Will cannabis be federally legalized in 2022? I’m sorry to say guys, probably not.
Hey, I’m Morgan Davis. I’m an attorney focused on cannabis and business in North Carolina. Let’s talk about how to keep your business protected and thriving.
Recently, president Biden pardoned 6,500 people for simple possession of marijuana charges at the federal level.
And a lot of people are commenting like such a pardon could be federal legalization. It’s not. It’s not even technically removing that conviction from their record. It’s simply pardoning them. And in fact, if they want it removed from their record, they need to contact an attorney to help them go through the expungement process, which may or may not be available to them. That being said, it is a huge step in the right direction and one everybody is very excited about, and we all hope that that continues. Another thing that people are really excited about is Senator Chuck Schumer’s bill that came out at the end of July, the Cannabis Administration and Opportunity Act.
It was the Senate’s response to the House’s More Act, which proposes federal legalization, and at 296 pages offers sweeping regulations when it comes to federal cannabis legalization that no other bill has offered.
Now, here’s the thing. Nobody thinks this bill is gonna pass in its current form.
Its chances are extremely slim, if not nil, especially with the midterm elections coming and it’s projected the Democrats are going to lose one if not both of the Houses of Congress. Nonetheless, as sweeping as the legislation is and as much input was given to it by all sorts of federal agencies and industry stakeholders, it is very, very likely that the provisions, or at least some of them that we see in the CAOA, will end up in whatever future cannabis federal legalization bill we see next. So it’s important to understand what’s proposed so that you can start planning for the future for your business.
Some of the provisions proposed are expunging federal cannabis related records, creating funding for law enforcement departments, a national driving while impaired standard for THC impaired driving, banking access for cannabis businesses, a 10-year pilot program through the SBA, which will allow cannabis businesses to start applying for funding that as of today, they are not eligible for.
Federal employers could no longer fire people based on positive THC tests, and it would seek to, among many, many other things, it would seek to regulate CBD and other hemp derived products as well as cannabis products through the fda. Under the CAOA, the FDA would assume primary regulatory responsibility over the manufacturing and marketing of cannabis products. This includes both hemp products and high THC products. Currently, the FDA has the ability to regulate hemp and hemp derived products. However, in the four years since the passage of the 2018 Farm Bill, they have done nothing.
A passage of something like the CAOA would force them to do so, and it would also give them the funds to be able to form the regulatory body that they would need to do. So, regulations over manufacturing and marketing would include marketing, national good manufacturing product standards, directions for use, registration and licensing, labeling, sale and regulations, record keeping and reporting.
These are all areas that the industry itself has been begging for regulations in since the inception of cannabis.
Most states have taken it on and there is a question of the CAOA’s regulations versus state regulations. Would this end up in a position where you’d have to comply with both? Would the federal regulations override state regulations, especially in places like California where you already have an extremely robust regulatory system, or would companies be forced to comply with both?
There’s also a massive taxation system that is included in CAOA that a lot of people are very unhappy about.
Taxation could be up to 25% depending on type of product and size of business. That would be in addition to state and local taxes that cannabis businesses are already being crippled by. That kind of taxation is going to make participation in a federal cannabis business very difficult, especially because it’s unclear whether or not cannabis businesses would then be able to file for any of the exemptions that other businesses currently are able to file for as regular business exemptions.
The big pro about the CAOA is that it marks a shift in federal regulatory thinking about cannabis. It’s no longer a fight of yes versus no. It’s now a fight over how are we going to do it, which is a huge step in the right direction. The big con about the CAOA, there are a few, one that it’s unlikely to pass, but two, such sweeping regulation is going to be very difficult for most existing businesses to adapt to.
It’s important to understand what’s happening in the CAOA because we know that at least part of it, if not all of it, is gonna be used in future bills. This is one to pay attention to. Give me a call if you have any questions.