Don’t assume a Dem win means life will become easier for OK cannabis businesses
Yes, the Democrats now control the White House. Yes, the Democrats control both chambers of Congress. Yes, senior Democrats in both chambers have said they will make some form of cannabis reform a priority. And yes, virtually everyone in cannabis is leaning toward action sooner from Washington than later.
It likely is the case that new steps toward reform will happen in the next two years. What shape they take remains to be seen. Any steps from Washington won’t immediately translate into a universe of new opportunities for cannabis businesses and have advantages and disadvantages you need to know.
Eight reasons to be cautious
With any form of legislation or relief from Washington, it may not necessarily be comprehensive. Federal law enforcers might arrest and prosecute fewer people for cannabis offenses, for example. But they already weren’t inclined toward relatively minor busts that didn’t grab headlines, especially where cannabis is state-legal. Here are some other important things to consider about anything Washington chooses to do in the coming months (or years).
Like any issue, Congress will be wary of seeming to impose upon the will of the states. Washington lawmakers can pass legislation that stops people from being arrested for federal marijuana violations. But Congress may be reluctant to significantly alter infrastructures that states already have in place for regulating cannabis. States could be left to continue prohibiting it altogether or disallow importing and exporting.
Compromise legislation from Washington in the near-term like the SAFE Banking Act would crucially shield banks from doing business with the cannabis industry. But tedious reporting requirements could remain that dissuade banks from offering accounts or prompt them to charge exorbitantly high fees.
Another incremental step that could pass as a compromise to something more comprehensive like the MORE Act is the STATES Act. But this would merely back the federal government away from states that have already authorized some form of legalization or decriminalization.
Incremental steps like the SAFE Banking Act have been attempted in the past but failed in part because discussion of the COVID-19 pandemic was simply more important in Washington.
The window Democrats have to take action is limited. Midterm elections for House members occur in just two years, and they could lose control of both chambers. Democrats would have to move fast and overcome any potential filibuster challenges.
Congress could pass the MORE Act, which would be comprehensive and deschedule cannabis completely from the Controlled Substances Act, rather than reschedule it to a lesser category. This measure would benefit the industry most. But it faces a tougher time in the Senate. It would also leave states to decide how to regulate cannabis and impose new federal taxes on it. Combined with already high state cannabis taxes and fees, that could unintentionally lead to a bigger black market.
Kamala Harris could be a crucial tie-breaking vote in any scenario. On the other hand, any filibuster challenge from Republicans requires 60 votes to overcome, rather than 51. And Republicans benefit politically in the short term by framing Democrats as more concerned with cannabis than COVID.
Biden in the past has called for rescheduling cannabis lower on the list of controlled substances, rather than descheduling it from the list entirely, like the MORE Act would do. His preference would be to leave significant authorities behind with the states instead of seeming to tell the states what to do. Biden has, however, supported expunging past marijuana offenses, something Oklahoma did not do with State Question 788.
Now for some reasons to be hopeful
While there are reasons to be skeptical about cannabis reform in the short term, there are also reasons to assume positive action could take place sooner rather than later with the Democrats taking Washington.
The Democrats now have control of the agenda-setting process, which is important. Far more bills are proposed than ever get passed. A bill not being taken up for meaningful discussion is just as bad as meaningful opposition to any final votes.
The Senate majority leader is Democrat Chuck Schumer of New York, the first to hold the title and openly support legalization. Several senior lawmakers don’t just support some form of legalization but are making it a priority. In other words, the right people are willing to spend limited political capital on the issue. Schumer has said the Senate could vote on legalization within two years and believes it could get Republican votes.
Major cannabis companies saw surges in investor interest after news that Democrats had won in two key Senate races from Georgia. These stocks were already rising upon news of Biden’s election. Massachusetts-based Curaleaf raised $200 million from investors in less than 24 hours after the vote’s outcomes were confirmed in Georgia.
The political gain Mitch McConnell earns from opposing cannabis stems in part from COVID, which won’t last. He scores by framing Democrats as more concerned with cannabis than COVID. He’s a supporter of agricultural hemp. Plenty of Republican senators hail from states where voters have reformed cannabis to some degree, including Oklahoma.
Kamala Harris supports cannabis reform and hasn’t hesitated to express it. She’s been the co-sponsor of the Senate version of the MORE Act.
Congress could pass the more incremental SAFE Banking Act. This would at least make it easier for you to store your money in a bank instead of being forced to handle so much virus-carrying money and risk being robbed. And it would become easier to document your business transactions for tax and other purposes.
If the more comprehensive MORE Act passed, it would become far easier for you not just to access more banking services but also to raise more investment dollars and pay far less in federal business taxes.
It’s counterintuitive to consider, but ongoing federal prohibition might actually put Oklahoma cannabis businesses in a better position to fortify themselves ahead of when cannabis brands inevitably become national and global in size. Competition across the industry will be formidable.
Meanwhile, pressure mounts from states
Without any changes at all from Washington, states are already taking their own action. Some form of drug legalization or decriminalization seemed to be the only thing voters agreed on in the November 2020 elections. Five new states added themselves to the growing list of reformers.
Pointed out the trade publication AdWeek:
“Sales in the five new legal states could grow the industry’s bottom line by $9 billion by 2025. … The addition of these markets means that 230 million Americans, 70 percent of the population, live in areas with medical or recreational weed sales.”
Nationwide, sales of state-legal cannabis boomed to $18 billion in 2020 from $7 billion the previous year. Nine states saw their sales double over the previous year, including Arkansas, Illinois, and North Dakota.
Market analysts predicted that sales here in Oklahoma might reach $250 million by the third full year of medical marijuana. Instead, the state was expected to easily top $800 million by the end of 2020. Oklahoma has far more business licenses than surrounding states. Nearly one in 10 people have patient licenses, a truly astonishing number for a state of four million people.
Several conservative lawmakers in Washington who might oppose federal reform attempts also hail from red states where limited cannabis reforms exist now. Mississippi, Montana, and South Dakota all recently passed reform measures. Ohio, West Virginia, Missouri, and Arkansas all have some version of cannabis reforms in place while also having Republican senators.
Even in McConnell’s home state of Kentucky, the governor and legislature there are taking steps now to legalize medical cannabis, and it appears to enjoy broad support.
Three-dozen states now have some version of medical marijuana and another 15 have full legal for adults. Only six states still outright ban cannabis: Idaho, Wyoming, Kansas, Tennessee, Alabama, and South Carolina. The pressure’s on not to be a state left behind in a fast-growing industry becoming an economic and tax windfall for states.
The sheer size of nationwide sales figures for 2020 -- boosted, to be sure, by COVID lockdowns -- are nothing short of stunning. The mammoth numbers for the year should bring any lawmakers, law enforcers, and bureaucrats pause.
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