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Federal Legislative Update

There are several competing and overlapping bills that have been introduced in Congress in the last two years. Although each will need to be reintroduced in the new Congress, chances are better than ever for marijuana reform. That said, however, the Biden Administration has higher priorities and it may be months before any of these bills become law.

I. SAFE Act.

The “Secure And Fair Enforcement Banking Act of 2019,” or SAFE Act of 2019 passed the U.S. House of Representatives on September 25, 2019 with broad bipartisan support. Its stated purpose is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses It would provide safe harbor to financial institutions, insurers and other ancillary businesses providing services to a “cannabis-related legitimate business.” A cannabis-related legitimate business is defined as a:

manufacturer, producer, or any person or company that—

(A) engages in any activity described in subparagraph (B) pursuant to a law established by a State or a political subdivision of a State, as determined by such State or political subdivision; and

(B) participates in any business or organized activity that involves handling cannabis or cannabis products, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products.

If the SAFE Act were to become law, it would represent a sea change in the cannabis business. Whereas currently, the cannabis business is almost exclusively a cash business, the SAFE Act would open up the world of financial services to providers. Not only would they be able to have operating bank accounts, but credit, insurance, payroll services, and even mortgages would be at their fingertips. These changes would also apply to hemp production. Passage of the SAFE Act would go a long way to legitimizing the industry by taking it out of the shadows and providing much-needed transparency.

The SAFE Act was read twice in the Senate and referred to the Committee on Banking, Housing, and Urban Affairs, where it has remained for over a year. Given the urgency of COVID relief and the Majority Leader’s desire to confirm as many judges as possible, there is little room on the agenda for the SAFE Act. It will likely be reintroduced in the House of Representatives soon after the 117th Congress convenes. Three weeks ago, I would have predicted the bill would die in Senate committee, but with the Democrats with a narrow majority in the Senate, chances it will pass are significantly improved. However, do not expect the SAFE Act to be a high priority for the new administration under the current circumstances.

II. STATES Act.

The “Strengthening the Tenth Amendment Through Entrusting States Act” or STATES Act, seeks to modify the Controlled Substances Act by carving out persons in compliance with state marijuana law.

Notwithstanding any other provision of law, the provisions of [the Controlled Substances Act] as applied to marihuana, other than the provisions described in subsection (c) and other than as provided in subsection (d), shall not apply to any person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.

The STATES Act was read in the U. S. Senate and referred to the Committee on the Judiciary, where it has remained since June 2018. It must be reintroduced in the 117th Congress before it can be considered and voted upon.

III. MORE Act.

To much fanfare in the industry, the House of Representatives passed the “Marijuana Opportunity Reinvestment and Expungement Act of 2020,” or MORE Act, on December 4, 2020. It was read twice in the Senate and referred to the Committee on Finance. The MORE Act would decriminalize and deschedule marijuana entirely if it were to become law. The MORE Act may be more important than other marijuana reform bills because of its impact on criminal justice reform, an acknowledged priority for the Biden Administration.

IV. Marijuana 1 to 3 Act

The Marijuana 1 to 3 Act of 2019 is a bare-bones bill that would reschedule marijuana from a Schedule 1 substance to a Schedule 3 substance under the Controlled Substances Act. Republican Representative Greg Steube of Florida just reintroduced the bill in the 117th Congress.

Although rescheduling marijuana would not end federal prohibition in the way the MORE Act would, it would still have a number of positive effects for the industry. Schedule III drugs are free from the tax rule 280E, which prohibits cannabis companies from deducting businesses expenses from their taxes. Reclassification would also liberate researchers by making it easier to obtain cannabis for scientific studies. In addition, taking cannabis out of Schedule I would end threats from the U.S. Postal Service publishers have faced over the mailing of newspapers containing marijuana advertisements, since the federal statute used to justify its actions applies only to Schedule I substances. However, unlike the MORE Act, the Marijuana 1 to 3 Act would not remove federal criminal penalties.