October 3, 2022

Volume XII, Number 276

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October 03, 2022

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Editors’ Roundtable: When Will Marijuana Be Federally Legal and What Will That Look Like?

This is the first in what will be a regular feature where Bradley's Budding Trends editors – Whitt Steineker, Jay Wright, Hunter Robinson, and Slates Veazey – discuss cannabis issues in the news and take a stab at where the cannabis industry is going in the future. Just remember, making predictions is hard, especially about the future. Let’s see how this goes.

Whitt Steineker (WS): One of the most common questions I get from the average person on the street, although typically not from experienced cannabis operators, is when will marijuana be legalized at the federal level? Two years ago I was more inclined to think some form of legalization would happen in the next four to five years (so, 2024-2025), and now if you put a gun to my head I would predict it would be later than 2025. The political climate today suggests we are further away, not closer, than we were when President Biden was elected. You?

Slates Veazey (SV): I am going to look at this glass half full. Just last week, Sens. Chuck Schumer (D-NY), Cory Booker (D-NJ), and Ron Wyden (D-OR) introduced their big Cannabis Administration and Opportunity Act (CAOA). Like the bill that passed the House earlier this year (the MORE Act), these senators’ bill would decriminalize cannabis on the federal level. And, as we have written many times already, other federal legislation (I’m looking at you SAFE Banking Act) has had momentum for some while now. That dam is inevitably going to break at some point. We also have seen positive activity on cannabis research legislation recently. Add to this some rumblings I have heard here in the Magnolia State about some actual meetings occurring recently among politicians and cannabis industry experts to start outlining and possibly drafting a set of regulations that the federal government would ultimately use as the foundation for a federal cannabis regulatory program. So, yeah, I’m going to say we very well could see cannabis federally legal by 2024 or 2025. 

Jay Wright (JW): Federal legalization continues to be the Holy Grail for cannabis advocates and operators across the country, but things have progressed to a point across the overwhelming majority of states that I have started to wonder how much of an impact it would actually have on folks that both provide and consume marijuana. In my mind, the most consequential component of proposed marijuana reforms continues to be the SAFE Act, which would allow marijuana operators the ability to tap into the traditional banking system as other industries have the ability to do, rather than face the whack-a-mole approach that banks, credit unions, and payment processors have to employ out of necessity for fear of running afoul of federal anti-money laundering laws. The Senate (under both Republican and Democratic control) shot down the SAFE Act several times over the past few years even after it passed the House. However, there continue to be signs of life, such as the new comprehensive package offered by Sen. Schumer this month, one of the co-sponsors of which is Sen. Patty Murray (D-WA), who reiterated that comprehensive legislation should not slow down passage of the SAFE Act. Back to the original question, I’m of the view that it’s in Democrats’ political self-interest to pass comprehensive marijuana reform prior to the midterms since their other priorities appear largely stalled at the moment. However, given that Republicans appear to be making “law and order” a central theme of their electoral strategy in 2022, it is hard for me to see the 10 Republican senators needed to get past a cloture vote going along with it. Given that marijuana legalization has never been a stated priority of the Biden administration, I ultimately believe we will not see marijuana legalization until 2025 at the earliest.

Hunter Robinson (HR): We all know Slates and I wear the rose-colored glasses in this crew. I generally agree with his analysis and his conclusion that some form of federal legalization could occur by 2025. To provide a little more color, here are my thoughts on the likelihood that some form of meaningful federal legalization will occur by certain dates:

  • 2030: 95%

  • 2025: 50%

  • 2023: 5%

WS: Assuming there is some kind of federal legalization of marijuana, what do you think that will look like? And I’m not talking about the SAFE Banking Act or broader research. Real deal legalization.

JW: It’s important to remember that the federal government is not the only authority that has a say over whether or how the marijuana industry can operate across the country – just like we have with alcohol, we’re going to see different states take different approaches to marijuana access. Federal legalization would allow the interstate shipment of marijuana rather than requiring all marijuana sold in a state to be grown within that state, opening the possibility of distributors and retailers in Alabama and Mississippi “importing” and selling marijuana grown in California, Colorado, Kentucky, or any other state. This will play out very differently for operators depending on how restrictive their home state is towards licensing marijuana operators. Again, just because federal law won’t prohibit it going forward does not mean that states will not impose their own hurdles to operate in this space, meaning the value of hard-earned licenses may fluctuate significantly depending on states’ response to legalization.

HR: I think the dam will break slowly. “SAFE Plus” (i.e., SAFE’s banking provisions coupled with first-step social equity components, such as expungement for federal marijuana convictions) would come first. This would likely supercharge the growth of the state-legal cannabis industry, and once more people see the sky doesn’t fall as the industry grows, that will broaden the coalition that supports broader cannabis reform. I think the broader reform would start with de-scheduling, which would essentially leave states to their own devices for regulating the production and sale of cannabis within their borders. That is essentially the status quo, but it would have a huge impact on cannabis operators’ tax liability since 280e would no longer bar them from deducting certain business expenses. And the ability to move cannabis in interstate commerce could result in a sea change in where cannabis is grown, with resulting downstream effects on the cannabis industry’s market structure.

SV: Gosh, the easy answer here is that federal legalization will look something akin to the result of the MORE Act and CAOA having a child together. I would add to that that I suspect a federal cannabis regulatory scheme would resemble, in certain key respects, the programs that have been most successful in the U.S.

WS: As of today, nearly 40 states have legalized marijuana for medicinal and/or adult use. Do you think it’s more likely that all 50 states will legalize marijuana before the federal government does so? My guess is that sounds impossible just as a conceptual matter (how can all 50 states allow something the federal government prohibits?), but given the widespread legalization of marijuana across all areas of the country, I don’t think I can name a state that is out of the question.

JW: Honestly it still shocks me that we’re talking about the federal government legalizing marijuana after states like Alabama and Mississippi, and I have trouble identifying the common thread that runs through the last batch of holdout states. Without the benefit of significant research into when and why certain Western states may change course, I generally presume that the federal government will take action before all of the remaining states do so.

HR: I think the federal government may beat a few states to the punch, but not many. I expect it will become harder and harder for states to hold out as they see schools, roads, etc. improve in legal states as a result of the tax revenue brought in from cannabis there.

SV: I generally agree with you, Whitt. But, going back to my answer to your first question, if federal legalization happens by 2025, I don’t see the remaining dozen or so states that haven’t legalized at least medical cannabis doing so in that time frame.

WS: If the Republicans gain control of Congress in the midterms, and perhaps even the White House in the 2024 election, what is the likelihood that there we bill some type of regression or backsliding on federal cannabis rules? Are we too far down the road for that or should cannabis stakeholders be concerned?

JW: Given that marijuana remains a Schedule I controlled substance, I’m not sure that the “rules” could get any stricter than they currently are, though perhaps the enforcement of those rules could be stepped up in ways we have not seen in the past decade.  However, with the groundswell for support across American society today – in which marijuana legalization receives majority support from every demographic, whether age, race, gender, party affiliation, etc. – I’m not sure future administrations would want to die on the hill of increased crackdowns on legitimate actors in the marijuana industry.

SV: I don’t see the momentum we have seen towards federal legalization reduced in that scenario. Our readers should not forget that a supermajority of Mississippi’s majority Republican-filled House and Senate approved the Mississippi Medical Cannabis Act in January. As more red states legalize cannabis in some form, I predict Republican members of Congress will continue to warm up to legal cannabis.

HR: Slates is right. While Republicans may not be quite as warm as Democrats on cannabis, legalization has broad bipartisan support among voters. If Republicans gain control of the White House and/or Congress in 2024, I do think there will be some negative regression. But I don’t think the momentum trendline changes direction.

© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 208
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About this Author

Whitt Steineker Cannabis Attorney Bradley Birmingham
Partner

Whitt Steineker has devoted his legal career to representing companies that provide a wide range of goods and services. He provides clients of all types with litigation counsel, transactional advice, and practical strategies for growth. Whitt advises clients of all sizes—from multinational corporations to local businesses—in transactional and litigation matters in jurisdictions across the country and around the world.

As co-chair of Bradley’s Cannabis Industry team, Whitt represents clients on a wide range of cannabis issues. In addition to...

205-521-8401
James W. Wright Jr. Attorney Banking Financial Services Bradley Arant Boult Cummings Birmingham
Partner

Jay Wright is a partner in the firm’s Banking and Financial Services and Litigation practice groups. Jay has earned his Accredited Mortgage Professional (AMP) designation through the Mortgage Bankers Association (MBA), and is one of a small number of lawyers who have achieved this status.

Jay’s practice focuses on financial services litigation and regulation, and he is actively involved in lawsuits and disputes across the country representing companies involved in a wide array of state and federal law claims. His representation includes general...

205-521-8924
J. Hunter Robinson Commercial Litigation Bradley Arant Boult Cummings LLP
Associate

Hunter Robinson represents clients in commercial litigation and compliance-related matters across the country. His litigation practice focuses on representing financial institutions in lender-liability, title, and business disputes, including class actions. Hunter represents mortgage servicers and lenders in suits arising from repurchase demands, and defends those entities in litigation involving alleged violations of the Truth in Lending Act (TILA), Fair Debt Collection Practices Act (FDCPA), Real Estate Settlement Procedures Act (RESPA), and the Fair Credit Reporting...

615-252-2328
Slates Veazey Construction Litigation Attorney Bradley Law Firm
Partner

Slates Veazey represents clients in all types of litigation, with a particular emphasis on construction and insurance coverage disputes. Slates’ construction practice involves representing owners and general contractors in a variety of issues and projects, both public and private. Slates, who is licensed in both Texas and Mississippi, has experience managing construction disputes across the United States, including Alabama, Florida, Georgia, Mississippi, and Texas. This experience includes prosecuting and defending delay, extra work, impact, and inefficiency claims on public and private...

601.592.9925
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