Summary

A bipartisan majority of the House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which would decriminalize cannabis at the federal level, impose certain federal regulations and taxes on legal cannabis businesses, and provide for federal grants and other benefits for individuals previously harmed by cannabis prohibition. While this bill is unlikely to be taken up by the Senate before the end of the year, it is the most far-reaching cannabis reform proposal to receive the support of either house of Congress and sets the tone for further reform efforts in the new Congress and under the Biden administration.

The Upshot

• The MORE Act’s passage by the House, along with several recent legalization victories at the state level, are clear signs of the momentum behind cannabis reform efforts.
• Federal decriminalization of cannabis would remove an enormous obstacle for entities, such as financial institutions, commercial landlords, and others, that would like to work with participants in the cannabis industry.

The Bottom Line

State-legal cannabis retailers and producers—and those who would like to do business with them—have been forced to navigate a treacherous and uncertain thicket of potential legal liability arising from the continued prohibition of cannabis at the federal level. While the MORE Act’s passage by the House does not itself ease these difficulties, it is an unmistakable step in the direction of relief and harmonization between state and federal law. 

FULL ALERT

Last Friday, December 4, 2020, a bipartisan majority of the House of Representatives voted to decriminalize cannabis at the federal level, impose certain federal regulations and taxes on legal cannabis businesses, and provide for federal grants and other benefits for individuals previously harmed by cannabis prohibition. The House bill, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2020, is the most far-reaching cannabis reform proposal to receive the support of either house of Congress.

The bill stands little chance of being taken up by the Senate in the waning days of the current Congress. Nevertheless, advocates are cheering the bill’s passage as a strong statement that sets the agenda for cannabis reform efforts under the Biden administration—not least because the Senate version of the bill was introduced and sponsored by Vice-President-elect Kamala Harris.      

In recent years, nearly every state has provided for some form of state-legal cannabis, whether for medical or recreational use. Fifteen states have fully legalized adult recreational cannabis use. That number is up from 11 at the beginning of last month, before four states (Arizona, Montana, New Jersey, and South Dakota) passed legalization referenda in the 2020 election. 

However, all of these state laws remain in conflict with the federal government’s near-total prohibition of cannabis under the Controlled Substances Act (CSA). By removing cannabis from Schedule I of the CSA—the highest tier, reserved for the most dangerous drugs with no countervailing medical value—the MORE Act would resolve this conflict between state and federal law. 

After “descheduling” cannabis at the federal level, the MORE Act would leave it up to each state to decide whether to allow cannabis use and how to regulate it—subject to some new federal requirements. For example, the Act levies a 5 percent federal sales tax on cannabis products, which would gradually rise to 8 percent over several years. The Act would also require cannabis producers to receive a federal permit and abide by certain labeling and other requirements, as alcohol distillers do. 

Finally, in an effort to “address the devastating injustices caused by the War on Drugs,” the MORE Act establishes a Community Reinvestment Grant Program, funded by the new cannabis sales tax, that would provide federal loans, grants, and other services for “individuals adversely impacted by the War on Drugs.”  Notably, the Act would prohibit the Small Business Administration from refusing to guarantee an eligible SBA loan solely on the basis that the recipient is a legal cannabis business. The Act also expands eligibility for expungement and resentencing for prior cannabis offenses. 

Assuming the Senate does not take up the MORE Act before the end of the year, it will have to be reintroduced in the next Congress. If the MORE Act eventually becomes law in anything like its current form, it will provide much-needed security and clarity for cannabis producers and retailers. Just as important, it will also provide legal security for other businesses—such as commercial landlords and financial institutions—that would like to do business with participants in the cannabis industry.

Lawyers in our Cannabis Group closely watch changes in state and federal law and advise growers, dispensaries, technology companies, researchers, and investors on a variety of regulatory, licensing, corporate, financing, intellectual property, and other legal issues.