Cannabiz Seeks Federal Reform, Despite Senate Setback

By Willis Jacobson
Nov 4, 2020

Cannabis reform advocates had plenty to celebrate Tuesday night after a perfect run of success for state ballot measures. They were markedly less enthusiastic about the direction of the federal races.

With several key states still counting absentee and mail-in ballots on Wednesday, much remained unsettled on the national level – including the presidency. Republicans appeared to have the edge for control of the U.S. Senate, however, dashing the hopes of industry insiders who saw Democrats controlling the upper chamber as the key to federal reforms.

Cannabis advocates, many of whom cheered on the perfect five-for-five sweep by states with legalization ballot measures, were split on how the tighter-than-projected federal races might play out, as well as what those possible outcomes could mean for the industry’s future.

Legalization advocate and attorney Allison Margolin, a founding partner of the Margolin & Lawrence law firm in Beverly Hills, Calif., was hoping for a dominant night from Democrats to advance legalization efforts. Despite many pre-election polls predicting a so-called “Blue Wave,” Democrats were on track Wednesday to barely maintain their majority in the House of Representatives with the fate of the Senate and presidency still undecided. Republican Senators Lindsey Graham (S.C.) and Mitch McConnell (Ky.), both considered anti-cannabis by many advocates, both won their races.

Margolin blamed what she characterized as a disappointing trend on apathy among cannabis supporters.

“I think we need to get better politically,” she said, attributing some of the passiveness to the anti-establishment roots of the legalization movement. “We need to get involved in the system and make it better. I don’t think being on the outside and just kind of putting our hands up [is helpful]. We need to get more into it.”

With votes still being counted, others in the industry expressed optimism that the state results would help galvanize support for federal reform, while an international analyst predicted the federal government will be forced to soon train its focus on cannabis, regardless of the final election results.

“That’s what makes cannabis such an interesting industry – it’s really unpredictable,” said Steve Schain, an attorney with the Hoban Law Group who represents cannabis clients in Pennsylvania and New Jersey. “One of the great things about legalized marijuana is no one knows anything.”

Federal review?

Although many activists consider a strong showing from Democrats as the path of least resistance to federal legalization, industry analyst Stephen Murphy said federal reform is likely to at least be considered, no matter who ultimately wins the national races. Murphy is a co-founder and managing director of Prohibition Partners, a U.K.-based data and intelligence firm that provides market analysis on the cannabis industry.

Voters in Arizona, New Jersey, Montana and South Dakota each approved REC measures on Tuesday, while voters in Mississippi approved a MED program (South Dakota became the first state to approve a REC and MED program on the same day). 

With those results, 35 states now have MED markets, and 15 of them allow REC. That means roughly one-third of the U.S. population has access to legal cannabis, a situation Murphy said cannot continue to go ignored by the federal government.

“Certainly, a review will be called,” he said, suggesting federal lawmakers will perform that examination within the next year. “That doesn’t mean anything will happen, but when one in three in the U.S. has access to legal adult-use [cannabis] and the federal government has no control over it, I think it has reached its tipping point that the federal government will need to review, regardless of who is president.”

He said that review could highlight some industry issues – like the lack of access to banking or the restrictions caused by the lack of interstate commerce – and lead to smaller reforms, if not broad legalization.

Schain, with the Hoban Law Group, also stressed that even if Democrats end up prevailing, there is no assurance that federal legalization will happen quickly. Even something like the SAFE Banking Act, a bill pending in the Senate that provides protections for financial institutions working with cannabis operators, could take more than a year to implement, he said.

“There’s a lot of stuff that could happen, but things happen at a glacial pace in legislation,” Schain said.

Making progress

Steve Hawkins, executive director of the Marijuana Policy Project said he felt Tuesday’s sweep of state ballot measures “will place even greater pressure on Congress to address the glaring and untenable conflicts between state and federal laws when it comes to cannabis legalization.”

Margolin, with the Margolin & Lawrence law firm, said that any meaningful cannabis legislation from federal lawmakers – however the election shakes out – must include considerations for social and justice reform.

“If the American people agreed on one thing, in terms of the election results, it’s that the drug war is wrong and that cannabis is a good thing,” she said.

On the flip side, she said the stronger-than-predicted showing by Republicans perhaps indicates that voters aren’t as interested in criminal justice reform, which she said should be an issue embraced by everyone fighting for cannabis legalization.

“It’s very easy for people who aren’t oppressed to legalize and then not [enact criminal justice reforms] because they’re never going to get in trouble,” she said. Such reforms “have to be part of it. It’s about the right to be free – and make money. It has to be both.”

Those reforms, she said, should include expungement of marijuana-related criminal records and programs, similar to the social equity set-ups in several cities and states, that provide resources to people disproportionately impacted by the War on Drugs.

Legalization without those reforms, she said, is “not really progress.”

“The elites have always done whatever they’ve wanted with impunity and immunity, so to say that they can now [use cannabis] as a statute? That doesn’t really mean anything to me,” said Margolin, who has represented growers and distributors in several high-profile cases, including before the California Supreme Court. “They always could get away with what they wanted.”

Murphy, with Prohibition Partners, said the rest of the world would be watching closely to see how the U.S. moves forward with cannabis policy post-election.

Several international investors and companies are waiting on legal clarity before entering the U.S. market, he said, and other international regulatory bodies will likely take their cues from the U.S. Through its collection of states, the U.S. has the largest legal cannabis market in the world despite the fact the federal government considers cannabis illicit.

A U.S. policy change could “massively impact” the way the United Nations classifies cannabis, Murphy said, which would in turn impact how the European Union treats it.

“It will trickle down globally,” he said from his U.K. home. “As a global leader, the U.S. is the most influential country in the world. The ramifications of legalization in the U.S. has global ramifications.”

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