Federal Cannabis Legalization: Policy Issues to be Addressed

For the first time in nearly a decade all three branches of the Federal Government are controlled by Democrats. The Democratic Party has a plethora of agenda items it is looking to enact within this unified government. One of those policy issues is the federal legalization of cannabis.

House Democrats recently passed the MORE Act, which would federally legalize cannabis. The House leadership intends to re-introduce the MORE Act and pass it in short order. Newly minted Senate Majority Leader Chuck Schumer has indicated the MORE Act will be a priority in the U.S. Senate moving forward.

As a result, the cannabis industry must be ready for federal cannabis legalization to occur within the 117th Congress and signed into law by soon to be President Joe Biden. As the Federal Government debates and looks to implement federal legalization, the cannabis industry needs to first focus on three very specific policy issues: interstate commerce, state preservation of regulatory structures, and enacting sensible Federal Government regulations of the industry.

Interstate commerce issues will be at forefront of any federal policy to legalize cannabis. For example, many states that have an oversupply of cannabis flower, such as Oregon, are strongly in favor of selling their excess supply across state lines. Many other states would follow suit. The question becomes how does the industry respond to a legalized commodity such as the cannabis plant and the subsequent ability of interstate commerce that would follow? Would some states look to ban out of state sales of cannabis flower to protect their own cultivators and cannabis industry within their states? Many legal experts have indicated that unless Congress explicitly states for such a prohibition, states would not be able to prevent the free flow of interstate commerce. The cannabis industry must determine what the best course of action is when moving forward with legalization and the subsequent ability of interstate commerce. Some industry players have suggested a “phased” approach to interstate commerce by delaying it for a few years after legalization occurs to allow the state based markets to settle in a new legalized environment. Other industry types want the free flow of cannabis flower and its products to commence immediately. All these thoughts and ideas have merit but it is incumbent upon the industry to have a serious discussion and consensus on this topic as Congress deliberates federal legalization.

In addition, the cannabis industry must consider the preservation of the states’ ability to license, create their own regulatory structures for cannabis, and avoid a federally mandated regulatory structure for industry, such as the three-tier system akin to how alcohol is regulated at the federal level. The states have created robust medical and adult use markets that are thriving. Any attempt by the Federal Government to reverse that would cripple a growing industry that is creating tremendous jobs and tax revenue. The industry must ensure this approach as it discusses federal legalization with congressional stakeholders.

However, that is not to say that there should be no federal oversight or regulation. Rather, it is the opposite. The industry should welcome appropriate federal regulation of cannabis and should have a seat at the table in developing the general framework of federal regulations. The industry should consider aspects like labeling, packaging, ingredient listing and other aspects to ensure product safety and consistency. Moreover, industry should be thoughtful, precise and measured in expressing their viewpoints to legislators. Some in the industry have called for a federal commission to be developed on how to appropriately regulate cannabis at the federal level to ensure it is achieved correctly. The industry should look to avoid any unintended consequences of cannabis legalization. For example, when Hemp was legalized three years ago, it created a conundrum for the FDA in figuring out how to regulate the ingredient CBD in terms of a dietary supplement. The cannabis industry should take note of this situation and look to avoid a similarly gray area of regulation for their businesses.

It is an exciting time for the cannabis industry. However, there is still a good amount of work that must be done before federal cannabis legalization can occur. The industry must understand the real world policy implications of legalization and offer their thoughts and ideas to lawmakers so the cannabis industry will continue to grow at great speed as it has been doing for nearly a decade but this time doing so in a federally legal environment.

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