Federal prohibition on marijuana has inspired generations of activists to dedicate their lives to reform. Efforts have been successful for some states to legalize cannabis, and more Americans support marijuana reform than ever before, yet the plant remains illegal at the federal level. As policymakers push for legislation that could increase access and ease operational woes for cannabis companies, many believe federal marijuana legalization could be looming on the horizon.
Before the 1930s, hemp domestication was encouraged in the United States. The Mexican Revolution brought more immigrants North, and many used cannabis recreationally. This practice spread among Americans until the Great Depression.
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A lack of work during this financially destitute period of American history led to a widespread xenophobic belief that Mexican immigrants would take the available jobs. This irrational fear became associated with the plant.
By 1937, after calls for cannabis prohibition, the plant became criminalized in the country. Since then, laws have ebbed and flowed from strict to lenient as different administrations took control of the White House–but the plant has remained illegal in the eyes of federal law enforcement.
Each legislative session, policymakers introduce bills to chip away at cannabis prohibition at the federal level. Topics like safe banking, expungement, and decriminalization seek to ease the toll on industry operators . These efforts aren’t futile, but rescheduling could solve many problems in the cannabis industry.
”As more members of Congress come to represent constituencies with legal cannabis markets, we will move ever closer to achieving the critical mass of nationwide support we need to finally end federal cannabis prohibition,” Toi Hutchinson, president and CEO of Marijuana Policy Project, told GreenState.
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Rescheduling efforts
Despite state laws making cannabis fully legal in up to twenty states– the Drug Enforcement Agency (DEA) still has the plant categorized as a Schedule I under the Controlled Substances Act (CSA), marking it as having no medicinal value with a high potential for abuse. This classification has remained despite multiple studies showing the plant’s medical potential.
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The Schedule I designation not only makes it illegal to purchase, sell, and possess the plant. It creates barriers for research scientists. Policymakers have attempted to reschedule the plant with bills like H.R. 3617, also known as the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), which passed in the House but died in committee in the 2021-2022 session. That was the second attempt at rescheduling cannabis using the bill.
Elected officials in the District of Columbia couldn’t get the MORE Act through the last session, but rescheduling is on the docket again. The Marijuana 1-to-3 Act (H.R.610) seeks to move cannabis from Schedule I to III, which reclassifies the plant as having less potential for abuse, low or moderate risk of dependence, and some medical use.
“Federal cannabis legalization is unfortunately not certain,” said Debbie Churgai, executive director of Americans for Safe Access, via email. “We believe a more promising pathway forward would be for Congress to create a new schedule designation for cannabis, Schedule VI and to create an Office of Medical Cannabis and Cannabinoid Control (OMCCC) housed in Health and Human Services to oversee the new schedule as well as licensing, research, federal agency implementation, and national coordination.”
H.R. 610 was introduced into Congress in January 2023 and has yet to reach the committee, which would be the first step before being sent to the House. Skopos Lab gives the bill a two percent chance of passage.
“For decades, the federal government has taken every step to make it impossible to access cannabis for any reason and they have created a convoluted control system that makes it nearly impossible to legalize within the current framework,” said medical cannabis advocate Alice O’Leary Randall. “The government needs to slice through it all. I’d like to see them create a Schedule VI for cannabis and all of its many products.”
But all is not lost in this fight. President Biden called for a review of the current scheduling from the Attorney General and Secretary of Health and Human Services. Reports dictate that the review is well underway, with a potential decision by the end of 2023. In the meantime, small moves have been made in Washington, including a shift in cannabis policy for the Secret Service.
“Twenty-three states have now enacted legislation regulating the adult-use cannabis market—none of these states have repealed or even rolled back their laws and public support for these policies has never been higher. That is because these policies are largely working as politicians and voters intended and they are preferable to prohibition,” Paul Armentano, Deputy Director of NORML, told GreenState. “Our nation’s federalist principles demand that Congress respect voters’ decisions on cannabis — and repeal the failed policy of federal prohibition.”
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Access to banking services
Banking is one barrier to a compliant cannabis business. The financial industry is subject to federal oversight, so many banks won’t serve cannabis companies. Several cannabis-friendly banks have emerged in the last decade, but the majority of major financial institutions refuse to accept plant-related clients in order to avoid possible penalties or punishment from the federal government.
Many cannabis entrepreneurs must seek alternative loan options to get started rather than traditional, regulated loans from established lenders. These loans often carry higher terms and make these businesses vulnerable to predatory lending practices.
Some cannabis companies have chosen to avoid disclosing that they are in the industry to their bank, operating like any other small business owner at the local credit union. This tactic has worked for many but has also caused sudden banking issues for others.
Once a bank flags that a business is even slightly close to the cannabis space, it will often freeze accounts and cease its relationship with the client. Any tangential connection to cannabis currently leaves a business at risk of sudden account closure.
The Secure and Fair Enforcement Banking Act (S. 1323), also known as the Safe Banking Act, has been introduced to the legislature in updated formats since the 2021 session. If passed, this iteration of the bill would protect financial institutions that choose to serve the state-regulated marijuana industry.
If the Act were to pass, federal banking regulators would be prohibited from ending or limiting a bank’s insurance because it works with a cannabis company. Ordering or requesting a bank shut down accounts of compliant, safe businesses would also be barred.
This cannabis bill would reframe how cannabis transactions are observed under federal law, stating that transactions at a “state-sanctioned marijuana business” would no longer be considered unlawful.
Legal cannabis businesses should be able to access the financial services they need to keep their employees, businesses, and communities safe. I am working to get the SAFE Banking Act to the Senate floor for a vote. We have the momentum to get this done.
— Senator Jeff Merkley (@SenJeffMerkley) June 2, 2023
Though the passage of Safe Banking would not ensure it, this definition could set a precedent that inches the wheels forward on legalizing marijuana fully. Many believe that this is the session where SAFE Banking makes it through due to its bi-partisan support.
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The Impact of federal marijuana legalization
Cannabis has gotten a bad rap after decades as a Schedule I drug. The misnomer that consumption of cannabis products leads to salacious activities and crime is still strong in older generations.
When legalization looms in a new location, public health officials worry most about a rise in crime rates and car accidents. Following state legalization, data regarding crime and car accident rates in the locales and relation to dispensary proximity have shown otherwise.
Legalizing adult use leads to a decrease in cannabis-related arrests, and a 2012 study showed no correlation between dispensaries and major crime in Sacramento, CA. A study of car accident data in Toronto indicated a decrease in accidents near cannabis dispensaries. Data supports the notion that cannabis reform may not have a negative impact.
Federal marijuana legalization likely on the horizon
Though it may be a few years off, federal marijuana legalization may happen in this lifetime. Efforts in the 2023 legislative session may set a precedent for future policy that could alleviate the bureaucratic chokehold on compliant operators.
“I think it’s entirely reasonable to expect the federal government to regulate cannabis in the next five to seven years,” predicted Aaron Smith, co-founder and CEO of the National Cannabis Industry Association. “Incremental progress such as passage of the SAFE Banking Act are much closer on the horizon. More states are moving to regulate cannabis for adults every year which increases the number of congressional representatives with a stake in the issue.”
Sara Payan, member of the California Cannabis Advisory Committee and Chair of the Medicinal Use Subcommittee, also believes that reform could within in a few years.
“I don’t believe federal legalization will happen during this presidential term. If the Democrats win the next presidential election, we have a good chance of seeing cannabis legalized nationally,” Payan said via email.
While Payan believes the U.S. is relatively close to cannabis legalization, Kaliko Castille, president of the Minority Cannabis Business Association, argues it could take nearly a decade.
“Many treat (legalization) as an inevitability, but that point of view minimizes how complicated it is to get anything through Congress during these polarized times,” Castille told GreenState. “If I had to guess, we are still two presidential cycles away from federal prohibition ending and it is going to require our industry to work in coalition for the greater good rather than in siloed interest groups.”
New data and research continue to deflect the assumption that legalization leads to crime and chaos. In tandem, these pushes could build enough momentum for federal marijuana legalization within the next five years.