Will 2021 Be the Year of Cannabis Reform?

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.

Recent Legislation

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.