Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Thursday, February 25, 2021

"Blowing Smoke at the Second Amendment"

The title of this post is the title of this new paper recently posted to SSRN and authored by Helen K. Sudhoff, a 3L at The Ohio State University Moritz College of Law.  (This paper is yet another in the on-going series of student papers supported by the Drug Enforcement and Policy Center.)   Here is this paper's abstract:

The Second Amendment to the United States Constitution codified the preexisting right to keep and bear arms, meaning the right was enshrined within the scope it was understood to have at its inception.  When enacted, the Second Amendment broadly protected the right to keep and bear arms for self-defense, only restricting gun ownership for certain classes of people, such as the mentally ill or felons.  However, these historical restrictions never encompassed marijuana users or possessors.  Quite the opposite, many of the founding fathers grew or manufactured cannabis themselves.  Despite this discrepancy, the Federal Government enacted § 922(g) in the Gun Control Act prohibiting gun owners and applicants who are medical marijuana patients from owning or possessing a firearm.  Further, such individuals must voluntarily disclose their medical marijuana use to the government, restricting their right to keep and bear arms and implicating the Fifth Amendment’s Privilege Against Self-Incrimination.  This paper will explore the consequences of the enactment and continued enforcement of § 922 against an individual’s right to keep and bear arms while possessing or using medical marijuana in accordance with their state’s medical programs.

February 25, 2021 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Who decides | Permalink | Comments (1)

Thursday, February 18, 2021

New Leafly report asserts "legal cannabis now supports 321,000 full-time American jobs"

This short new "Jobs Report 2021" from Leafly provides a rosy account of the job creation contributions of the legalization of marijuana in US states.  Here is part of the start of the 16-page report:

How many jobs are there in America’s legal marijuana industry?  The 2021 Leafly Jobs Report found 321,000 full-time equivalent (FTE) jobs supported by legal cannabis as of January 2021.

To put that in perspective: In the United States there are more legal cannabis workers than electrical engineers.  There are more legal cannabis workers than EMTs and paramedics. There are more than twice as many legal cannabis workers as dentists.  And those jobs aren’t limited to Colorado and California. Medical marijuana is now legal in 37 states, while 15 states and Washington, DC, have legalized cannabis for all adults.  In Florida, there are now more cannabis workers than plumbers. In Pennsylvania, the state’s famous steel industry employs roughly 36,000 workers — and the state’s not-so-famous legal cannabis industry employs nearly 16,000. In Michigan, there are more cannabis workers than cops.

The annual Leafly Jobs Report, produced in partnership with Whitney Economics, is the nation’s cornerstone cannabis employment study. Federal prohibition prevents the US Department of Labor from counting state-legal marijuana jobs.  Since 2017, Leafly’s news and data teams have filled that gap with a yearly analysis of employment in the legal cannabis sector.  Whitney Economics, a leading consulting firm that specializes in cannabis economics, has partnered with Leafly on the project since 2019.

In real numbers, the cannabis job growth in 2020 represents a doubling of the previous year’s US job growth.  In 2019, the cannabis industry added 33,700 new US jobs for a total of 243,700.  Despite a year marked by a global pandemic, spiking unemployment, and economic recession, the legal cannabis industry added 77,300 full-time jobs in the United States.  That represents 32% year-over-year job growth, an astonishing figure in the worst year for US economic growth since World War II.  Outside the cannabis industry, the US economy shrank by 3.5%, the unemployment rate almost doubled, and nearly 10 million Americans saw their jobs disappear.

February 18, 2021 in Business laws and regulatory issues, Employment and labor law issues, Medical Marijuana Data and Research, Recreational Marijuana Data and Research | Permalink | Comments (1)

Sunday, December 27, 2020

"How state marijuana legalization became a boon for corruption"

The title of this post is the headline of this great new lengthy Politico article, which is summarized by its subheadline: "By making local officials the gatekeepers for million-dollar businesses, states created a breeding ground for bribery and favoritism."  I recommend the piece in full, and here is a small taste:

In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana.  But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption.

Almost all the states that legalized pot either require the approval of local officials – as in Massachusetts – or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures – the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards.  And these strictures have given rise to the exact type of corruption that got [Fall River Mayor Jasiel] Correia in trouble with federal prosecutors.  They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists.

For some entrepreneurs, the payments can seem worth the ticket to cannabis riches.  For some politicians, the lure of a bribe or favor can be irresistible.

Correia’s indictment alleges that he extorted hundreds of thousands of dollars from marijuana companies in exchange for granting them the local approval letters that are necessary prerequisites for obtaining Massachusetts licenses.  Correia and his co-conspirators — staffers and friends — accepted a variety of bribes including cash, more than a dozen pounds of marijuana and a “Batman” Rolex watch worth up to $12,000, the indictment charges.

December 27, 2020 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Tuesday, December 15, 2020

"Marijuana Businesses, Section 280E, and the Sixteenth Amendment"

The title of this post is the title of this recent article authored by Erik M. Jensen that I just saw on SSRN. Here is its abstract:

Quite a few judicial opinions in recent years have discussed the constitutionality of Internal Revenue Code section 280E, which denies income-tax deductions and credits to taxpayers for any trade or business that involves “trafficking in controlled substances,” as the section is applied to cannabis businesses.  Since marijuana is a controlled substance under federal law, section 280E comes into play for those in the cannabis industry even though that industry has been legalized in many states.  This article makes two main points.  One is that, even though courts have consistently rejected taxpayers’ arguments that Congress may not impose limits on business-related deductions, that shouldn’t mean that Congress can deny all deductions from gross income for trafficking individuals and still have a “tax on incomes” exempted from the direct-tax apportionment rule by the Sixteenth Amendment.  The second is that the Sixteenth Amendment isn’t even arguably relevant if the taxpayer engaged in the cannabis business is a C corporation, a taxable entity.  The Supreme Court concluded, before the 1913 ratification of the amendment, that a corporate income tax is not a direct tax that has to be apportioned to be valid.  Denial of significant deductions to a corporate taxpayer may be an important policy issue, but it’s not a constitutional one.

December 15, 2020 in Business laws and regulatory issues, Taxation information and issues | Permalink | Comments (0)

Sunday, December 13, 2020

"Half Banked: The Economic Impact of Cash Management in the Marijuana Industry"

The title of this post is the title of this notable new paper now on SSRN authored by Elizabeth Berger and Nathan Seegert. Here is its abstract:

We investigate the economic effects of cash management services that banks and credit unions offer in the legal marijuana industry, where only half of businesses have access to cash management services.  Administrative data from Washington state on marijuana sales, data on financial institutions, and our hand-collected survey on marijuana dispensaries allow us to investigate product-level effects.  Dispensaries with cash management services have 40% higher profitability, and we find that this is due to reduced frictions with upstream suppliers. Specifically, dispensaries with cash management negotiate 10% lower wholesale prices.  Through this channel, we find banking services provide large economic value.

December 13, 2020 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Recreational Marijuana Data and Research | Permalink | Comments (0)

Thursday, December 10, 2020

"Can Revenue From Legalized Recreational Marijuana Help States Close Budget Gaps?"

Webp.net-resizeimage-17The question in the title of this post is the headline of this new piece from folks at Pew.  Here are excerpts:

Voters in Arizona, Montana, New Jersey, and South Dakota on Nov. 3 legalized recreational marijuana in their states, joining 11 others that already allow regulated use and sale of the drug.

Policymakers in these states pitched legal cannabis in part to bring in much-needed revenue.  For example, in New Jersey, Governor Phil Murphy (D) said the money would “help fund critical priorities like education and infrastructure.”  But tax revenue from marijuana has proved uncertain in normal times, and pandemic-driven economic disruptions and consumer behavior shifts may only add to that uncertainty....

One of the challenges of legalized recreational marijuana is that the tax revenue is difficult to forecast because of the lack of historical data.  Even Colorado and Washington, the first states to begin legal marijuana sales in 2014, have only a few years of data on which to base projections.  (See Figure 1 for details on which states have legalized marijuana and when.)

This uncertainty may be compounded by the recession, the first to hit since the sale and use of recreational marijuana has been legal in any state.  Although revenue forecasters have historical data on sales and excise taxes for other goods over the business cycle, this is not true for recreational marijuana, which was first legalized well after the official end of the Great Recession more than a decade ago.  The 2020 downturn — driven by a disease that has prompted significant shifts in individual behavior — could prove especially difficult for forecasters trying to predict how much states could collect in marijuana taxes.

In addition, states’ experiences so far suggest that the initial years may be the most volatile as supply tries to meet demand. Recreational marijuana may provide a burst of revenue upon introduction, but policymakers should not expect consistent growth over the long term.  In Colorado, for example, revenue has been volatile in recent months, in large part because of the disruption to the state economy caused by the pandemic.  April usually brings an uptick in marijuana revenue, but this year tax collections were down 2% over the previous month. In the following months, however, the state has seen record-breaking revenue.  It is unclear whether this spike is temporary and related to the recession or part of a longer-term trend.

Policymakers can hedge against the uncertainty and volatility of marijuana revenue by budgeting it cautiously.  They can put the money toward savings, for example, or spend it after it is collected.  If states are considering using the funds for ongoing spending priorities that require sustainable revenue streams, they should be careful about relying too heavily on marijuana taxes.  Understanding the short- and long-term effects of budget balancing actions such as these can help officials make decisions that put their states on sound fiscal footing for years to come.

December 10, 2020 in Business laws and regulatory issues, Taxation information and issues | Permalink | Comments (0)

Monday, December 7, 2020

Congressional Budget Office reports MORE Act would generate over $13 billion in net federal revenue over next 10 years

Medical-marijuana-tax-28251526_11622906As reported in this new Marijuana Moment article, the MORE Act "passed in a historic vote last week by the U.S. House of Representatives would generate about $13.7 billion in net revenue for the U.S. treasury over the next decade, according to a new report by the Congressional Budget Office (CBO)." Here is more:

Most of the new funds — roughly $8 billion — would come from business taxes on the legal marijuana industry, such as income and payroll taxes. A separate excise tax, initially based on the price of cannabis products, is estimated to yield another $5.7 billion.

“CBO and the staff of the Joint Committee on Taxation estimate that H.R. 3884 would increase revenues, on net, by about $13.7 billion over the 2021-2030 period,” says the nonpartisan report, published Friday....

Legalization would also bring additional government costs, the CBO report says, though all spending would be entirely offset by new revenue. The expected reduction in the federal prison population, for example, would lead to an estimated $636 million in new spending on federal benefits programs, such as Medicare and Medicaid.

“Federal prisoners generally are not eligible for these benefits,” says the report. “By reducing the prison population, CBO estimates, H.R. 3884 would increase the number of federal beneficiaries, compared with current law, and thus increase direct spending for federal benefit programs.”

The $5.7 billion in expected revenue from the marijuana excise tax, meanwhile, would go into the so-called Opportunity Trust Fund. From that, an estimated $3 billion would be spent by the Department of Justice over the 10-year period to provide job training, legal aid and other services to disproportionately impacted communities. The remaining $2.7 billion would go to the Small Business Administration to be used on state and local grants to cannabis-related small businesses that help develop licensing rules.

It wasn’t immediately clear whether the CBO report analyzed the bill as originally introduced last year or included the impacts of new changes made to the legislation last week that would adjust cannabis excise taxes as the market matures. Under the amendment, the excise tax would initially start at 5 percent of a product’s cost, then increase over time to 8 percent and later shift to a weight-based tax.

The new CBO report was a long time coming. The office is supposed to assess the financial impact of most bills that advance out of congressional committees, but it’s been more than a year since the MORE Act won approval from the House Judiciary Committee....

While the MORE Act faces an uphill battle in the Senate — some have called the issue a nonstarter unless Democrats gain control of the chamber — legalization proponents have nevertheless cheered the bill’s House passage as a major milestone.

December 7, 2020 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Taxation information and issues | Permalink | Comments (1)

Monday, November 30, 2020

"Preventing Industry Abuse of Cannabis Equity Program"

The title of this post is the title of this paper authored by Daniel G. Orenstein recently posted to SSRN.  Here is its abstract:

Enforcement disparities have pervaded the history of U.S. drug control laws, particularly regarding cannabis.  These disparities have systemically disadvantaged persons of color and other communities.  Responding to these inequities, some state cannabis legalization campaigns have emphasized social justice goals, and states and localities have adopted cannabis social equity programs directed toward communities disproportionately impacted by the War on Drugs.  These programs encourage and assist individuals from target communities in entering the legal cannabis industry by offering access to grants, loans, and technical assistance and providing priority or preference in licensure, a significant advantage in a competitive industry. 

Equity programs serve laudable goals but must be structured to mitigate the risk of corporate abuses that threaten public health.  The history of tobacco control in particular offers cautionary examples of how for-profit industries can infiltrate communities by leveraging targeted marketing, building political relationships, and operating disproportionately in underprivileged areas.  Equity programs’ focus on disadvantaged communities may inadvertently allow this damaging history to repeat in the cannabis industry to the detriment of the communities equity programs seek to help.  This Article explores pathways that could lead to industry abuse, surveys possible restrictions within a for-profit market, and assesses options for alternative market structures, including government monopoly, mandatory nonprofit status, and mandatory public benefit company status.  Among these options, compulsory public benefit status offers the best combination of current legal feasibility and advancement of social equity goals. 

November 30, 2020 in Business laws and regulatory issues, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Sunday, November 8, 2020

Noticing how marijuana reform contributes to regulator diversity even with much equity work ahead

Download (14)Because there has historically been a general lack of diversity in all sorts of government positions, I would guess that state administrators and regulators have not typically been an especially diverse bunch.  But, when Cat Packer in 2017 was appointed the first Executive Director of the Los Angeles Department of Cannabis Regulation, I started noticing the efforts in some quarters to try to ensure state and local marijuana regulators reflected more of the diversity of our great nation.  (Just some of a number of other notable regulators in this space include Toi Hutchinson in Illinois, Shaleen Title in Massachusetts, Marisa Rodriguez in San Francisco.)

These stories came to mind as I saw this story out of New Jersey from The Root, headlined "America Has Yet to Achieve Racial Equity in Cannabis Reform. New Jersey Is Hoping Dianna Houenou Can Change That."  I recommend the piece in full, and here are excerpts:

[A] third of Americans (more than 111 million total) now live in states where adults can legally purchase pot.  But although reform is sweeping the nation, with dispensaries popping up everywhere from Oakland and Denver to Baltimore and Chicago, America’s “green rush” has yet to substantially uplift the communities most harmed by the country’s devastating “war on drugs.”  Instead, white business-owners and large corporations have disproportionately benefited from cannabis reform, prompting fresh concerns about what the future of marijuana legalization holds for the Black and Latinx communities who suffered the most from America’s punitive drug policies.

New Jersey hopes to change that narrative.  On Friday morning, Gov. Phil Murphy appointed Dianna Houenou, a senior advisor with an extensive background in criminal justice reform, to lead the state’s Cannabis Regulatory Commission, which will be charged with shaping the state’s cannabis laws and ensuring that the communities devastated by the New Jersey’s drug policies reap the benefits of the burgeoning industry.

“Dianna has been a critical voice for social justice and equity on my team for the past year and a half after spending several years working on the fight to legalize marijuana with the ACLU,” Gov. Murphy told The Root in a statement. “Her commitment to doing what is right and to leaving no one behind has powered our criminal justice reform agenda, and I am immensely proud that she will be continuing that commitment as Chair of the Cannabis Regulatory Commission.”

“Since day one, we have said that the legalization of recreational marijuana must prioritize the communities marginalized and decimated by the failed War on Drugs,” Murphy added.  “I know that Dianna is the perfect person to lead our state’s effort to create a marketplace for recreational marijuana that is equitable, fair, and inclusive of all communities.”...

New Jersey is the most populous of all the states that legalized recreational marijuana this week, and the first state in the mid-Atlantic to do so — leading Pennsylvania and New York, where lawmakers have long discussed legalization but have disagreed on how to do so.  In New York, a major part of that disagreement has stemmed from questions around equity and accessibility.  Nationwide, Black and Latinx Americans aren’t leading cannabis operations in significant numbers, nor have they been leading regulation or law-making efforts....

Working to make cannabis reform equitable will be no small task for Houenou and the commission, particularly in a state like New Jersey, where, despite similar rates of marijuana usage, Black people are 3.45 times more likely to be arrested for cannabis possession than white people.  As recently as 2016, the Garden State spent $669.3 million to enforce restrictive drug policies, “despite the grave racial inequities in fuels,” writes Insider New Jersey.

Because the country has yet to really get equity in the cannabis industry right, Houenou will be leading New Jersey into uncharted territory.  But if successful, the state could very well be a model for the region and the country at large.

Houenou isn’t going it alone.  She has the full support of Gov. Murphy, who made marijuana legalization a signature part of his 2017 election campaign.  She also understands that making cannabis reform truly equitable will be a holistic process requiring education, advocacy and buy-in from a variety of stakeholders, from law enforcement to those who lost years of their lives to drug prohibition policies.  For her and the commission, equity won’t be an afterthought, as it has been in other places.  “We really are looking to make sure that equity is built into a regulated structure at the onset,” she said.

Houenou stresses that under her leadership, nothing would be off the table for the commission.  This includes policies already existing in other places, including prioritizing permits for those who live in neighborhoods impacted by harsh drug policies, as well as individuals who have been entangled in the court system specifically for cannabis offenses. But she’s also interested in exploring — and breaking down — other barriers to entry and ensuring that revenue from these burgeoning businesses goes back into Black communities.

November 8, 2020 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Tuesday, November 3, 2020

"From Medical to Recreational Marijuana: Lessons for States in Transition"

The title of this post is the title of this exciting and timely new report authored by Dexter Ridgway and Jana Hrdinova of The Ohio State University's Drug Enforcement and Policy Center.  (The full glossy version of the report is at this link, an SSRN version can be found at this link.)  Here is the report's abstract:

As of October 2020, eleven states and the District of Columbia have undergone a transition from medical to adult-use marijuana regimes navigating the creation of a new industry within a complex and incongruous legal framework.  The collective experience of these states has created a wealth of lessons for other states that might legalize adult-use marijuana in the future.  Yet not much has been written about the process of transition and how states managed the creation and implementation of the regulatory framework for an emerging industry.

This report, which draws on interviews with current and former government officials, aims to fill this gap by documenting lessons learned and decision-making behind the policies that shaped the recreational landscape in four states: Colorado, Michigan, Nevada, and Oregon.  The purpose of this research is to provide actionable and concrete advice to states that are transitioning, or are planning for a transition, from a medical marijuana regime to an adult-use or recreational framework.  The report highlights major decision points states face in their transitions and the pros and cons of each choice, lessons learned gathered from the participants in our study, and a short discussion of major challenges each state had to face with their respective programs.y 

November 3, 2020 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Medical Marijuana Commentary and Debate, Medical Marijuana State Laws and Reforms, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Wednesday, September 30, 2020

"Cannabis and Coronavirus: Impact on Medical Cannabis Industries in Three States"

The title of this post is the title of this new paper recently posted to SSRN and authored by Samuel DeWitt, a student at The Ohio State University Moritz College of Law.  (This paper is yet another in the on-going series of student papers supported by the Drug Enforcement and Policy Center.)   Here is this latest paper's abstract:

The COVID-19 pandemic, while detrimental to the American economy as a whole, positively impacted the cannabis industry in many ways.  This paper examines how the pandemic changed the medical cannabis industries in three states where medical cannabis programs were recently implemented -- Ohio, Pennsylvania, and Maryland. 

In all three states, cannabis dispensaries were declared essential businesses and have remained in operation throughout the pandemic.  Due to the necessities of social distancing and minimizing contact, the medical cannabis programs in these states implemented new, innovative measures such curbside pickup, online ordering technology, drive-thru windows, delivery systems, and telehealth consultations.  Additionally, some states loosened restrictions on supply limits and caregiver registration, making medical cannabis more accessible to patients.  This paper suggests that many of these changes should remain permanent after the pandemic ends because they have modernized and, in some cases, legitimized, the cannabis industries in these states.

September 30, 2020 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Medical Marijuana State Laws and Reforms, Who decides | Permalink | Comments (2)

Tuesday, September 8, 2020

"Building a Better Marijuana Tax"

The title of this post is the title of this new paper recently posted to SSRN and authored by Carl Crow, a recent graduate of The Ohio State University Moritz College of Law.  (This paper is yet another in the on-going series of student papers supported by the Drug Enforcement and Policy Center.)   Here is this latest paper's abstract:

Eleven states and the District of Columbia have passed legislation legalizing adult possession and use of marijuana.  Of those twelve jurisdictions, only eight of those jurisdictions have active markets where the substance can be legally bought and sold, and each imposes a different taxation scheme on the flow of marijuana goods in the marketplace.  This paper analyzes each tax base and then proposes a bifurcated recreational marijuana tax scheme for states that are currently thinking about legalization: (i) tax flower, bud, and trim based on weight; and (ii) tax concentrates, edibles, oils, and other “distilled” marijuana products based on potency, currently measured by THC content.

The idea behind taxing by potency is two-fold: first, the state may pursue public health goals by nudging consumers away from high-potency forms of marijuana – and prevent producers from gravitating even more strongly toward high-potency goods; second, taxing by potency may help normalize the recreational use of marijuana by encouraging society to treat marijuana more like other legal drugs such as alcohol and cigarettes.  While no tax scheme is perfect, a hybrid weight/potency base combined with a sunset provision to allow further research on the area appears to be the ideal way to regulate marijuana at this moment in time.

September 8, 2020 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Taxation information and issues , Who decides | Permalink | Comments (0)

Tuesday, August 4, 2020

"Legal Cannabis Provides A Bright Spot In A Bleak Economy"

The title of this post is the headline of this notable new Forbes piece.  Here are excerpts:

The pandemic has hobbled entire sectors of the economy but the cannabis industry is surviving, even thriving. Sales are up as consumers turn to marijuana for stress relief and recreation.  Companies in the industry are making those sales easier and safer with online ordering to reduce contact between retailers and customers.  There are even a variety of new products for consumers to try.

Consumers may be cutting their spending, but not on cannabis.  Retail sales of medical and recreational cannabis in the U.S. is predicted to top $15 billion by the end of 2020 according to the Marijuana Business Factbook.  That’s an increase of about 40% over 2019 sales.

Two thousand people who consume marijuana regularly were surveyed by Verilife and reported using more cannabis during the pandemic.  Their increased consumption upped their average monthly spend on cannabis from $49 to $76.  Greg James, the publisher of Marijuana Venture and Sun Grower magazines, said at least part of the sales increase is due to the bars closing. “Staying home and enjoying a joint or edible becomes the thing to do,” he said....

Of course, the cannabis industry is not a money-printing machine, even when demand expands.  Basic business rules apply including follow the intricate laws carefully, keep pristine records, and hire excellent employees.  Most businesses fail because they "have questionable management and unrealistic business plans,” said James.  He has spoken with hundreds of cannabis companies during the six years his magazines have been published.  “As with most businesses, the successful ones quickly adapt and figure out how to manage with the new normal,” he said. “Good management and well trained employees are as valuable in Cannabis as in every other industry.”

August 4, 2020 in Business laws and regulatory issues | Permalink | Comments (0)

Sunday, August 2, 2020

Is the COVID pandemic really "eating away at the illicit marijuana market"?

The question in the title of this post is prompted by the headline of this new Politico piece which is fully headlined "The pandemic is eating away at the illicit marijuana market: Legal sales have boomed since March, though it’s hard to say how many customers previously bought from illegal dealers."  Here are excerpts:

The legal marijuana industry has spent years battling illegal sellers who have eaten away at its market share and undercut its prices. But the coronavirus has proven to be a boon for legal pot shops, as customers fear the risks associated with inhaling questionable products and are nervous about letting sellers into their homes.

Legal operations have moved quickly to take advantage of the situation, seizing on relaxed rules to expand shopping options in states across the country, including curbside pickups and deliveries. Also, pandemic-frazzled Americans are simply getting stoned more often.

“It's understandable that people may be more hesitant to get their products from sources that are unregulated,” said Kris Krane, CEO of 4Front Ventures, which operates dispensaries in multiple states. “They may not want to go to their dealer’s house, or they may not want to have their dealer come into their house, at a time when people are social distancing and not supposed to be interacting with people that they don't know.”

In addition, cities that never allowed pot shops in their towns, even in states where marijuana is legal, are rethinking the local bans in search of fresh tax revenue. And more people than ever are registered as medical marijuana patients: Florida added nearly 5,000 patients a week in June, and more than 50,000 since March.

The data is murky — credible sales figures on illegal marijuana transactions are inherently difficult to come by — and it’s likely that those sales are also booming as anxious Americans smoke more weed while hunkered down. But many close industry watchers believe the current circumstances are pushing more Americans into state-legal markets. Revenues are expected to hit $17 billion this year, according to New Frontier Data — a 25 percent spike over 2019.

Mitch Baruchowitz, managing partner at cannabis investment firm Merida Capital Partners, argued in a paper in May that the pandemic is “cannibalizing” the illegal market. He hasn’t seen anything in the ensuing months to change that assessment. “The vast majority of the current growth in the cannabis space is being driven by consumers transitioning from the black market to the legal market,” Baruchowitz wrote.

The boom in sales is driven in large part by new legal markets, particularly the start of recreational sales in Illinois and Michigan. But even some states with relatively mature markets have seen big spikes in sales. In Oregon, for example, monthly revenues jumped from just below $70 million during the first two months of this year to more than $100 million in May and June....

Even with this year’s rapid growth, however, the legal marijuana market is still dwarfed by illegal sales, which New Frontier estimates at $63 billion for this year. Nowhere is the underground weed market a bigger problem than in California, where it’s estimated that 80 percent of marijuana sales are still from illegal sources — and most industry officials are deeply skeptical that the pandemic will significantly alter that reality in the short term....

Michigan faces a similar problem in quashing illegal sales: The vast majority of cities in the state — including Detroit — still don’t allow recreational pot shops to operate. In addition, marijuana cultivation is still ramping up in the state, since full legalization only took effect in December. “Demand, especially in the adult-use market, is still higher than the supply as the production in the industry continues to grow,” said Andrew Brisbo, executive director of Michigan’s Marijuana Regulatory Agency. “That keeps prices still higher than I think they will be in the long term.”

Industry officials are divided on whether the pandemic is eroding the illicit marijuana market, but there’s little doubt that the current economic troubles will push more states to consider legalization. That’s in large part because states' desperation for cash is only going to grow. Even if marijuana taxes would only make a difference at the margins, it undoubtedly will prove enticing to lawmakers.

Some New York lawmakers are pushing this idea, after legalization efforts failed in each of the last two years. They’ll likely face even greater pressure to enact recreational sales if New Jersey voters pass a recreational legalization referendum in November, as expected. Even in deep red states, the idea is likely to get a good look. A Republican lawmaker in Oklahoma has argued the state should look at allowing recreational sales, suggesting it could raise $100 million per year.

August 2, 2020 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (3)

Tuesday, July 7, 2020

"Understanding Social Equity"

The title of this post is the title of this significant new digital book put together by Chris Nani now available via SSRN.  I am proud to be able to say Chris is a former student who has been doing amazing work in the cannabis space since his time in law school (including the development of a great tool for judging social equity programs available as "Social Equity Assessment Tool for the Cannabis Industry").   In his new book, Chris has assembled short and effective essays from more than a dozen experts; here is the book's SSRN abstract: 

Understanding Social Equity is a compilation of viewpoints from various authors with diverse backgrounds.  From attorneys, policy analysts, and journalists to advocates, business owners, and social equity applicants, my goal was to provide as many perspectives as possible – some of which may conflict with other authors to provide regulators a wide range of respected opinions about social equity programs.  Together, we believe this compilation can be used as a guide for drafters and regulators when determining minute details about how they would like to create or improve their social equity program.

The goal of this book can further be defined into four objectives:

 ●  Educate regulators on what social equity programs are and their importance.

 ●  Why certain criteria should be used to define social equity applicant eligibility.

 ●  An analysis of prior social equity programs.

 ●  Key factors for social equity programs.

I was quite honored that Chris asked me to author an essay for this book. My contribution is titled simply "Tracking Social Equity," and here is how it begins:

Chris Nani, in the first sentence of his preface to this volume, defines social equity programs as those that “seek to remediate and help individuals, families, and communities harmed by the War on Drugs.”  Behind this crisp definition of social equity programs stands a series of complicated questions about just who should be the focal point for remediation and help and how these programs should be oriented and assessed.  By starting to unpack these questions, we can begin to appreciate just why these programs are so important in principle and so challenging in practice.

July 7, 2020 in Business laws and regulatory issues, Criminal justice developments and reforms, History of Marijuana Laws in the United States, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Tuesday, June 30, 2020

"Marijuana and Its Movement: Issues with Transporting a Legally Ambiguous Substance"

The title of this post is the title of this new paper recently posted to SSRN and authored by Joshua Gmerek, a recent graduate The Ohio State University Moritz College of Law.  (This paper is yet another in the on-going series of student papers supported by the Drug Enforcement and Policy Center.)   Here is this latest paper's abstract:

Regardless of whether you are a commercial truck driver performing a job, a patient driving to get her medicine, or a citizen who just recreationally enjoys marijuana, the rules surrounding the transportation of marijuana are important.  California became the first state to legalize the medical use of marijuana in 1996, and the prevalence of medical and recreational marijuana legalization has only expanded since then.  At this point, some product or chemical compound from the cannabis plant is virtually everywhere in the United States, yet the transportation of these products has not been comprehensively debated by the public, let alone legislated. 

This article is focused on exploring the unique legal landscape surrounding the transportation of marijuana, hemp, and cannabidiol (CBD) from both a business and individual perspective.  By showcasing examples of how businesses and individuals have been impacted by the unclarity in this area, the goal is to convey that nothing about transporting these products is risk-free and that there is unnecessary conflict between state and federal law.

June 30, 2020 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

"What’s the best minimum legal age for cannabis?"

The question in the title of this post is the headline of this effective new Leafly article, which builds off the research noted in this prior post about the "right" minimum age for legal access to recreational cannabis.  Here are excerpts:

When it comes to legal cannabis, the random collection of ages across North America is curious. Every US state that allows recreational cannabis sales requires customers to be at least 21 years old. In Canada the minimum age is 19, except in Alberta (where it’s 18) and Québec (which started at 18 but raised it to 21 earlier this year).

In most jurisdictions, medical marijuana is legal for people age 18 and older, with a doctor’s recommendation.

What difference does it really make if someone is 18, 19 or 21? A research team at Memorial University in Newfoundland, Canada, recently investigated the question. Instead of looking at the immediate health and safety of young adults, they assessed later life outcomes — namely educational attainment, lifetime cigarette smoking habits, and general physical and mental health. In their study, the Memorial University team concluded that the ideal minimum legal age for cannabis was 19....

Health experts cite THC exposure in adolescents causes changes to the brain’s folding patterns, decreased neural connectivity, thinning of the cortex and lower white matter, among other symptoms. However, one recent study suggests any changes to brain structure caused by cannabis use in adolescence cleared up by the time subjects were in their 30s.

Another ongoing study in the Saguenay region of Quebec took MRI scans of over 1,000 adolescent brains in 2002, and the same subjects are currently being re-evaluated as adults — results pending.

If the serious nature of brain health is such a risk, why not just make cannabis illegal until a person’s mid-20s? In the real world, policymakers have to weigh human nature’s penchant for the forbidden with appropriate rules and consequences. In an ideal world, sure — and in this ideal world underage kids never go looking for cannabis from illicit sources, either. In the real world, though, policymakers have to weigh human nature’s penchant for the forbidden with appropriate rules and consequences. In an ideal world, alcohol would also be outlawed for health reasons, but we all know how Prohibition worked out.

Prior to the Oct. 2018 opening of legal cannabis sales in Canada, a government task force took a hard look at the best-legal-age question. That group found that the higher the minimum legal age, the more likely adolescents will seek out unregulated sources, risking both consumption of potentially more dangerous products and also incarceration.

Prior related post:

June 30, 2020 in Business laws and regulatory issues, International Marijuana Laws and Policies, Medical community perspectives, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Monday, June 29, 2020

"California cities begin embracing cannabis in desperate search for cash"

The title of this post is the title of this recent notable Politico article. Here are excerpts:

California local governments scrambling to find tax revenues during the coronavirus pandemic are turning toward an industry they had considered taboo until now: cannabis.

It has been almost four years since voters legalized recreational marijuana in California, and nearly 70 percent of cities and counties have yet to embrace pot businesses because they see regulatory problems or have concerns about public safety and negative publicity.

But some, facing insurmountable budget gaps as unemployment rises to its worst level since the Great Depression, would now rather open their doors to cannabis than lay off more workers or cut services.  So far, a handful of cities have begun developing cannabis tax measures for the November ballot since voter approval is required to add local taxes.  It's a trend many in the industry expect to continue over the next month absent approval of a federal bailout for state and local governments....

San Bruno, a Bay Area city that two years ago banned marijuana businesses, is among the governments with a change of heart.  Last week, city council members voted unanimously to fund a tax measure and public education campaign, while voicing support for the idea of exploring an ordinance that would allow a dispensary or delivery service to open sometime next year.

According to projections from city officials, an operational cannabis shop could reduce San Bruno’s projected $8.2 million deficit in the upcoming fiscal year by around $300,000. “It's not gonna solve our problems, but it's going to keep $300,000 that we desperately need to hire whomever it is to make our city better,” Councilmember Marty Medina said at the meeting.

The city of Montclair in San Bernardino County is facing a similar budget crunch as sales tax revenue has cratered following the temporary closure of its mall. There, city officials are considering proposals to repeal a marijuana ban and create regulations for commercial activity.  The plan could raise up to $2 million annually, according to City Manager Edward Starr.

While both San Bruno and Montclair are left-leaning cities where a majority of residents voted to approve the Prop. 64 legalization initiative in 2016, Republican-led jurisdictions where voters rejected the statewide measure are also starting to consider cannabis — to the surprise of industry observers.  Last month, councilmembers in Yucaipa asked city staff to begin looking into alternative revenue streams, including marijuana businesses, amid a 15 percent decline in sales tax revenue and increasing public safety costs. Republicans hold a 20-point registration advantage over Democrats in the San Bernardino County jurisdiction, where a majority voted against Prop. 64....

Calls for jurisdictions to dive into the legal market have even come from some of the highest levels of state leadership, with Treasurer Fiona Ma calling the tax revenues a potential “game changer” during a virtual round table last month....

Among the other jurisdictions that have already begun developing cannabis tax measures or have shown interest in doing so are Sonoma, Signal Hill, Wildomar, Lemon Grove and Yountville.  As in Yucaipa, one of the prevailing themes in council meetings elsewhere has been that their residents are sending tax dollars to neighboring jurisdictions by purchasing marijuana products from other cities with licensed stores or from the state’s robust illicit market.

Industry research firms BDS Analytics and Arcview Market Research estimate that unlicensed operations brought in $8.7 billion in untaxed revenue in 2019, compared to the legal market's $3.1 billion.

According to Jackie McGowan, founder of Green Street Consulting, local leaders are also looking at nearby jurisdictions that have developed their cannabis markets and don’t want to be left behind.  Among those that have already allowed marijuana businesses, Monterey County is counting on $10.2 million in projected cannabis tax revenues to cover general fund shortfalls and avoid layoffs in the upcoming fiscal year and Santa Barbara County leaders believe $10.6 million in marijuana revenue will help offset coronavirus losses.

June 29, 2020 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues , Who decides | Permalink | Comments (1)

Tuesday, June 16, 2020

"Struggling Through the Pandemic: Cannabis Social Equity During Covid-19"

Thumbnail_COVID-19_Social Equity During COVID-19_for-socialThe title of this post is the title of this new report that the team at Ohio State's Drug Enforcement & Policy Center has just gotten online via SSRN.  I was pleased to be play a part in this work, and here is the report's abstract:

In March 2020, in response to the COVID-19 national emergency, states across the United States began issuing shelter-in-place orders curtailing operations of individual businesses based on “essential” and “non-essential” classification.  Virtually all states with legalized medical cannabis, and the majority of adult-use states, allowed cannabis establishments to remain open albeit often with significant restrictions on their operations.  Yet, the cannabis industry, and small, minority-owned or social equity designated businesses in particular, are not insulated from the broader economic shockwaves spreading through the country. 

In April 2020, the Drug Enforcement and Policy Center conducted a survey asking patients/consumers and cannabis industry professionals about the challenges they were experiencing and government responses.  Hoping to fill a gap in early discussions of the impact of the COVID-19 crisis, we were especially interested in the impact on cannabis industry participants designated as social equity businesses.  The results indicate that the COVID-19 pandemic has both introduced tremendous new challenges for the cannabis industry and exacerbated long-standing difficulties for businesses in this arena.  If small, minority-owned and social equity businesses are to survive, they need to be treated by the system like any other regular small business venture.  While regulations and safeguards are necessary, these businesses need to be able to operate as a true business, rather than a semi-legal venture with no access to loans, banking, insurance, tax relief, and flexible deliverable modes.

June 16, 2020 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Thursday, May 21, 2020

Bipartisan coalition of state attorneys general urge Congress to include banking access for marijuana businesses in COVID relief bills

As reported in this press release from earlier this week from the Colorado Attorney General, "a bipartisan coalition of 34 state and territorial Attorneys General [on Tuesday urged]  Congress to pass as part of upcoming COVID-19 relief legislation the federal Secure and Fair Enforcement (SAFE) Banking Act (H.R. 1595) or similar measures that would give legal marijuana-related businesses access to the federal banking system."  Here is more from the press release:

Under existing law, federal regulators prohibit financial institutions from providing services to marijuana businesses in states where medical or retail marijuana sales are legal. Forcing legal businesses to operate as cash-only operations poses serious safety threats, creating targets for violent and white-collar crime. The SAFE Banking Act permits marijuana-related businesses in states and territories with existing regulatory structures to access the federal banking system.

The SAFE Banking Act has widespread, bipartisan support with 206 cosponsors in the U.S. House of Representatives. The House passed the bill in September 2019. The HEROES Act relief legislation, which the House approved last week, also included the language of the SAFE Banking Act.

In their letter, the Attorneys General note that the COVID-19 pandemic has shed new light on problems that the SAFE Banking Act is intended to remediate, including health and safety concerns stemming from frequent and large cash exchanges.

The full text of the letter can be read here.

Also released with this letter ws this effective report from the Attorney General Alliance Cannabis Project titled "Solving An Untenable Situation: The Public Health and Safety Rationale Behind The Secure and Fair Enforcement Banking Act."

May 21, 2020 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Federal Marijuana Laws, Policies and Practices, Who decides | Permalink | Comments (0)