Mixed Indicators of Marijuana Legalizations This Term

Last month, supporters of marijuana legalization got a welcome surprise when conservative Supreme Court Justice Clarence Thomas questioned the constitutionality of federal prohibitions on marijuana. That line of questioning didn’t alter federal law, but it does seem to inch us closer to a reality where cannabis could be legalized, regulated and accepted the same way alcohol has. Hope has been especially high since the election of President Joe Biden. Still, the actual odds aren’t at all clear-cut.

As of the beginning of this month, recreational marijuana was legal in 18 states, while medical marijuana was legal in 36. Since March of this year, five more states have enacted or introduced legislation that would legalize production, sales and use of the plant. Further, more than 9 in 10 Americans queried by the Pew Research Center believe cannabis should be legal at least for medicinal use.

Despite all this, though, marijuana continues to be classified as a Schedule I narcotic under federal law. As our Los Angeles marijuana business lawyers can explain, that’s the same category used for drugs like heroin – highly addictive and with no medicinal purpose. Obviously, the label isn’t congruent with the reality, and there is a clear disconnect between federal and state laws that has proven a fine line for cannabis companies to walk.

Last year, when House Democrats passed a marijuana legalization bill, it was ultimately stymied by Republicans in the Senate. Even Republicans who generally support legalization opposed the MORE Act, citing concerns about certain taxes intended to cover social equity programs. This year, though, Democrats control both Chambers – and the White House. All of this has risen the hopes of cannabis activists about federal legalization.

However, some are not so sure. For example, some opine the line of questioning by Thomas had less to do with the issue of marijuana legalization and more with his well-known problems with federal overreach in general. Beyond that, many lawmakers consider cannabis legalization a low priority, especially in this moment as the country is still struggling to its feet after the pandemic.

And then there is the fact that Joe Biden has stopped well short of voicing support of full legalization, though he has vocally backed medical marijuana rights and decriminalization.

As for Thomas’s line of questioning (in a case involving a challenge to tax rule 280E preventing marijuana businesses from writing off common expenses), it’s important to remember that the courts do not make the laws. They can set legal precedent, but really they’d need sort of “the perfect case,” perhaps involving an in-all-ways stand-up marijuana business owner complying with all applicable state laws and industry standards yet is still being dragged by federal repercussions. But this scenario may be unlikely considering federal authorities haven’t routinely arrested or prosecuted business owners operating under state-legal programs since the Obama years. And even small changes to 280E tax cases and banking cases don’t seem to be making the sort of sweeping changes that some activists had been hoping for. That puts the ball back in Congress’ court, which means change could be slower.

But how much does it actually matter in a state like California, where cannabis is already legal for adult recreational use? A lot, actually, particularly with regard to banking and taxation – both of which currently aren’t on the side of cannabis businesses as a direct result of marijuana prohibition.

Although some credit unions and smaller banks will take on marijuana businesses (albeit quietly), credit card corporations and major banks won’t touch the industry, for fear of being slapped with federal money laundering charges because of the drug’s continued federal classification.

Beyond that, legalization could allow cannabis companies to grow beyond state borders. A cannabis farm in California can only sell its product in our borders. If they wanted to sell to marijuana shops in Nevada or Oregon, they have to invest additional funds to also grow in that state. California is renowned for having some of the best marijuana crops in the world. Export of those products would be a huge boon for state revenue – but that can only happen if the U.S. makes it legal.

If you are operating a marijuana business and are having difficulty navigating the legal market, our Los Angeles cannabis lawyers can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.

Additional Resources:

Could cannabis be made legal in U.S. under Biden? Signs are mixed. July 2, 2021, By Brooke Staggs, The Orange County Register