Cannabis Legislation Year-in-Review | Sheppard Mullin Richter & Hampton LLP

[co-author: Skyler Hicks*]

Although Congress failed to pass federal legislation legalizing cannabis in 2021, pressure to end the federal ban on the ever-growing industry continues to gain traction. While Republican lawmakers have traditionally opposed decriminalization, more are beginning to support or even introduce new legislation on cannabis.[1] Moreover, recent polls indicate that an estimated 68% of Americans now support legalization[2] Many consumers now see cannabis as less dangerous than alcohol.[3] In addition, the total addressable market in the industry is expected to grow to $84 billion by 2026.[4]

Federal Efforts

At the federal level, Democrats have so far failed to garner enough bipartisan support to overcome the threat of Senate stalling. In 2021, neither the Cannabis Management and Opportunity Act nor the Marijuana Opportunity Reinvestment and Delisting Act made much progress. Moreover, the SAFE Banking Act, which would have opened the door for cannabis companies to access commercial banking services, has so far failed in the Senate despite broad support in the House.[5]

However, the Republican-led State Reform Act may provide Congress the most realistic opportunity to decriminalize cannabis at the federal level. This “compromise” law, introduced in November, will give individual states full authority to regulate or ban cannabis as they see fit. As a result, cannabis scheduling will be de-scheduled under the Controlled Substances Act, opening the door for cannabis companies to gain access to commercial banking services. In addition, the bill would allow the transportation of cannabis in interstate commerce and also suppose to repeal Section 280E of the federal tax code, which currently prevents cannabis companies from seeking federal tax cuts. Also, the bill would allow cannabis companies to obtain loans and other exemptions from the Small Business Administration. While passing the State Reform Act would not lead to federal legislation, it would remove many of the federal regulations that currently burden cannabis companies.

In addition, a new bipartisan bill recently introduced in the House of Representatives seeks to require the US Food and Drug Administration (FDA) to regulate hemp-derived CBD as an ingredient in food and drink. Since there are no clear federal guidelines on how much hemp-derived CBD can be added to food or drink, this bill would make CBD clear to CBD companies by requiring the Food and Drug Administration to finally develop clear rules.[6]

Countries are pushing forward

Despite the failure of Congress to enact cannabis legislation, the list of states that allow the legal use of cannabis for adults has grown in 2021. New York, New Jersey, Connecticut, New Mexico and Virginia now belong to the list of states that allow recreational cannabis consumption. These eighteen states account for nearly half of the US population.[7] Additionally, medical cannabis is now legal in several other states, bringing the total to 36. On the other hand, in a rare setback, the South Dakota Supreme Court overturned a state ballot initiative that garnered 54% of the vote in favor of legalizing recreational cannabis.

For hemp products, states have also begun to propose and enact legislation aimed at legalizing the use of cannabis in consumer products. For example, Governor Newsom recently signed California’s AB 45 into law. This will allow producers to include hemp and its derivatives, hemp (such as CBD) and extracts in food and beverage products as well as nutritional supplements, cosmetics, and even pet food.[8]

Looking forward to 2022

The States Reform Act or the Safe Banking Services Act (SAFE) could realistically be enacted into law in 2022. The 2022 midterm elections will certainly affect if and when either bill becomes law, but the lame-duck period immediately following the election could provide Reluctant lawmakers have an attractive opportunity. A window for a bipartisan compromise. On the other hand, it appears that President Biden remains opposed to the legalization of recreational cannabis, and it remains unknown whether he will veto any of these laws.[9]

Even if Congress fails to act, states have begun introducing their own legislation to ease the hurdles posed by the federal ban on cannabis business. For example, legislatures in New York, New Jersey, and Missouri recently introduced bills intended to circumvent Section 280E of the US tax code by allowing cannabis companies to deduct business expenses from state taxes. Additionally, Michigan recently introduced a bill that mimics AB 45 in California and would allow the inclusion of hemp-derived CBD in foods and supplements.[10]

While federal legislation did not occur in 2021, cannabis companies must stay abreast of new state regulations and also begin to prepare for potential federal legislation that would open the door to interstate commerce, access to commercial banking, and federal tax rebates. .

* Skylar Hicks is a legal writer in the San Francisco office of Shepherd Mullen.

footnotes

[1] See the States Reform Act; Here’s what’s in the new Republican marijuana legalization bill – Leafly

[2] Legal marijuana support hits new high of 68% (gallup.com)

[3] Cowen-Research-Themes-2022.pdf (pcdn.co)

[4] Identification card.

[5] A previous article on the Safe Banking Services Act (SAFE) can be found here.

[6] What is the CBD Product Safety and Standardization Act? – CBD Retail Trends

[7] 18 states, DC US weed legal – Where is marijuana legal 2021? (esquire.com)

[8] A previous article on the AB 45 can be found here.

[9] Psaki: Biden unaffected by legalization of marijuana despite Schumer legalization – Politico

[10] Brief report on the Cannabis Bill: Prep season kicks off – Law360

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