Federal marijuana legalization is stopped in its tracks

It has been nearly a decade since the first time a majority of Americans supported legalizing cannabis. Two years ago, that number reached a record high, according to Gallup, with 68 percent supporting marijuana legalization — a number that has held steady since. That same year, as the coronavirus pandemic engulfed the country in March 2020, medical marijuana businesses were declared essential, allowing them to remain open along with pharmacies and grocery stores. It was a triumph for legalization advocates. As the New York Times reported, it was “official recognition that for some Americans, cannabis is as necessary as milk and bread.”

Cannabis is one of the fastest-growing industries in the US; sales of adult-use and medical marijuana products hit $25 billion in 2021 and, by one Wall Street estimate, could reach $100 billion by 2030. Eighteen states have legalized cannabis for adult use, and another 19 currently have at least a comprehensive medical marijuana program. As of 2020, one in three Americans lived in a state with access to legal marijuana, according to Politico, and that number is quickly growing as the East Coast catches up with the West — last year, Connecticut, New Jersey, New York, and Virginia all passed adult-use cannabis laws, joining Maine, Massachusetts, and Vermont. Rhode Island lawmakers are expected to approve a legalization bill this month.

However, under the federal Controlled Substances Act, marijuana remains classified as a Schedule 1 illegal drug with no medical uses, on par with heroin and LSD. The Drug Enforcement Agency strictly limits marijuana cultivation for research, frustrating scientists who are unable to investigate its medical benefits and risks under current regulations.

Rescheduling marijuana for research was an oft-repeated promise of President Joe Biden’s campaign, along with a pledge to decriminalize the use of cannabis and grant clemency to people with federal marijuana convictions.

But after more than one year in office, Biden’s promises remain unfulfilled — and a January YouGov poll of 1,500 people showed that more than half of Americans believe that the Biden administration has made little to no progress advancing marijuana reform. The administration even screened staffers for marijuana use last year, dismissing several incoming candidates because they revealed they’d used cannabis during background checks for positions in the Biden White House. Just this month, employee conduct guidelines were updated to potentially deny security clearance to people who have invested in cannabis companies. All in all, the Biden administration seems to be pretty anti-weed.

Critics of legal marijuana cite the potential for confusion among law enforcement agencies keeping up with evolving regulations, concern about minors gaining access to the drug, a potential drop in property values, and more for maintaining marijuana’s status as an illicit drug. (Though it looks like legal cannabis can actually increase property values.)

Legal cannabis, however, also presents a tremendous financial opportunity, and despite federal inaction, the industry is growing fast; a report from the cannabis website Leafly shows there are more than 428,000 full-time jobs in the cannabis industry, with a 33 percent increase in jobs just last year. Even so, the fallout from the lack of federal legalization is felt by many sectors of society: Medical research is stalled, prisoners are languishing in jails, small businesses are going under without access to federal banking, and big cannabis companies face stiff challenges in raising money to stay afloat as long as marijuana is illegal under federal law.

However, as more states move to decriminalize and legalize cannabis, and as the economic benefits of a legal marijuana industry become apparent, it seems likely that we’ve passed the point of no return on the road to federal legalization. So why hasn’t the federal government been able to unify to enact cannabis legalization nationwide?

Historically, Democrats have championed legalization as a social justice issue; Gallup poll numbers indicate that half of Republican voters now also support legal marijuana. Support among younger Republicans is especially high, says Morgan Fox, political director of the National Organization for the Reform of Marijuana Laws (NORML): “It’s difficult to find any issue right now that enjoys as much public support as ending prohibition for cannabis.” It seems increasingly likely that a bipartisan effort to legalize cannabis at a federal level will pass in the next few years.

It’s still wholly unclear, however, what that policy will even look like. In fact, it’s more likely several pieces of legislation will be necessary to address the labyrinthine issues around marijuana legalization.

To that end, several pieces of legislation are being pushed forward. This February, a bipartisan coalition of House lawmakers including Rep. Ted Lieu (D-CA) and Rep. Matt Gaetz (R-FL) demanded that the Marijuana Opportunity Reinvestment and Expungement (MORE) Act be “expeditiously considered by the House and Senate.” The MORE Act would deschedule cannabis from the Controlled Substances Act and enact criminal and social justice reforms, including the expungement of prior cannabis convictions. It was approved by the House in a momentous vote in December 2020 that marked the first time in history Congress has moved to end federal marijuana prohibition. However, the bill failed to advance in the Senate.

Another piece of legislation aims to change federal regulations for cannabis-related businesses: The Safe and Fair Enforcement (SAFE) Banking Act, which has been passed by the House six times since it was first introduced in 2013. If the SAFE Banking Act were signed into law, federal regulators would be prohibited from handing down penalties to banks serving licensed marijuana businesses; those businesses would then be able to access financial services like checking accounts and accept payment with credit or debit cards.

Under current laws, fearing federal prosecution, most large financial institutions, including Visa and Mastercard, refuse to work with marijuana businesses. A lack of access to traditional banking services makes cannabis stores especially vulnerable to theft, fraud, and violent crime since they’re largely forced to operate as cash-only businesses. During one wave of looting in 2020, 43 cannabis dispensaries on the West Coast were targeted and robbed. Federal reform would prevent regulators from penalizing banks who do business with the industry and allow marijuana businesses to operate with safer, more trustworthy financial practices rather than relying entirely on cash.

The SAFE Banking Act, which has had bipartisan support since its inception, was most recently attached to a manufacturing and innovation bill called the America COMPETES Act in February, and passed the House with a vote of 222-210. Senate Minority Leader Mitch McConnell condemned Democrats for including the provision, calling it a “poison pill.” The SAFE Banking Act has also failed to come to a vote in the Senate.

There’s some tension between supporters of the MORE Act, who want criminal justice reform first and foremost, and those backing the reforms in the SAFE Banking Act, which opens a clear pathway for more capitalistic endeavors. After the SAFE Banking Act was approved by the House for the fifth time last December, the Drug Policy Alliance tweeted: “We agree marijuana businesses, like any other businesses, need access to banking services — and in fact, the MORE Act would fully fix the banking issue. The MORE Act also deschedule[s] marijuana to end federal criminalization and repair the harms of prohibition, SAFE Act does not.”

Yet another bill is now also making the rounds: The States Reform Act was introduced by Republican lawmakers last year. Sponsored by Rep. Nancy Mace (R-SC), the legislation was framed as an alternative to Democratic-led reform proposals and would end federal prohibition and regulate cannabis under various agencies, including the Department of Agriculture and the Food and Drug Administration, for growers, consumers, and medical marijuana patients, while notably allowing states to determine their own policies on commerce and other aspects of legalization. It attempts to bridge the partisan divide by including expungements for those with nonviolent cannabis convictions, and a 3 percent federal excise tax to fund law enforcement, small businesses, and veterans’ mental health initiatives. It has not yet been voted on by Congress.

Finally, legalization advocates are hopeful that yet another bill, the Cannabis Administration and Opportunity Act, which could be introduced as soon as April, will provide federal lawmakers the opportunity to debate cannabis policy in the Senate. The sweeping bill, co-sponsored by Sens. Cory Booker (D-NJ), Ron Wyden (D-OR), and Senate Majority Leader Chuck Schumer, aims to delist marijuana from the Controlled Substances Act while recognizing existing state laws; it would enact banking reform, criminal justice reform, and automatic expungement of federal records for nonviolent marijuana crimes. Under this bill, federal tax revenue would support restorative justice and public health and safety research, with a portion allocated for reinvestment into the communities most affected by the war on drugs.

Since 1996, when California passed the nation’s first medical marijuana law, a number of factors have driven states to pass some form of legalization, including the rising costs associated with arresting and incarcerating nonviolent drug offenders, growing scientific evidence of the therapeutic benefits of the plant, the shift in the public attitude toward cannabis use, and, of course, marijuana as a source of tax revenue.

The policy gap between state and federal law is now so vast that it has created a patchwork of marijuana markets that could be incredibly difficult to unify under one federal law. Policies vary from state to state, with differing factors including personal cultivation, regulation of producers and suppliers, the types of retail products allowed, prices, and taxes. For example, in Colorado, adults are allowed to possess up to two ounces of cannabis at a time; in California, the limit is one ounce. New York allows growing up to six plants per person at home, while New Jersey only allows licensed cultivators to grow. Each state has its own agency that oversees the enforcement of cannabis regulations and laws. Businesses are unable to trade marijuana legally with one another across state borders, because interstate commerce falls under federal jurisdiction.

Those states with existing marijuana laws may not have to reconcile their laws with federal policy anytime soon. If cannabis were removed from the Controlled Substances Act by the federal government, that wouldn’t mean it would instantly be legal in Nebraska, for example, where ​​the sale of marijuana is a felony under state law. “Federal regulation would not disrupt existing systems, and it wouldn’t force states to legalize,” says Fox.

It’s for this reason, and others, that some believe federal legalization could make things worse, according to Shaleen Title, chief executive of the cannabis policy think tank Parabola Center and a prominent voice in legalization policy.

“If local policies are confusing and chaotic and inequitable, passing a state legalization law doesn’t automatically fix the problem,” Title says. “We’ve seen this in California, Massachusetts, and other states. In the same way, if you add another layer of chaos by putting the federal government in charge when its only expertise has been in arresting and prosecuting marijuana users — not regulation — we could end up with worse problems than we have now.”

Title says that federal regulation could also give the green light for massive corporations, even Big Tobacco, to move into the space. “I’m talking about companies that would never dream of risking their interstate business by getting into something that’s federally illegal, but they’re waiting in the wings,” Title says. “A combination of interstate commerce and enormous new entrants to the industry could put small operations out of business forever, and kill marijuana culture as we know it.”

Last year, Amazon announced its support for legislation to federally legalize marijuana and an end to drug testing of its employees for cannabis. The updated policy was widely celebrated by reform advocates — but also raised questions about whether the company was staking a claim to dominate the industry as soon as cannabis is legal under federal law. (The company sells beer and wine through its grocery delivery services, but notably does not currently sell other regulated products like tobacco.)

A report issued last year by the nonprofit group Drug Policy Alliance outlines protective measures that would allow existing state programs a grace period to transition to federal regulations while limiting large corporations (like Amazon) from capitalizing on a newly legal industry. If a corporation is over a certain size, or controlled by a tobacco company, the report recommends that it should not receive a federal license, adding that the largest corporations should be subject to “the most robust regulation, marketing restrictions, and taxes.”

To protect existing businesses and consumers, federal regulations would need to be rolled out slowly, Title says. She points to Massachusetts, where she served as commissioner of the Cannabis Control Commission from 2017 to 2020, as a successful model for policy change. “We had a huge grassroots movement for decades, and they succeeded in passing small, local-level advisory decriminalization policies,” she says. “That turned into state decriminalization in 2008, then medical legalization in 2012, and adult-use legalization in 2016. We did it really gradually, focused on consumers and small businesses. We were the first to incorporate social equity at the state level. If you look at the way in which we changed the law, you can see that we didn’t try to do too much overnight. And if [we] don’t do that at the federal level, then [we] won’t get another chance.”

Yet there are myriad reasons for the growing support for federal legalization. Cannabis advocates continue to press forward in their quest to end federal prohibition, saying it will create jobs and economic opportunities, reduce harm, redirect law enforcement resources, generate tax revenue, and promote consumer safety.

The Drug Policy Alliance’s 2021 report of recommendations for federal lawmakers was extensive, authored by a group of reform advocates, public health professionals, regulators, and attorneys (Title among them). It touches on everything from criminal justice reform to environmental regulations to ensuring controls around minors’ access to marijuana. They argued that cannabis policy reform, if done right, could create equity in community, health, housing, and the federal economy. In order to achieve these ambitious outcomes, they wrote, “We must admit, document, and comprehensively assess past harm. We must seek to repair and undo that harm, and replace existing systems with ones that are anti-racist.”

The group’s first recommendation was that federal legislation should require “a historical accounting of what the Drug War was and is.” An evaluation of the damage caused by cannabis prohibition is needed, they wrote — along with an apology. They noted that, because of the history of the war on drugs, regulating cannabis would be vastly unlike regulating alcohol or tobacco, and that the purpose of federal reform would have to be to “end and repair the harms caused by cannabis prohibition, to advance health equity, to foster social and economic equity, and to prevent future harm.”

Those harms include the about 40,000 people currently incarcerated for marijuana offenses in state and federal prisons; Black and Latino Americans make up two-thirds of the prison population in part because of the discriminatory enforcement of drug laws. A 2020 report from the American Civil Liberties Union (ACLU) shows that Black people are over three times more likely than white people to be arrested for marijuana possession, even though both groups use marijuana at similar rates. Although the total number of people arrested for marijuana possession has decreased in the past decade, law enforcement still arrested 6.1 million people over that period, even in states and cities where marijuana had been decriminalized, and racial disparities in arrests remain intact. If cannabis were federally decriminalized, it could drastically reduce the number of people in the criminal justice system.

Activists have also taken the position that people of color and those with marijuana offenses predating legalization should be afforded the opportunity to participate in the cannabis industry. The Massachusetts Cannabis Control Commission, for example, implemented a social equity program that serves the individuals most impacted by marijuana prohibition, arrest, and incarceration, by providing participants with education and training for jobs in the cannabis industry. The program could serve as a model for federal reform, with legal-marijuana states being required to create social equity programs that benefit disproportionately harmed communities. Other states that have incorporated social equity programs into adult-use cannabis legislation include California, New Jersey, New York, New Mexico, Michigan, Vermont, Illinois, Connecticut, Arizona, and Virginia, as well as Washington, DC.

Cannabis attorney Cristina Buccola, who also contributed to the Drug Policy Alliance report, says that federal lawmakers need to consider marijuana legalization first and foremost as a justice issue, and that New York state’s Marijuana Regulation and Taxation Act could serve as a gold standard. “New York is only one of three states that has earmarked tax revenues that go back to a community reinvestment fund,” she says. “What’s really incredible is that 40 percent of tax revenue is marked for that fund; New York also has a target of awarding 50 percent of legal cannabis licenses to social and economic equity applicants.”

A big reason that the federal government might also want to legalize marijuana is, of course, cash. If state tax revenues are any indication, legal cannabis would reap massive amounts of income for the feds: California collected around $817 million in adult-use marijuana tax revenue during the 2020-2021 fiscal year, while marijuana taxes in Massachusetts outpaced those garnered from alcohol sales during the same period.

According to a 2018 study by New Frontier Data, a data analytics firm focused on the cannabis industry, legalizing marijuana nationwide could create as much as $130 billion in tax revenue and more than a million new jobs across the United States in the next decade. Legal cannabis could be a massive windfall for the government, pulling in sales tax, as well as payroll taxes, from the burgeoning industry and its new employees. Now, factor in that the nation has spent tons of money in the past two years on Covid-19 research, relief, and care, and the potential money from legalization is probably looking mighty nice.

“When there are budget deficits and the like, everybody wants to know where there is an additional revenue stream, and one of the most logical places is to go after cannabis and cannabis taxes,” Beau Whitney, then a senior economist at New Frontier Data, told the Washington Post in 2018.

Change in a particular federal policy also stands to benefit marijuana businesses: Under current federal law, cannabis businesses are subject to the same Internal Revenue Code statute enacted in 1982 that prevents smugglers from deducting expenses like guns and yachts from illicit operations. However, the IRS applies the same statute to state-authorized marijuana retailers, meaning that they aren’t allowed to deduct many typical business expenses including rent, marketing, payroll, and losses.

Federal reform could repeal that law and allow cannabis companies to deduct such expenses, potentially increasing tax revenue by encouraging growers and retailers to report income, and even offer incentives for environmentally sustainable industry practices like renewable energy and waste reduction. Tax revenue could also be allocated to reparative justice with funding for expunging cannabis convictions, investment in communities harmed by the war on drugs, and assistance for people in the criminal legal system.

There are potential financial pitfalls to federal legalization, too. Marijuana markets in California and Oregon are in crisis due to a collapse in cannabis pricing, largely caused by an overabundance of legally grown product. As prices for wholesale cannabis tank, high taxes and oppressive regulations are putting many companies out of business. If a nationwide industry opened up, struggling cannabis farmers would potentially be able to ship their products around the country to states like Massachusetts and Florida, which could force regional cultivators and small local businesses to compete with cheaper out-of-state marijuana, potentially pushing them out of the market altogether.

The move to legalize cannabis has broad support even in Republican-leaning states like Florida, Louisiana, North Carolina, and Texas — but even though it’s popular, it’s not a top priority for many voters, perhaps in part due to the success of legalization at the state level.

However, as the industry continues to grow, pressure is sure to increase on legislators to end federal prohibition, one way or another. With more than two-thirds of Americans supporting legalization, and bipartisan support for a federal cannabis policy, it seems likely to happen at some point — until then, the states’ solution may be the best anyone can muster.

Mary Jane Gibson writes about cannabis culture and trends for a number of outlets including Rolling Stone. She has been tracking the legalization of medical marijuana and adult-use cannabis since 2007.