More Smoke Signals From Capitol Hill: What's Going On With Cannabis Legalization?

This article by David Feuerstein and Richard Trotter was originally published on The Leaflet, a newsletter by Feuerstein Kulick

For months, cannabis industry observers have been eagerly watching for movement on some form of legalization bill from Capitol Hill.  And while de-scheduling marijuana and other reforms have broad popular support that transcends party lines in a way that almost no other issue can (link), the cannabis industry has nothing to show for the seemingly endless array of political soundbites. 

Still, not all is lost.  Sometimes, in Washington, talk can be a sign of things to come, and lawmakers (as well as numerous Leaflet sources) continue to send some promising smoke signals from Capitol Hill. 

Go Big or Go Home?

Most of the gridlock on the issue of cannabis in Washington can be found in the United States Senate, where Senators continue to debate whether the reform bill that ultimately makes it to the floor should swing for the fences, or just try to put the ball in play.  Most of the debate revolves around three bills, each of which have various permutations and gaps that have yet to be filled.  

First, there’s the SAFE Banking Act (which passed the House in May 2020), a finance-focused bill that would enable financial institutions to do business with cannabis companies without the fear of regulatory reprisal and, in the process, increase the amount of available capital required to help grow the industry.  Then there’s the MORE Act (which passed the House in December), which would de-schedule cannabis, pave the way for the increased expungement of cannabis convictions, and eliminate Section 280E – the tax rule that prohibits cannabis companies from taking routine business deductions.  Finally, there’s “the Schumer Bill” – the largely unknown cannabis-reform bill being birthed from the office of Senate Majority Leader Chuck Schumer, which insiders describe as the most ambitious of the three.

The problem, according to numerous Leaflet sources, is that no one can agree which of the three should be brought to the floor first.  Senators on the more cautious end of the cannabis spectrum argue that the Senate should vote on a narrower bill first, in the hopes of getting something passed, and avoiding the legislative quagmire that may come with a more broad-sweeping bill.  Opponents of this incremental approach argue that a narrow bill won’t get the job done, and that the industry, the victims of the War on Drugs, and the public at large want (and deserve) something bolder.  

In addition, there is (as always) a political component to the ongoing legislative stalemate.  Leaflet sources have indicated that Majority Leader Schumer – who controls the Senate’s agenda – intends to hold back the SAFE Banking and MORE Act until his own bill is ready to bring to the Senate floor.  Pundits believe Schumer’s gamble is that the Senate (starved for a legislative victory that they can call cannabis reform) may approve some of the more ambitious aspects of the Schumer Bill in the name of getting the less controversial aspects of the more-sweeping legislation (like SAFE Banking) signed into law.

For now, both sides are locked in an attritive war of strategic ideas, while the industry and its millions of enthusiastic supporters wait to see who blinks first.

A Spoon Full of Sugar

Even if advocates for a narrower, more cautious approach to reform should win the day, not all hope is lost for those that prefer more far-reaching cannabis reform.  Proponents of the SAFE Banking Act argue that not only does it have the votes to pass, but it could – with its less controversial focus on the elimination of unnecessary restraints on the growth of a promising industry – open the flood gates to more ambitious reforms.  The SAFE Banking Act is, in their eyes, the spoon full of sugar that will help the rest of cannabis reform go down.  There’s also the possibility that the SAFE Banking Act and the MORE Act could be married at some point, offering opponents of a “skinny” cannabis bill with a bit more in the way of reforms than they may expect.  

But alongside the strategic aspect of this political debate sits the simple reality that the industry is in need of legislative and regulatory relief.  As one Capitol Hill observer told The Leaflet – the industry has waited a long time for the SAFE Banking Act, and it can’t continue to wait while the Schumer bill takes shape.

Biden on Board?

And where, you might wonder, is our newly elected President in all of this?  Biden has spoken publicly about his support for allowing states to legalize cannabis (link), but to date has yet to use the bully pulpit to push Congress to act on any particular piece of legislation.  Some observers have questioned Biden’s commitment to legalizing cannabis at the federal level. (Link).    When pressed on the issue of cannabis reform at a recent White House news conference, Press Secretary Jen Psaki said that Biden supports leaving cannabis policy to the states, reducing cannabis to a Schedule II drug, decriminalizing marijuana, expunging cannabis convictions and legalizing medical marijuana at the federal level.  (Link).  But she gave no indication that Biden supports nationwide legalization of adult-use cannabis.

Still, some within his administration are giving stronger signals that Biden may tacitly support more ambitious cannabis reforms.  For example, Biden’s Treasury officials have shown a continuing interest in the harmful ramifications of Section 280E and seem committed to seeing it repealed.  Treasury Secretary Yellen herself has expressed support for the SAFE Banking Act, and the President’s council of economic advisors seem to grasp the industry’s potential as an economic engine and job creator.  All of which is to say, the Biden Administration seems to be on board the SS Cannabis, even if the President himself seems reluctant to captain this particular legislative voyage (for now).   

(For information contact David@dfmklaw.com and Rich@dfmklaw.com).