November 15, 2021 – It should come as no surprise that Americans’ attitudes toward cannabis, and cannabis legalization, have come a long way since President Richard Nixon signed the Controlled Substances Act of 1970 into law.
Support for full federal legalization is at an all-time high, with 60% of adults believing that marijuana should be legal for both medical and recreational use.
And, as recent prosecutions have shown, federal authorities will step in from time to time, often unleashing an arsenal of powerful tools available to them under federal law, in dealing with industry participants who cross the line.
In practical terms, continued federal prohibition means that there is no nationwide market for state-legal cannabis.
As noted above, state-legal marijuana related businesses pay more for services that many business owners in other industries take for granted, like banking and insurance.
Prohibited penalties include terminating or limiting the deposit insurance or share insurance of a depository institution solely because the institution provides financial services to legitimate MRBs and prohibiting or otherwise discouraging a depository institution from offering financial services to such a business.
That bill would prohibit federal agencies from penalizing or discouraging a company in the business of insurance from transacting with MRBs that are operating in compliance with state and local law.
In addition, the Act would bring in federal tax revenue by imposing an initial 5% tax on retail sales of cannabis, which would increase to 8% over three years.
While CAOA recognizes state law as controlling the possession, production and distribution of cannabis, the law would preempt states from interfering with interstate commerce where a lawful cannabis delivery requires transport through the state’s borders.
CAOA also proposes a federal excise tax of 10% on cannabis in the first year the bill is enacted, increasing to 25% after five years.
And while the Biden administration appears to be open to re-scheduling cannabis to Schedule II under the CSA — from the more restrictive Schedule I where it currently resides — there has been no detailed proposal to do so.
Mikos, one of the nation’s leading experts on federalism and drug law, who has long argued that the authority to re-schedule drugs under the CSA is much more limited than CRS’s report suggests.
Among the various stakeholders — who are in no way a unified bloc — there are real concerns about getting federal legalization right.
At the same time, certain stakeholders are worried about the rapid de-scheduling of cannabis because it would allow established companies, currently operating in major markets, to use their economies of scale to dominate the market, pushing out start-ups and competitors .
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He contributed the chapter, “Banking and Investment Considerations for Cannabis Businesses” in “Health Care and the Business of Cannabis: Legal Questions and Answers,” .
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