Dare We Hope For Federal Legalization?

Efforts have been stymied, but momentum continues to build at the state level.

In interviewing cannabis-industry analyst Scott Hammon for this week’s cover story, I was surprised to hear him say that federal legalization of cannabis “might not ever happen.” He backtracked somewhat after making that statement. Legalization might well happen, he said, but nobody should expect it to come any time soon. It could, in fact, be several years.

He might well be right. The momentum toward legalization in individual states has perhaps led too many of us to believe that federal legalization, or at least decriminalization, was right around the corner. But the Trump administration, which could score an easy win amid a whirlwind of incompetence by announcing its support, hasn’t made a move. And while the Democratic-controlled House seems ready for reform, the Republican-controlled Senate is another matter. When Senate Banking Committee Chairman Mike Crapo (R-Idaho) last month nixed the SAFE Act, which would have protected banks from liability for doing business with cannabis companies, hopes were dashed. It wasn’t just that he killed the bill, it was the midcentury-style prohibitionist language he used to do it: stuff about the health dangers of pot use, the “criminality” cannabis attracts, and, of course, “the safety of children.” None of that has anything to do with banking. Other pot-reform bills, including ones that sailed through the House, have met similar fates in the Senate.

Hammon, the cannabis practice leader for MGO|Ello, which provides accounting and advisory services to pot companies, likens the current situation to that of sports gambling, where a “patchwork” of state laws, all of them different, govern the industry. As with cannabis, banks are at best hesitant to serve the gambling business. Cannabis operators, Hammon said, might have to learn to live with that situation for some time to come.

Still, the patchwork is growing ever larger, and every time a state legalizes cannabis for medical or recreational use, the pressure on federal officials to end prohibition only gets stronger. As things stand, 11 states have legalized pot for recreational use. Among the rest, only three still prohibit cannabis entirely, including for medical use: South Dakota, Nebraska, and Idaho. All the rest allow some form of medical pot, but 15 are so highly restrictive that it might as well still be illegal. For instance, some allow only CBD treatments, but ban all THC-containing products.

Last year turned out to be sort of a holding pattern, as only one state, Illinois, legalized recreational pot in 2019 — an off year as far as federal elections are concerned. But hopes are high in a whole bunch of states this year:

In New York, Gov. Andrew Cuomo has made legalization a priority. A bill to allow recreational sales died in the legislature last year, but lawmakers are likely to take it up again in 2020.

In New Jersey, voters will have the chance to approve recreational pot in an initiative that observers say is likely to pass.

In Vermont, adult use is already allowed, and the state Senate passed a law allowing commercial sales in 2019. This year, the state House will take up the measure, which is likely to pass.

In Arizona, voters nearly passed a legalization initiative in 2016, but the measure lost in a squeaker. In 2020, supporters will try again. Details are still being hammered out, but the eventual initiative might slap a whopping 18 percent excise tax on pot sales.

In New Mexico, hopes for legalization were fairly dim until Gov. Michelle Lujan Grisham took office last year. She is working with legislators on a path forward for 2020.

In Montana, observers say a voter initiative on legalization might take place in November, if the state legislature doesn’t do the job first. Hesitant lawmakers might be moved to pass a bill before then, in order to obviate the initiative and thus allow them to exercise more control over what the details of the law.

In Pennsylvania, a formerly skeptical Gov. Tom Wolf has come out in favor of legalization, but state Republicans have taken a hard line. They might be persuaded if neighboring states New York and New Jersey legalize.

In Florida, prospects seem dim at the moment, as time is running out to collect the required number of signatures to put legalization before voters in 2020. Proponents are challenging the initiative requirements in court.

In North Dakota, voters turned back an initiative to legalize recreational pot. A new version slated for this year is more restrictive and would include an excise tax of 10 percent.

In Virginia, a legalization measure failed to pass the legislature last year, but the bill will be re-introduced, this time with the backing of the state’s attorney general.

Meanwhile four states are taking up proposals for medical marijuana programs this year: Alabama, South Dakota, Kentucky, and Mississippi.


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