From interstate commerce to a long-awaited banking solution, these are the issues that need to be raised.
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8 min read
Opinions expressed by Entrepreneur contributors are their own.
Cannabis is booming, despite the United State’s government’s reluctance to take action on federal regulations.
Since Colorado became the first state to legalize cannabis for recreational use in 2013, the cannabis business has grown from a bold experiment to a multinational, billion-dollar industry. Still, as monumental as these past five years have been, the next few will be even more crucial and defining.
What’s more, as the 2020 U.S. elections inch closer and the cannabis legalization platform gains momentum, pressure on the federal government to pass nationwide cannabis reform will increase.
What will be the tipping point when it comes to federal action? The real unknown is whether the federal government will be a major player in the industry’s success, or if individual states and regions will continue to lead the charge.
Looking at the year ahead, here are six questions we should be asking about the future of the cannabis industry.
1. Will states start coordinating legalization efforts?
So far, cannabis legalization has been a solitary, state-specific effort. Each legal market has its own set of laws and licenses with varying rules for each county. In the absence of true federal oversight, states have been operating as the regulating bodies when it comes to cannabis. Those days are coming to an end.
In the fall of 2019, New York Gov. Andrew Cuomo (D), Connecticut Gov. Ned Lamont (D), New Jersey Gov. Phil Murphy (D), and Pennsylvania Gov. Tom Wolf (D) all met to discuss aligning their states’ cannabis policies in 2020.
If this fledgling coalition succeeds in legalizing adult-use cannabis and cooperative legislation across state lines, it would create a new model for regulation. This kind of regional alignment would put pressure on bordering states that have not yet legalized cannabis.
In a sense, these states would be creating a new kind of centralized law. When cannabis regulations are consistent state-to-state, the power dynamics between state and federal government will shift. U.S. lawmakers will either become increasingly irrelevant or be forced to enact reform.
2. Will interstate commerce become a reality?
Presenting an allied and coordinated legislative front is only one way that state governments will begin to transform the cannabis industry. The concept of opening up state borders for cannabis trade has been discussed since states first began to legalize. As we move into the new year, the momentum for interstate commerce is greater than ever before. Many of the states leading this charge are located on the West Coast. This is because their cannabis crop supply has surpassed the demand within their own borders, making interstate commerce reform even more compelling.
Oregon has been particularly active in this movement. Earlier in 2019, Oregon Gov. Kate Brown signed into law a bill that would allow Oregon to enter into export agreements with other legal cannabis markets. Then in June, U.S. Sen. Ron Wyden (D-Ore.) and U.S. Rep. Earl Blumenauer (D-Ore.) introduced the State Cannabis Commerce Act, which would enable companies to trade cannabis resources across state borders. However, these bills remain stalled until the federal government decides to allow interstate cannabis commerce.
Oregon is not the only state interested in opening state lines for cannabis trade. Many legal markets share borders and would benefit from broader cannabis economies. This may be especially true on the East Coast. While mature West Coast cannabis markets boast expansive geographies, as dense Eastern states begin to legalize, interstate activity will be almost impossible to avoid.
Should any of the above scenarios play out, the federal government would be forced to either crack down on state-led cannabis programs (which is unlikely, given the lack of political will) or to take action. Cannabis legal states, like Oregon, are doing everything they can to prepare themselves for when the laws shift. By being so ahead of the game, Oregon is in control when it comes to shaping interstate cannabis commerce laws – all that is left for the federal government to do is to say yes.
3. Will Congress fix the cannabis banking crisis?
One area where the federal government’s influence has not yet diminished is banking. Cannabis is still treated as a Schedule I substance, meaning that banks servicing cannabis clients are under constant threat from the federal government. As a result, cannabis businesses have been forced to use a patchwork of stopgap measures to protect their assets, such as on-site cash safes, credit unions, and checking accounts with exorbitant fees.
Right now, the SAFE Banking Act, a measure that would put a permanent end to the cannabis banking crisis is working its way through Congress. There is great bipartisan support for the Act, but there is also bipartisan opposition. Some Senate Democrats believe that the measure doesn’t go far enough, especially in the area of social justice, while some Republicans are simply against any bill that would relax federal cannabis laws.
If the SAFE Banking Act or the MORE Act, which would federally decriminalize cannabis, pass in Congress and in Senate, cannabis prohibition in the U.S. would be severely weakened. Even if these measures don’t pass, support for cannabis reform within Congress is likely to keep growing. While banking remains a holdout, it is undeniable that cannabis is flourishing — with or without traditional financial institutions. The U.S. is not the only government being given a major economic opportunity.
4. Is cannabis legalization imminent in Mexico?
At the end of 2018, Mexico’s Supreme Court overturned the country’s ban on recreational cannabis. Throughout 2019, the Mexican legislature worked on measures that would establish a recreational cannabis market. While the legislature’s efforts have been moving at a slow pace, the Supreme Court’s ruling still stands, which means legalization in some form is coming.
When legalization eventually comes to Mexico, it will put the U.S. in an interesting position. Sandwiched between two nationally legalized cannabis economies, the federal government will face a reality where they either need to make big, sweeping cannabis reforms, or be left behind as our neighbors reap the benefits of the industry’s rapid growth.
5. How will the vaping health crisis increase pressure for cannabis reform?
Earlier this year, cannabis hit one of the most widely-covered speed bumps yet: the vaping health crisis. While the true economic effects of the crisis have yet to be seen, it has remained top of mind for both the public and politicians across the nation.
After more than a thousand people were hospitalized due to vaping health-related issues, some markets have taken the reactionary approach of banning the sale of flavored vape pods, or outlawing vaping altogether. Within the cannabis industry, however, many are focused on the root cause of this health issue: prohibition.
Most of those affected have been vaping illegal THC cartridges filled with harmful chemicals including vitamin E acetate oil. Given that the crisis originated in the unlicensed market, many have called on the federal government to legalize cannabis and oversee consumer product production. It is unclear how quickly the federal government will act in response to this health crisis. In the meantime, cannabis-legal states are starting to take their own precautions, whether by cracking down on unlicensed market products or enforcing more stringent testing.
6. What kind of government action will public sentiment spur?
Despite the media-fueled reaction to the vaping crisis, overall support for cannabis legalization has been steadily growing. According to Gallup, support for cannabis legalization has surged by more than 16 percent over the last six years, growing from 50 percent in 2013 to 66 percent in 2019.
Even if the U.S. government is not willing to federally legalize cannabis, there is not much it can do to stop the will of the people. State-specific legislation has been overwhelmingly successful, and people are focusing on the positive impacts (and opportunities) of industry growth. I have witnessed this fundamental shift in public sentiment first-hand. When we first founded LeafLink, our team was met with skepticism from friends, family, and potential investors. Currently, I find most attitudes to be optimistic.
As we look ahead, maybe the question isn’t so much about when the federal government will take action, but more along the lines of, do we really need them to? Cannabis has blossomed into one of the fastest-growing, most promising industries in the U.S., thanks to the innovation and determination of individual states.