Cannabusiness Advisory

This past week, Senate Majority Leader Chuck Schumer (D-NY) unveiled the first draft of his long-awaited bill to legalize marijuana at the federal level. Along with Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ), Sen. Schumer presented the proposal at a July 14 press conference. Titled the Cannabis Administration and Opportunity Act, the legislation – which was partly modeled after the social equity-focused Marijuana Opportunity Reinvestment and Expungement (MORE) Act – largely aligns with advocate and stakeholder expectations.

See “MORE Act: Federal Cannabis Legalization Reintroduced in House” for discussion of the House legislation and its social equity provisions.

“Communities that have been most harmed by cannabis prohibition are benefitting the least from the legal marijuana marketplace,” reads the findings section of the bill, further noting that a “legacy of racial and ethnic injustices, compounded by the disproportionate collateral consequences of 80 years of cannabis prohibition enforcement, now limits participation in the industry.” If enacted, the senators’ bill would decriminalize and deschedule cannabis, expunge prior convictions, and allow the states to create their own marijuana policies.

The proposal is multifaceted and comprehensively addresses several critical issues:

• Federalism: States may decide whether or how to legalize marijuana. The legislation does not legalize cannabis in every state, but rather preserves the right of states to maintain prohibition. For example, shipping marijuana into a jurisdiction where cannabis is prohibited would still be federally illegal. However, states would not be permitted to stop businesses from transporting cannabis products across their borders to other states where cannabis is permitted.
• Taxes: By removing marijuana as a controlled substance, the bill would eliminate the onerous Section 280E of the tax code. It would also phase in federal taxes on cannabis product sales: a gradual federal tax rate on marijuana sales starting at 10% for the first year after the bill’s enactment and the first, subsequent calendar year. Then it would be increased annually, rising from 15% to 20% to 25%.
• Grant Programs: Some of the federal tax revenue derived from marijuana product sales would be directed toward certain grant programs. The bill would create three grant programs to support people from communities most impacted by prohibition who want to participate in the industry.
• Regulatory Oversight: The legislation would transfer regulatory authority over cannabis from the Drug Enforcement Administration (DEA) to the Food and Drug Administration (FDA), the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and the Alcohol and Tobacco Tax and Trade Bureau (TTB).
• Criminal Penalties: Requires that the attorney general remove marijuana from the Controlled Substances Act within 60 days of the bill’s enactment. The bill would also remove federal penalties on marijuana and expunge nonviolent federal marijuana criminal records.

While the senators are confident that the proposal addresses key concerns from all stakeholders – advocates, public health officials and law enforcement – they are actively inviting public feedback on the legislation. Issues they are seeking comment on include measuring cannabis potency, coordinating federal and state law enforcement responsibilities, and balancing efforts to reduce barriers to enter into the marijuana industry.

Read the draft of the Cannabis Administration and Opportunity Act.