The laws governing the Cannabis industry are changing so rapidly that it’s almost impossible to keep up with all the new legislation across the country. Currently, there are over 1,100 cannabis bills in state legislatures and Congress for 2020. While most in the industry do not believe we will see national legalization in 2020, an additional seven states could legalize cannabis in some form this year. That would bring the 2020 total to 40 states with some form of legalized cannabis. Presidential candidate Bernie Sanders announced at an Iowa rally that if he is elected to the White House, he will “legalize marijuana in every state in this country” on his “first day in office, through executive order.” Very interesting times for this industry!
Let’s take a look at the major changes over the last couple years and then look ahead at what is sure to be an exciting 2020.
The defining events for the cannabis sector from 2018:
- Canada legalized cannabis for adult use nationwide.
- The Farm Bill in the U.S. was signed into law. This legalized the hemp industry nationwide. (Hemp is a cousin of the cannabis plant.)
- The U.S. Food and Drug Administration (“FDA”) approved Epidiolex, a cannabinoid, for use in people with two forms of rare epilepsy.
- Five cannabis companies listed their shares for trading on major U.S. exchanges: two on NASDAQ and three on the New York Stock Exchange.
- Adult-use cannabis sales exceeded cannabis-medicinal sales for the first time.
As 2019 began, there were more cannabis bills submitted to Congress than at any other time in U.S. history. Some of the biggest milestones last year were:
- The Marijuana Opportunity Reinvestment and Expungement (“MORE”) Act moved out of committee and headed to the House floor.
- The Federal Reserve said that hemp businesses can have full access to the U.S. banking system just like other businesses.
- The U.S. FDA held its first national meeting on CBD and began formal policymaking.
- Colorado hit $1 billion in cannabis tax revenues.
- The Secure and Fair Enforcement (“SAFE”) Banking Act passed the House of Representatives by a huge margin.
The two most prominent efforts are the SAFE Banking Act and the MORE Act. The SAFE Act would permit legal cannabis businesses to access the federal banking system and all of its protections. Ed Perlmutter, a Colorado Democrat, sponsored the bill in the House. In the Senate, the companion bill was sponsored by Oregon Democrat Jeff Merkley. On September 25, 2019, the House of Representatives overwhelmingly passed the bill by a vote of 321 to 103. In the Senate, the bill remains with the Banking, Housing, and Urban Affairs Committee. It stalled as impeachment proceedings were consuming all the members’ time and energy.
The MORE Act would remove cannabis from the Controlled Substances Act, effectively legalizing the plant at the federal level. In addition, it would seek to expunge prior convictions for cannabis use or possession. In the House, New York Democrat Jerry Nader introduced the bill; in the Senate, California Democrat and former 2020 presidential candidate Kamala Harris is the sponsor. On November 20, 2019, the House Judiciary Committee approved the MORE Act, moving it back to the full House for a potential vote to be scheduled. This was considered a historic congressional approval. It was the first time since Prohibition that a federally illegal substance seeking a change in status was moved forward along the legislative path. (However, the Senate continues to stall on its progress.)
Finally, on December 3, 2019, the Federal Reserve, the Federal Deposit Insurance Company (FDIC), and other regulators announced that banks nationwide no longer have to treat their hemp-farming customers differently from others. This move follows the 2018 Farm Bill that legalized hemp production in the U.S.
As 2020 begins, this is the status of the key initiatives in both the House and the Senate:
|House of Representative Bill||Corresponding Senate Bill|
|Bill||Bill Name||Description||Sponsor||Recent Activity||Bill||Sponsor||Recent Activity|
|HR 712||VA Medicinal Cannabis Research Act of 2019||Allow Sect. of VA to do clinical trial for pain and PTSD||J. Luis Correa,
|June 20, 2019 – Committee hearing held||S.179||Jon Tester D-MT||January 17, 2019 – Referred to Committee on Veterans Affairs|
|HR 1118||Small Business Tax Equity Act of 2019||Allows similar tax treatment of cannabis companies in legal states||Earl Blumenauer, D-OR||February 8, 2019 – Referred to House Committee on Ways and Means||S.422||Ron Wyden D-OR||February 7, 2019 – Referred to Committee on Finance|
|HR 1119||Responsibly Addressing the Marijuana Policy Gap Act of 2019||Comprehensive reform. Banking tax, expungement, CSA remove||Earl Blumenauer D-OR||March 14, 2019 – Referred to Subcommittee on Health||S.421||Ron Wyden D-OR||February 7, 2019 – Referred to Committee on Finance|
|HR 1120||Marijuana Revenue and Regulation Act||Establishes taxes on cannabis||Earl Blumenauer D-OR||March 22, 2019 – referred to SubCom on Crime, Terrorism, and Homeland Security||S.420||Ron Wyden D-OR||February 7, 2019 – Referred to Committee on Finance|
|HR 1151||Veterans Medical Marijuana Safe Harbor Act||Allow veterans to use medical cannabis and discuss with doctors||Barbara Lee D-CA||March 25, 2019 – Referred to SubCom on Crime, Terrorism, and Homeland Security||S.445||Brian Schatz
|February 12, 2019 – Referred to Committee on the Judiciary|
|HR 1456||Marijuana Justice Act of 2019||De-schedules marijuana from CSA||Barbara Lee D-CA||April 8, 2019 – Referred to SubCom on Crime, Terrorism, and Homeland Security||S.597||Cory Booker D-NJ||February 28, 2019 – Referred to Committee on the Judiciary|
|HR 1595||Secure and Fair Enforcement Banking (SAFE) Act of 2019||Allows for cannabis access to banking||Ed Perlmutter D-CO||Passed House – Referred to Senate September 26, 2019||S.1200||Jeff Merkley D-OR||April 11, 2019 – Read and referred to Committee on Banking, Housing, and Urban Affairs|
|HR 1893||Next Step Act of 2019||Prison reform for cannabis convictions||Bonnie Watson Coleman, D-NJ||April 8, 2019 – Referred to SubCom on Crime,
Terrorism, and Homeland Security
|S.697||Cory Booker D-NJ||March 7, 2019 – Referred to Committee on the Judiciary|
|HR 2093||STATES Act||CSA doesn’t apply to cannabis in legal states||Ed Perlmutter, D-CO||May 15, 2019 – Referred to SubCom on Crime, Terrorism, and Homeland Security||S.1028||Elizabeth Warren D-MA||April 4, 2019 – Referred to Committee on the Judiciary|
|HR 3884||Marijuana Opportunity Reinvestment and Expungement Act of 2019||Decriminalize, De-schedule, expungement||Jerrold Nadler, D-NY||November 21, 2019 – Ordered to be Reported||S.2227||Kamala Harris D-CA||July 23, 2019 – Read and referred to Finance Committee|
By the time 2020 ends, it is very likely that seven more states will legalize or expand cannabis programs. That would result in 40 states with some type of legal market at the close of 2020. Here is the latest on the various state efforts at legalization.
Medical Cannabis Legalization Prospects
Alabama: Although known as one of the most conservative states in the nation, Alabama is actually one of the more likely to pass a medical cannabis program via its Legislature in 2020. A study commission approved a draft bill that would legalize MMJ for diagnosed medical conditions but prohibit smokable flower and edibles.
Kentucky: The home of U.S. Senate Majority Leader Mitch McConnell has remained focused on cultivating a large hemp industry, but in a step toward legalizing medical cannabis, the state House Judiciary Committee approved a bill in 2019. Democratic Governor Andy Beshear is supporting it as well.
Mississippi: Although Mississippi is another very conservative state, it has a strong chance to pass a medical cannabis program via ballot initiative in 2020. The initiative is very business friendly, too, with no limits on the potential number of licenses. There is resistance from the state Board of Health.
South Dakota: Voters will decide on a medical cannabis initiative that gives local governments the power to decide how many licenses are issued in their jurisdiction.
Adult-Use Legalization Prospects
Arizona: Two proposals are on the table, but even if one makes the ballot, passage is uncertain. The state missed passage in 2016 by a couple percentage points. This was the last time it held a vote. It’s expected that a cannabis program will be brought to the voters in 2020, especially as neighboring New Mexico appears likely to legalize as well. About 50% of the population have indicated their support, with 10% still undecided and 40% still not convinced.
Connecticut: Democratic Governor Ned Lamont started predicting last year that Connecticut would legalize adult use, and he’s emerged as a key player with New York’s Cuomo in the effort to develop a regional approach. Connecticut is feeling the effects of Massachusetts’ legalization of recreational marijuana, which could be an additional driver.
Florida: Proponents of adult-use legalization ran out of time to collect the 766,200 signatures needed to place the adult-use marijuana issue on the ballot in 2020. The group backing the initiative recently announced it will focus on getting recreational marijuana on the 2022 ballot.
Montana: National groups are backing a ballot initiative in Montana, which also could put pressure on a resistant state Legislature to consider a pre-emptive bill.
Ohio: Ohio has an emerging medical program that was passed into law in 2016. However, actual sales only started in early 2019. Support is building for an adult-use ballot measure in 2020. About 52% of the population supports legalization. The biggest hurdle is Governor Mike DeWine, who does not support a recreational cannabis program. However, the Ohio Marijuana Legalization Initiative could invoke a constitutional amendment that the governor would not be able to veto.
New Jersey: Lawmakers voted to put the issue on the November ballot, where it has a good chance of passing. The initiative is broadly written, meaning the state would decide licensing specifics later. A recent poll showed 62% of the state population is supportive of legalizing cannabis for adult use. It seems likely to pass in November 2020.
New Mexico: Sentiment shifted toward legalization when Governor Michelle Lujan Grisham took office in 2019. Although legislation stalled in 2019, a bill has passed the House. Now, efforts are taking shape in the Senate. It is reported there is sufficient interest to find success and legalize cannabis in 2020.
New York: Governor Andrew Cuomo has made adult-use legalization a top priority again this year. Legalization was close in 2019, but there were some conflicts with the legislature on tax revenues and social issues. Following the legalization in Illinois, New York looks open to the idea. Cuomo has vowed to legalize cannabis in the state in 2020. He also proposed a new Global Cannabis Center for Science, Research, and Education to be housed in the SUNY system.
Pennsylvania: Democratic Governor Tom Wolf has changed his stance on approval. But state Senate Republicans recently were adamant that they have no intention to consider a legalization bill this year. However, if New York and New Jersey both legalize, pressure could increase on Pennsylvania to do so as well.
South Dakota: This year will mark the first time a state has voted on medical and adult-use legalization on the same ballot. The adult-use initiative calls for a 15% sales tax. The state Department of Revenue would determine licensing, with a mandate to allow enough licenses to drive out the illicit market.
Vermont: In 2019, the state pushed to legalize cannabis and establish a structure for taxation. A legalization bill was passed early in 2019 by the Senate, but the House adjourned before a floor vote. It appears likely that Vermont will legalize cannabis in the state this year.
Closer to Home: Illinois and Missouri
On January 1, 2020, Illinois became the first state to allow adult-use cannabis sales through legislation. There was a lot of excitement and news coverage of sales activity throughout the state. Fifty-five dispensaries in the state sold more than $3 million in marijuana products on January 1. By January 5, Illinois’s cannabis customers had made more than 271,000 purchases totaling nearly $11 million worth of recreational marijuana. There was so much demand that many of the dispensaries ran out of marijuana the following day. In June 2019, Illinois passed legislation to legalize the sale and possession of recreational cannabis by January 2020, giving the existing growers — who served about 87,000 medical marijuana patients before the change — fewer than six months to expand their operations to meet the increased demand. Illinois has placed strict limits on the number of licenses for cannabis growers and dispensaries. Existing cultivators were allowed to expand under the new law, and already-open medical dispensaries were the first stores allowed to make recreational sales. But the market will continue to improve when additional licenses are added later this year. Applications for additional dispensaries just closed on January 2. Up to 75 additional dispensary licenses will be issued by May 1, 2020. Applications for Cannabis Infuser, Transporter, and Craft Grower licenses must be submitted by March 16. The state can issue up to 40 Craft Grower and 40 Infuser licenses in 2020. Licenses will be awarded by July 1, 2020.
Missouri legalized medical marijuana at the ballot box in November 2018. The state just issued licenses for cultivation and manufacturing on December 26, 2019. On January 23, 2020, the state announced the winners of the 192 dispensary licenses. It is not expected that sales will actually begin until late spring or summer. As there were 1,163 dispensary applicants, a number of disappointed applicants are challenging the state’s licensing decisions through the regulatory appeal process and the courts. The campaign to put adult-use marijuana legalization on Missouri’s November ballot officially launched on January 30. Missourians for a New Approach, the group behind the proposed constitutional amendment, announced it will begin working to collect the 160,199 verified signatures from voters needed to qualify the measure. Under the initiative, adults 21 and older would be able to possess and purchase cannabis from licensed retailers, and individuals could cultivate up to three plants for personal use. A 15 percent tax would be imposed on marijuana sales, with revenue going toward veterans’ services, substance misuse treatment, and infrastructure projects. According to a fiscal analysis from the state, a regulated marijuana market would generate as much as $155 million annually by 2025. The proposal would also allow individuals with prior cannabis convictions to apply for resentencing or expungements.
As demonstrated above, this is an exciting and confusing time for the Cannabis industry. If your business touches the industry in any way, you need to be fully aware of the ever changing legal ramifications. The attorneys in HeplerBroom’s Cannabis Law Practice Group are here to help.
*Sources: Congress.gov, Stansberry Research, Marijuana Moment, MJBizDaily