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  • Writer's pictureWill Furtado

Competing Federal Cannabis Proposals Offer Opportunities and Pitfalls

Despite recent public polling showing nearly 90% support for the legalization of either medical or adult-use cannabis, and the vast majority of states adopting some level of cannabis legalization, cannabis remains illegal at the federal level; classified as a Schedule I narcotic under the Controlled Substances Act. However, the United States Congress is now considering several pieces of legislation that would significantly alter federal cannabis policy and which represent the best opportunity for cannabis legalization in decades.

The Secure and Fair Enforcement (SAFE) Banking Act. The SAFE Act would protect federally regulated banking and depository institutions by prohibiting regulators from penalizing the institution for providing banking services to a legitimate cannabis-related business. Proceeds from legitimate cannabis-related business would not be considered proceeds from unlawful activity and, thus, not subject to anti-money laundering laws. The bill would also protect a bank or other depository institution from asset seizure for providing loans or other financial services to cannabis businesses. The SAFE Act was passed by the House of Representatives on April 19, 2021, and referred to the Senate Committee on Banking, Housing and Urban Affairs.

Criticism of the SAFE Act - Despite drastically needed banking reforms, cannabis advocates have targeted the SAFE Act for protecting large corporate banking institutions, while leaving canna-businesses and users subject to severe criminal penalties and liabilities. The SAFE Act faces an uphill battle in the Senate, where several key Democrats (including Senate Majority Leader Chuck Schumer) have indicated they support a more comprehensive piece of legislation.

The Cannabis Administration and Opportunity Act. On July 13, 2021, Senators Chuck Schumer (D-NY), Cory Booker (D-NJ) and Ron Wyden (D-OR) introduced a "discussion draft" of legislation to legalize and regulate cannabis at the federal level. Likely representing the most comprehensive and serious effort to overhaul cannabis legislation since the creation of the Marihuana Tax Act of 1937, the CAOA would:

  • Remove marijuana/THC from the Controlled Substances Act

  • Transfer agency jurisdiction over cannabis from the Drug Enforcement Administration to the Food and Drug Administration, Alcohol and Tobacco Tax and Trade Bureau, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

  • Allow transit of of cannabis products in interstate commerce, regardless of located in a state where cannabis is legal or illegal.

  • Impose a federal excise tax on the sale of cultivated marijuana – 10% first year, followed by annual increases up to 25% over the next three years.

  • Establish a trust fund managed by the Small Business Administration for loans to women and historically disadvantaged individuals for use in the cannabis industry.

  • Provide funding to states to be used in connection with expungement proceedings for those convicted of state level marijuana crimes.

  • Establish and conduct a study into the impacts of cannabis use on the human brain, the efficacy of cannabis use for medical purposes, driving under the influence of marijuana

  • Create federal advertising regulations.

Criticism of the CAOA - While many advocates see the CAOA as the best opportunity to address the legacy of the war on cannabis, others see it as not going far enough, leaving in place state prohibitions on cannabis. Further, small government conservatives are likely to see the comprehensive legislation as an expensive social justice program and expansion of the federal bureaucracy better left to state regulation.

The Marijuana Opportunity, Reinvestment and Expungement (MORE) Act. Re-introduced by Congressman Nadler (D-NY) in May 2021, the MORE Act would:

  • Remove cannabis from the Controlled Substances Act

  • Facilitate the expungement of past convictions.

  • Tax cannabis products at 5% to fund criminal and social reform projects, including an Office of Cannabis Justice within the Department of Justice Office of Justice Programs, responsible for administering grants to aid communities negatively affected by the war on drugs.

  • Establish a trust fund to support various programs and services for individuals and businesses in communities impacted by the war on drugs.

  • Prohibit the denial of any federal public benefits, like housing, on the basis of cannabis use and states that use or possession of marijuana would have no adverse impact under immigration laws.

Criticism of the MORE Act - Like the CAOA, critics argue that the MORE Act "goes too far, too fast," creating a new and unwieldy federal sub-agency. However, cannabis advocates believe that removal from the Controlled Substance Act must be coupled with specific and deliberate efforts to address the legacy of the war on cannabis through social equity and opportunity programs.

States Reform Act. On November 15, 2021, Congresswoman Nancy Mace (R-SC) introduced legislation "to amend the controlled substances Act regarding marihuana, and for other purposes," referred to as the States Reform Act. The bill would end federal cannabis prohibition by removing cannabis from the Controlled Substances Act, implement a 3% cannabis excise tax, regulate interstate commerce and provide automatic expungement for non-violent cannabis convictions, among other provisions. The legislation also aims to assign different primary oversight bodies to cannabis and hemp—keeping one plant divided based on THC potency.

Clarifying Law Around Insurance of Marijuana (CLAIM) Act. The bill, introduced by Sen. Menendez (D-NJ), provides a safe harbor from penalties or other adverse action for insurance companies that provide services to cannabis-related legitimate businesses in jurisdictions where such activity is legal.

Common Sense Cannabis Reform for Veterans, Small Businesses, and Medical Professionals Act. In addition to removing cannabis from the Controlled Substances Act, this legislation introduced by Congressman David Joyce (R-OH), would:

  • Direct the U.S. Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau to issue rules to regulate cannabis modeled after the alcohol industry within one year of enactment.

  • Create a federal preemption to protect financial institutions and other businesses in non-cannabis legal states so that they can service cannabis companies.

  • Allow the Department of Veterans’ Affairs to prescribe medical cannabis to veterans.

  • Direct the National Institutes of Health to conduct two studies on cannabis as it pertains to pain management and cannabis impairment and report to Congress within two years of enactment.

VA Medicinal Cannabis Research Act of 2021. Introduced in companion bills by Senator Jon Tester (D-MT) and Congressman Luis Correa (D-CA), the bill requires the Department of Veterans Affairs to conduct clinical trials of the effects of medical-grade cannabis on the health outcomes of covered veterans diagnosed with chronic pain and those diagnosed with post-traumatic stress disorder. Covered veterans are those who are enrolled in the VA health care system.

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