act and eliminate federal criminal penalties for individuals who manufacture, distribute, or possess marijuana (states would still have criminal jurisdiction over marijuana offenses and would be able to enact the laws they deem appropriate). The MORE Act would also create a 5% federal tax on cannabis products, which would be applied toward small business loans and support for law enforcement. It would make Small Business Administration loans and services available to cannabis-related legitimate businesses or service providers and establish a process to expunge convictions and conduct sentencing review hearings related to federal cannabis offenses.
The MORE Act was passed by the House of Representatives, again with bipartisan support. The historic vote represented the first time that either chamber of Congress voted to legalize cannabis. Following passage in the House, Sen.Chuck Schumer (D-N.Y.) commented: “I have long believed that any effort to reform our nation’s marijuana laws should also include significant measures to undo the harms that too many families and communities have suffered as a result of the war on drugs.” With Sen. McConnell as Majority Leader in the Senate, however, the bill would not receive a vote in the Senate. At the time, it appeared the Senate would remain under Republican control, in which case, meaningful reform was unlikely.
Following the surprise sweep by Democrats in the January 2021 runoff elections in Georgia, hope for comprehensive cannabis reform was revived. In a February statement issued by Sen. Schumer, along with fellow Sens. Cory Booker (D-N.J.) and Ron Wyden (D-Ore.), the senators asserted: “Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war [on drugs] and end decades of harm inflicted on communities of color across the country.” Nevertheless, given the immediate health and economic crises facing the nation, cannabis reform will likely remain on the back burner for the time being. Even so, reform remains likely. Consider, for instance, that Vice President Kamala Harris was one of the original co-sponsors of a previous iteration of the MORE Act.
Certainly, cannabis issues are extraordinarily complex, transcending legal, social, geographical and economic barriers. Despite (or perhaps because of) the rapid legal and cultural shift, confusion and misinformation regarding cannabis abound. But, as laws across the country become more permissive, people see firsthand how beneficial cannabis legalization can be. Even those who are not interested in consuming cannabis are benefitting from the massive tax windfall generated by cannabis sales. Excise and sales taxes on cannabis raised more than $1.9 billion in 2019. Those dollars can be applied to much needed education and infrastructure improvements. By contrast, enforcing cannabis prohibition laws costs taxpayers approximately $3.6 billion a year. Additionally, legal cannabis sales totaled $9.5 billion in 2017 and are projected to reach $23 billion by 2022.
HEMP and CBD Products
On the hemp front, the FDA is still in the early stages of creating its own rulemaking process governing non-psychoactive cannabinoids in hemp, like cannabidiol (CBD), a compound widely credited for treating a variety of ailments, including stress, pain, and seizure disorders, among others. As a reminder to readers, the term “cannabis” includes both hemp and marijuana. The two share many properties, but whereas marijuana typically produces high levels of tetrahydrocannabinol (THC)—the psychoactive compound that produces a “high” when consumed—hemp does not. Hemp produces only trivial amounts of THC, generally insufficient to cause impairment. Hemp is also utilized for a range of nutritional and industrial purposes.
While there are currently no federal standards for cannabinoid hemp processors or retailers, and cannabinoid products are not federally approved as dietary supplements or food additives, that will likely change in the future. Given the federal government’s lack of action, states have been active in developing regulatory frameworks governing CBD products.
New York, for instance, recently enacted comprehensive regulations governing the manufacture and sale of cannabinoid hemp products. Among the most notable shifts in the New York framework are an allowance for more permissive THC levels and the requirement that cannabinoid hemp processors maintain qualified third-party GMP certifications. These are both common sense reasonable, measures. The more permissive THC allowances will improve outcomes for business by allowing them to address marginally higher THC levels rather than destroying the products. Likewise, the new certification requirements will promote enhanced consumer safety and confidence, giving consumers better assurance that the products they purchase contain what they say. The New York regulations provide what is broadly expected to be a successful framework that will likely be adopted by other states, and perhaps even federally.
Only time will tell whether 2021 is the year that comprehensive cannabis reform finally occurs at the federal level. But at a minimum, we are closer than we have ever been. We have never before seen, as we have with cannabis, such a rapid emergence of an entire industry. Consequently, it is impossible to predict what might come next. But given the rapid adoption and popularity of cannabis legalization initiatives across the U.S., it appears that cannabis is here to stay.
Chappelle is a food industry lawyer and a consultant at Food Industry Counsel, LLC. Reach him at firstname.lastname@example.org. Stevens, also a food industry attorney, is a founding member of Food Industry Counsel, LLC. Reach him at email@example.com.