Now that the new year is here and in full swing, B&L’s cannabis advisory practice is taking some time to reflect on successes and shortfalls in the cannabis industry’s over the past 12 months. Following a momentous 2018 — which saw the passage of a federal Farm Bill legalizing hemp as well as marked increase in public support for legalization — this past year made clear that the industry has not yet reached its next phase of long-term growth.
In short, industry developments in 2019 have received mixed reviews — cannabis stocks fell sharply while federal legislation slowly progressed in Congress, bipartisan support for cannabis legalization continued to grow as several states were blindsided by the vaping crisis and so on. Thus, while the state of the industry remains strong (and we remain optimistic), its shortfalls reflect an industry still in its adolescence. Nonetheless, this was an exciting year as lawmakers on both the federal and state level
In Congress, the dam appears to have broken on the introduction of cannabis legislation as there were several positive developments this year. For one, the long-awaited Secure and Fair Enforcement (SAFE) Banking Act was finally passed by the U.S. House of Representatives on September 25, 2019, which marked the first standalone cannabis reform bill to ever pass the House. The legislation, which does not decriminalize or legalize the distribution, sale, or manufacturing of marijuana, but rather, provides a safe harbor for financial institutions offering financial services to cannabis-related business (“CRBs”), has remained in the hands of the Senate Banking Committee.
Just before Thanksgiving, the House Judiciary Committee approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, a sweeping cannabis reform bill which would legalize marijuana federally by removing it from the federal Controlled Substances Act as well as allow states to continue to choose how to regulate a commercial marijuana industry Moreover, the bill would institute a five percent federal retail sales tax on all marijuana products with revenues allocated towards empowering the individuals and communities most impacted by the war on drugs. The revenues would, among other things, go to job training and small-business loans, as well as efforts to minimize barriers to marijuana licensing, which is becoming increasingly controlled by multistate operators (Other bills introduced in 2019 include the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act and the
State Successes and Setbacks
On the state level, many expected for the Illinois, New York, and New Jersey legislatures to all legalize cannabis in 2019. Unfortunately, New York and New Jersey failed to progress on marijuana legalization, but, remarkably, Illinois became the first state in the country to legalize recreational marijuana cultivation and sales through its Legislature. The Illinois Department of Financial and Professional Regulation reported more than 77,000 legal recreational cannabis transactions totaling nearly $3.2 million on the first day of sales (Jan. 1).
In Massachusetts, where there are now more than 30 licensed retailers selling adult-use cannabis, the state brought in at least $420 million in gross cannabis sales. Still, Massachusetts operators could not escape a nationwide public health crisis. In response to the growing crisis around vaping-related illness, Governor Baker has declared a public health crisis and issued a temporary ban on the sale of all vaping products in the Commonwealth, which impacted sales figures across the industry.
Notwithstanding a few hiccups in 2019, the year is off to a strong start. As we look forward to 2020, it seems inevitable that we’ll continue to see more and more successful state legalization efforts as well as continued progress with respect to federal legislation.j
We’re looking forward to the new opportunities that 2020 will bring.