Year in review: Cannabis laws in the U.S.
Majority favors legalization
Although Congress failed to pass federal law to legalize cannabis in 2021, the push to end the federal ban on the ever-growing industry continues to gain momentum. While Republican lawmakers have traditionally opposed decriminalization, more and more people are starting to endorse or even introduce new cannabis laws. In addition, recent polls show that an estimated 68% of Americans are in favor of legalization, and many consumers now consider cannabis to be less dangerous than alcohol. Additionally, the industry's total addressable market has been predicted to grow to $ 84 billion by 2026.
Federal effort At the federal level, the Democrats have so far not been able to get enough cross-party support to prevent the threatened procrastination in the Senate. In 2021, neither the Cannabis Administration and Opportunity Act nor the Marijuana Opportunity Reinvestment and Expungement Act saw much progress. In addition, the SAFE Banking Act, which would have given cannabis companies access to commercial banking services, has so far failed in the Senate despite widespread support in the House of Representatives.
However, the Republican-led States Reform Act may offer Congress the most realistic chance at decriminalizing cannabis at the federal level. This "compromise" bill, tabled in November, would give states full power to regulate or ban cannabis as they see fit. As a result, cannabis would no longer be listed under the Controlled Substances Act, which would give cannabis companies access to commercial banking services. Additionally, the bill would allow the transportation of cannabis in interstate commerce and would likely also override Section 280E of the federal tax code, which currently prevents cannabis companies from applying for federal tax deductions. The bill would also allow cannabis companies to obtain loans and other aid from the Small Business Administration. Passing the States Reform Act would not legalize it at the federal level, but it would repeal many of the federal regulations that currently weigh on cannabis companies.
Additionally, a new bipartisan bill recently tabled in the House of Representatives aims to require the FDA to regulate hemp-derived CBD as a food and beverage ingredient. In the absence of clear federal guidelines regulating how much CBD from hemp can be added to a food or drink, this bill would give CBD companies clarity by requiring the FDA to finally come up with clear rules.
States are pushing forward Despite the failure of Congress to pass cannabis laws, the list of states allowing the legal use of cannabis by adults was expanded in 2021. New York, New Jersey, Connecticut, New Mexico, and Virginia are now on the list of states that allow recreational cannabis use. These 18 states make up nearly half of the US population. In addition, medical cannabis has been legalized in several more states, bringing the total to 36 states. On the other hand, the South Dakota Supreme Court has, on one rare occasion, overturned a state electoral initiative that voted for recreational cannabis legalization with 54% of the vote.
As for hemp products, states have also begun proposing and enacting laws to regulate the use of hemp in consumer products. For example, Governor Newsom recently passed California's A.B. 45 signed. This allows manufacturers to use hemp, hemp derivatives, cannabinoids (e.g. CBD) and extracts in food and beverages as well as in food supplements, cosmetics and even in animal feed.
Outlook for the year 2022 It is realistic that either the States Reform Act or the SAFE Banking Act will come into effect in 2022. The mid-term elections in 2022 will certainly affect whether and when either of the two bills will come into effect, but the lame duck period following the elections could offer hesitant legislators an attractive window of opportunity for bipartisan compromise. On the other hand, President Biden still appears to be against legalizing recreational cannabis, and it is unknown whether he would veto any of these bills.
Even if Congress doesn't act, states will begin to enact their own laws to ease the hurdles posed by the federal ban on cannabis companies. For example, lawmakers in New York, New Jersey, and Missouri recently tabled bills aimed at circumventing Section 280E of U.S. tax law by allowing cannabis companies to deduct business expenses from their state taxes. In addition, Michigan recently tabled a bill that would add to California's A.B. 45 and would allow the use of hemp-derived CBD in food and dietary supplements.
Even if federal legalization doesn't come in 2021, cannabis companies should continue to look out for new state regulations and also prepare for possible federal laws that would allow interstate trade, access to commercial banks, and federal tax deductions.