Reviewing 2022 Cannabis LegislationCould 2022 be the end of prohibition as we know it? We reviewed the bills and what they mean with Geoff Trotter, CGO at Regennabis.
A flurry of cannabis legislation has been introduced recently. From the CAOA, SRA, MORE, SAFE, and CLIMB – there’s an alphabet soup of hope making its way through Congress. Speaking with Geoff Trotter at Regennabis, we attempt to break down the various bills and discuss their potential for going the distance.
We asked Trotter to provide insight on the differences between the five bills, how they will impact the future of cannabis regulation, and why there are so many.
To Legalize or Not to Legalize, that is the Question
Trotter emphasized that the bills making their way through the process fall under two categories. The first category is those that will impact the legalization of cannabis, and the second is those that won’t - but will significantly alter the shape of the Cannabis Industry.
Bills Proposing a Change of Legality
Three bills circulating through the ranks of congress ask for either the decriminalization or legalization of cannabis. Here is a summary of each of those bills.
The Cannabis Administration and Opportunity Act (CAOA)
Senators Cory Booker (D-NJ), Ron Wyden (D-OR), and Chuck Schumer (D-NY) introduced this latest rendition of legislation proposing a conclusion to federal prohibition. As the discussion draft states, this bill “preserves the integrity of state cannabis laws and provides a path for responsible federal regulation of the cannabis industry. Like with federal regulations on alcohol, states can determine their cannabis laws, but federal prohibition will no longer be an obstacle.”
This bill simply shifts responsibility for cannabis from the US DEA to three separate regulatory bodies:
- Alcohol and Tobacco Tax and Trade Bureau (TTB)
- Bureau of Alcohol Tobacco Firearms and Explosives (ATF)
- Food & Drug Administration (FDA)
Additionally, the bill aims to make several changes in how the nation looks at cannabis and provide national guidance on regulation and control. According to the draft, the bill will tackle this extensive change through five major initiatives:
- Decriminalization of Cannabis & Recognition of State Law Controlling Cannabis – this segment focuses on removing cannabis from the Controlled Substances Act, recognizes the state-enforced cannabis laws, and establishes public safety and enforcement guidelines, minimum age & restrictions on retail sales.
- Research, Training, and Prevention – this segment of the bill would lift the veil on cannabis research, allow for more robust tracking societal impact, and enable the development of impairment standards and public health education and prevention.
- Restorative Justice & Opportunity Programs – this segment of the proposed legislation seeks to correct the “collateral consequences” and reparative action for those impacted by the failed War on Drugs, as well as establish programs to encourage small business development.
- Taxation of Cannabis & Establishment of a Trust Fund – the bill suggests a scale for taxation similar to that of the alcohol and tobacco industries while establishing permitting and operations regulations.
- Public Health, Cannabis Administration, and Trade Practices – this section recognizes the FDA as the primary federal regulatory authority for GMP, product standards, registration and listing, and labeling. The TTB would be the regulatory authority for the taxation of the industry and products, track and trace, and prohibit unfair competition and bribery.
The States Reform Act (SRA)
On November 15th, 2021, Nancy Mace (R-SC) introduced the States Reform Act, which promises to remove cannabis from the Schedule 1 list and maintain the states’ rights to determine their level of reform. Additionally, the bill provides inclusions that support veterans, law enforcement, farmers, businesses, medical patients, and criminal justice reform.
In an official statement, Mace said, “The States Reform Act takes special care to keep Americans and their children safe while ending federal interference with state cannabis laws. Washington needs to provide a framework which allows states to make their own decisions on cannabis moving forward. This bill does that.”
This bill proposes the following key points and provisions:
- Regulation of Cannabis Products Like Alcohol – with federal authority divided amongst the FDA, USDA, TTB, and ATF.
- Designated State Medical Cannabis Product Safety Act – this limits the authority of the FDA on existing cannabis and industrial hemp products by protecting “the use of cannabis or its derivates in non-drug applications, such as in designated state medical cannabis products, dietary supplements, foods, beverages, non-drug topical solutions, or cosmetics.”
- Small Business Administration Provisions – opens up cannabis businesses to the same SBA benefits and loans as any other business.
- Imposition of Cannabis Excise Tax – proposes the federal tax structure and the establishment of the “Law Enforcement Retraining and Successful Second Chances Fund.”
- Veterans’ Care Provisions – protects against discrimination for cannabis-consuming Veterans and protects their rights to VA benefits and healthcare.
- Several other miscellaneous provisions – notably, opening the door for international trade and harmonizing terminology, asking that all federal laws stop using the terms “marihuana or marijuana” and simply use “cannabis.”
The Marijuana Opportunity, Reinvestment and Expungement Act (MORE)
The House of Representatives passed the MORE Act for a second time in April this year. Sponsored by House Judiciary Committee Chairman Jerrold Nadler (D-NY), the MORE Act removes cannabis from the Controlled Substance Act and provides provisions to address the decades of damage caused by prohibition and enable restorative justice.
In a statement, Chairman Nadler said, “For far too long, we have treated marijuana as a criminal justice problem instead of as a matter of personal choice and public health. Whatever one’s views are on the use of marijuana for recreational or medicinal use, the policy of arrests, prosecution, and incarceration at the Federal level has proven both unwise and unjust.”
Most significantly, the MORE Act, if passed, promises to end the federal criminalization of cannabis and provides for the auto-expungement of cannabis arrests, charges, and convictions.
Other measures included in this bill are:
- Creating the Office of Cannabis Justice
- Protects cannabis consumers from discrimination
- Allows for improved research, banking and tax law reform, and more
Bills that Change Laws, But Not Legality
The two other bills focus more on lifting the banking and financial restrictions without changing the federal status of cannabis.
The Secure and Fair Enforcement Banking Act (SAFE)
The SAFE Banking Act epitomizes the proverb, “If at first, you don’t succeed, try, try again.” After failing in the Senate five times, the bill has again advanced and is up for its sixth attempt at passing in the US Senate.
Unlike the other bills mentioned above, the SAFE Banking Act doesn’t change the federal stance on cannabis itself; instead, it simply provides a safe harbor for banking and financial institutions and investors to participate in the industry without fear of repercussion from the federal government.
Trotter commented, “If we look at the SAFE Banking Act, what’s different from the other three is that the safe Banking Act is looking to pass some new laws that, at a bare minimum, no matter what happens at the federal level around cannabis, enable the cannabis industry, in states where it’s legal, to move away from being a cash-based space.”
US Rep. Ed Perlmutter (CO-07) calls the current banking restrictions and cash-only nature of the cannabis industry a public safety risk, “as these businesses are forced to operate as cash-only businesses in an industry with billions of dollars in transactions. These high-volume cash businesses are being targeted by violent criminals and putting our communities at risk, inviting theft, robberies, burglaries, or worse, as we saw with the murders of Travis Mason in June 2016 and Michael Arthur in Portland, Oregon in December 2020.”
Representative Perlmutter believes the economic promise of the booming cannabis industry cannot be understated, as the industry already provides 321,000 jobs despite the limited nature of legalization. Opening the floor to banking would only increase the opportunities for industry expansion and economic gain.
The Capital Lending and Investment for Marijuana Businesses Act (CLIMB)
A newcomer to the cannabis normalization movement, CLIMB (HR 8200) has the advantage of bipartisan support. Introduced on June 23rd by US Representatives Troy Carter, Sr. (D-LA) and Guy Reschenthaler (R-PA), the Capital Lending and Investment for Marijuana Businesses Act also provides safe harbor for a variety of banking and investment opportunities, including,
- Credit Card Services
- Money Transfers
Additionally, this bill allows cannabis businesses to list on the New York Stock Exchange, Nasdaq, and other national securities exchanges.
Trotter explained that three significant factors of the CLIMB Act hope to bring added liquidity to the industry.
He elaborated, “The first one is it opens the door for institutional investors to invest in the state-legal cannabis business. So, if it’s legal in a state and your or cannabis company is a listed entity, say in Canada, then the CLIMB Act would provide the opportunity through safe harbor for institutional investors to invest in the cannabis space.”
“That’s huge, make no bones about it – by ‘institutional investors,’ we mean the multi-trillions of dollars that move around, such as investing in pension funds,” he emphasized.
He said, “The second part of the bill, equally interesting and important, is those state-legal cannabis businesses, especially those listed in Canada right now, would be able to list in the United States because the exchanges in the US - most notably, the New York Stock Exchange and NASDAQ would be open for business.”
“The third thing the CLIMB Act does is provide safe harbor for ancillary businesses who support institutional investors and/or the cannabis companies, with their own services, such as the big four audit and accounting firms.”
The Problem with Too Many Choices
While having a multitude of choices may increase the chances of at least one of them making it through the Senate, Trotter believes that too many options could just muddy the waters.
“Laws are proceeding through the House of Representatives and the Senate to some degree. But they’re ultimately vying for the brain capacity of the legislature. And, you could argue that’s where some of the problems lie because these three independent potential laws [CAOA, SRA and MORE] can make it less clear,” Trotter mentioned. He believes the ambiguity only creates more questions in the minds of lawmakers.
“The government is making it harder on everyone to determine when and how we should federally legalize cannabis, which, for the record, we’re all for at Regennabis,” he added.
Trotter also believes valuable time is being wasted. With each new delay in addressing the issues, the United States falls further behind on the global market.
“Outside of the US, we are seeing other nations begin to move ahead on their own plans for their own federal legalization,” Trotter said, mentioning countries such as Germany, Mexico, and Colombia making pro-cannabis moves.
He believes that these three international markets may “agitate and provoke” the US into taking action sooner rather than later. And he warns, “And If the US doesn't move swiftly, there’s a good chance, the market will move, and they'll get left behind.”
The ESG Factor
As institutional investors start to eye the cannabis space, Trotter advises any cannabis business or ancillary service to hone their ESG initiatives and programs.
“Institutional investors, by their very nature, must deliver fiduciary duty to their investors and multiple stakeholders. That also means not just bringing economic upside, but they need to look at all aspects of social and environmental impact,” he stated.
Trotter is optimistic about the future. He mentioned, “I’d say there’s been a positive shift,” referring to the number of cannabis companies embracing ESG.
“Frankly, it’s things like the SAFE Banking Act and the CLIMB act that spur conversations within these organizations, and it’s getting them to sit up, take note, and do something about it,” he concluded.
Only time will tell how and when cannabis legislation will finally bring change to the industry and the millions of consumers it supports. In the meantime, to learn more about the importance of ESG in the cannabis space as legalization advances, join Geoff Trotter and Regennabis at the United Nations Building in New York for their second iteration of the Regenerative
Cannabis Live event on October 27th, 2022 - Hosted at the Delegates Dining Room, United Nations, New York City.