Although US states continue to legalize cannabis, legalization at the country’s federal level is challenging
In November, 2018, Michigan became the 10th state in the US (United States of America) to legalize recreational cannabis. Earlier in 2018, California legalized the sales of recreational cannabis in the state. As of now, 10 out of 29 states, along with Washington, D.C. have laws that fully legalize recreational marijuana.
Although marijuana legalization is sweeping US states, it’s worth mentioning that legalization is harder to regulate and get approved at the federal level than we can imagine.
Federal resistance is holding the US cannabis industry back
Though marijuana legalization is growing at the state level, the federal government still sees cannabis as an illegal drug.
The United States federal government classifies marijuana as a Schedule 1 narcotic, which means it has no accepted medical benefits and a high potential for abuse. That’s where things get complicated.
This conflict between states and the federal government makes doing business in the marijuana industry more expensive and potentially troublesome. Banks avoid working with cannabis-based companies because banks are federally regulated. This causes marijuana businesses to be short of capital or forces them to operate in cash.
Troy Dayton, the CEO, and co-founder of Arcview Group, a cannabis market research firm, says moving cash around is expensive and dangerous. He adds that only a few banks are doing business with cannabis firms, but most of these are often short-lived and charge a lot of money due to extra liabilities and compliance.
Weak Lobby for Federal Legalization
There is no significant lobbying group in the United States pushing for federal legalization of cannabis. Instead, many major lobbies, such as Big Pharma and Big Tobacco are working against it.
President Donald Trump, ahead of the G-7 summit in Canada, said that he would probably support a measure to legalize marijuana nationwide, which brought hope to many Americans. The introduction of the U.S. Senate bill, called STATES Act, strengthens the possibility of an end to marijuana prohibition even more. However, before the STATES Act or any other lingering marijuana measure can be signed by President Trump, it would need Congressional approval, which seems unlikely at this juncture. Most federal lawmakers are against marijuana legalization, and the STATES Act has only nine co-sponsors. One of the most influential powers on Capitol Hill – Senate Majority Leader, Mitch McConnell – is nowhere ready to see marijuana legal at the national level.
Marijuana legalization challenges are not limited to the federal level; challenges exist on the state level also. The US states where marijuana is already legal are facing difficulty regulating the cannabis market. This causes concern among other states looking forward to legalization.
People can’t buy as much as they want. Does that mean they’ll turn to the black market?
Currently, in Colorado, cannabis users can only possess a maximum of 1 ounce and no person under the age of 21 can legally buy or smoke it. Similar measures, taken by other states that have legalized marijuana to ensure safety and public health, restrict pot users.
A recent report shows that 18% of pot users start consuming marijuana between age 18 and 29. There is some concern that those under the age of 21 may look to the black market for cannabis, given the age restriction of the legal market. This raises doubts about the popular idea that the black market will vanish with legalization at the state level. A better chance at significant reduction of the black market might require marijuana to be accepted at the national level, which is currently far from a reality.
Further, a quasi-black market might evolve as a result of governments setting high tax rates to cover regulatory costs, which will force cannabis businesses to stay in the shadows and go unregulated and untaxed. Many growers are already dodging taxes and vendors are violating labeling and packaging laws enforced in the states.
On 17 October, Canada became the world’s second country to legalize marijuana.
Canadian cannabis firms have already entered into multibillion-dollar partnerships and sales are skyrocketing day by day, while marijuana remains illegal at the federal level in the US. Some business owners in the US marijuana sector say America must either catch up quickly or get left behind.
As for now, the picture is completely obscure. We can expect to see an increasing number of states legalizing marijuana, but one thing seems certain – the federal law is not going to change anytime soon.