Black market cannabis sales have long been a problem in the United States. States that have legalized medical and/or recreational cannabis hoped to stamp out the illicit drug markets, and to a large extent have reduced or eliminated their influence. Still, some states continue to struggle with black market marijuana growers, dealers, and distributors.
California is one of those states. To combat black market sales of marijuana, two state legislators have proposed reducing the cannabis tax rate for a period of three years. In this article, we will explore California’s tax proposal, contrast California’s cannabis tax revenue with other legal states, and discuss the future of taxes on ridding the legal weed industry from black market competition.
California’s Cannabis Tax Proposal
Assemblyman Tock Lackey, a Southern California Republican, and Rob Bonta, a Democratic lawmaker from Oakland, are co-sponsors of a proposal to reduce California’s cannabis tax rate for a period of three years. The bipartisan bill was written with the help of additional Democratic lawmakers. This proposal was designed to allow licensed marijuana retailers to lower their prices on products, helping both to spur sales and to undercut the influence that black market dealers enjoy on the cannabis consumer market. Analysts peg the reduction in taxes as effectively cutting retail prices across the board by an average of 9%, including both medical and recreational cannabis products.
Currently, the cannabis excise tax is set at 15%. Under the provisions of the bill, the excise tax would be lowered to 11% for three years, with the time period ending in June 2021. The bill also suspends collection of cultivation taxes that California’s licensed growers must now pay. Under current legislation, growers must pay a cultivation tax of $9.25 per ounce of flower and $2.75 for “trim”, or the leaves resulting from manicuring cannabis buds for retail sale. Combined, the cultivation tax averages to about $150 per pound, a significant expense for licensed California growers.
Both of these tax-suspension measures are seen by cannabis industry analysts as creating a more favorable environment for legitimate cannabis businesses. Black market growers and sellers do not have to worry about the expenses associated with licensing or taxes, giving them a competitive advantage over licensed producers. By being able to sell their products more cheaply, they represent a lucrative portion of the overall cannabis market – a portion that can stifle legitimate sales and cultivation.
California and Legal State Cannabis Tax Revenue
When discussing cannabis taxes, it can be useful to understand how much tax legal states are taking in. In a large part, tax revenue was pitched to state voters during the legalization initiatives as a means of improving social and public services funded by tax dollars.
Taxes on medical and recreational cannabis have been quite substantial, allowing otherwise cash-strapped states to pay for a wide range of services. Some tax revenue is earmarked for law enforcement and cannabis regulation uses, while others is mandated to be spent on youth cannabis use prevention programs at the school or community levels. Other tax dollars are spent on marijuana impact studies by universities and law enforcement agencies.
California’s cannabis tax revenue for the past six months is estimated at $175 million. In its first full year of legality, industry analysts indicate that the state’s cannabis excise taxes could bring in $643 million. Local sales taxes, particularly in California, add millions more to government coffers. In other legal states, millions upon millions of dollars are being collected in taxes. Colorado, for example, collected $67 million in taxes, licenses, and fees collected in the state’s first year (2014) of legalization. In 2017, the state raked in $247 million in taxes, licenses, and fees. As in other legal states, these taxes are helping to fund a variety of state efforts including research, law enforcement, and youth cannabis use prevention programs.
To make the tax revenue picture even more enticing, a cannabis industry analysis firm called New Frontier Data conducted a study that suggests that if the federal government were to legalize marijuana, it could add $132 billion in tax revenue by the year 2025.
There’s an incentive to keeping taxes high, but some states are discovering that their tax rates are not only hurting licensed businesses, but spurring the growth of black market cannabis operations. Other financial hurdles for legitimate producers include exorbitant licensing and cultivation fees. Licensing in some parts of California may exceed $17000. It is generally believed that a combination of tax reform and reduction in licensing fees will help the legal cannabis industry thrive by limiting the advantage black market dealers currently have. The future is uncertain, but the fact remains that California’s tax reduction proposal is being met with accolades by those in the industry that know change is needed.
Thanks to the U.S. Attorney General Jeff Sessions, cannabis stocks dropped significantly after rising 40% in November leaving many investors with losses instead of gains. Earlier this month, A.G. Sessions rescinded the Cole Memorandum with a “return to the rule of law” announcement.
What the Sessions Memo Says
In Sessions’ memo sent to all U.S. attorneys, Sessions reminded readers that when deciding which marijuana activities to prosecute with the finite resources given to the Justice Department, there are “well-established principles that govern all federal prosecutions.”
He went on to say that those principles were established in 1980 by Attorney General Benjamin Civiletti. Over time, these principles have been refined and require federal prosecutors to decide which cases to prosecute on four main considerations:
- Federal law enforcement priorities
- Seriousness of the crime
- Deterrent effect of criminal prosecution
- Cumulative impact of particular crimes on the community
He finished by saying that specific guidance to marijuana enforcement is unnecessary and therefore rescinded.
It is a well-known secret that Sessions has hated marijuana and the Cole Memorandum. However, with his inaction his first year with the Trump administration, many were lulled into believing that he would not change any current guidance. Instead, he responded to conservatives by rescinding the Cole Memo. Or did he?
What U.S. Citizens Believe
Several surveys taken around the country show that a majority of people believe that marijuana should be legalized for medical and recreational use. Even Sessions’ home state of Alabama showed overwhelming support for cannabis legalization. According to the Pew Research Center, the percentages are actually astounding.
In 2016, a survey showed that 57% of adults in the U.S. favored legal marijuana compared to only 37% who said it should remain illegal.
- Millennials, ages 18 to 35, are the largest supporters with 71% in favor of legalizing marijuana.
- Generation X, ages 36-51, showed support in line with the general public at 57%.
- Even the Baby Boomers, ages 52-70, show favor with 56% supporting legalization.
In 2017, over 1,200 adults in the U.S. were asked about marijuana legalization based on political party.
- Democrats favored legalization of marijuana with 66% in favor and 30% not in favor.
- Surprisingly, 63% of Republicans who identify as moderate or liberal Republicans favor legalizing marijuana.
- Conservative Republicans are the only political group surveyed that opposed legalizing marijuana use, with 62% against.
Pew Research Center surveys have also found that blacks and whites are identically in favor of legal marijuana at 59% each, while Hispanics are less supportive at 46%.
Good News for Those Who Are Concerned
Even though Sessions rescinded the Cole Memo, the situation is not necessarily changed for the cannabis industry. With his memo, he left room for each state attorney general to decide whether to act or not. Xavier Becerra, California’s state attorney general, supports the laws passed by California voters and therefore will probably not act.
Congress also has the ability to keep the reigns tightened on Sessions. The Rohrabacher-Blumenauer amendment was created to keep funds away from the Justice Department to enforce the laws. It has been renewed every year and 2017 was no exception. On December 22, the Rohrabacher-Blumenauer amendment was included in legislation to fund the government for two weeks. The intention of the amendment was to protect medical marijuana, but a limited Justice Department budget will affect all areas of the cannabis industry.
The Effect on Marijuana Stocks
Leading up to California’s legalization of adult use marijuana, cannabis stocks had been bullish. In November, stocks rose 40% with anticipated strong sales of adult-use recreational marijuana. Up until January 4th, the date when Sessions released his memo in regards to the Cole Amendment, stocks were continually rising. However, as soon as word got out of the Sessions memo, stocks began to drop.
For example, companies such as MassRoots (MSRT) and Insys Therapeutics (INSY) dropped a staggering 26%, while Innovative Industrial Properties (IIPR) drop 18%. One company that seemed to fare best was GW Pharmaceuticals (GWPH) with a decline of only 0.36%.
Canada Is Also Affected
The AG’s letter to federal prosecutors allows individual prosecutors to decide whether or not to prosecute. This uncertain environment creates a problem for cannabis companies. Jonathan Sherman, an attorney at Cassels Brock, a Canadian law firm that specializes in cannabis legalization, stated, “If the Cole Memo no longer applies, the CSA (Canadian Securities Administrators) policy, with respect to U.S. cannabis operations, may be reversed as the Cole Memo was part of the reason why the CSA was comfortable to allow cannabis companies with U.S. operations to be listed.”
He went on to say that since the implications of the changing federal government’s approach are uncertain, there still will be a “significant concern to Canadian cannabis companies with U.S. operations.”
American cannabis companies now seem to be a risky investment for Canadian investors, whereas only a month ago, these same companies seemed like a good investment. The Toronto Stock Exchange (TSE) warned investors in October about American cannabis companies. The TSE did not want the Canadian companies listed to engage in activity with U.S. cannabis companies because of federal marijuana laws.
However, the Canadian Stock Exchange was more lenient. The Canadian companies that were cash heavy from money raised in the public markets, have been aggressively acquiring stock in U.S. cannabis companies. After the release of Sessions’ memo, Canadian company Horizons Marijuana Life Sciences ETF closed down 8.7% the same day.
What This Means for U.S. Investors
While the Sessions’ memo sent a slight shockwave through the cannabis stock market, this has not kept many investors from continuing to buy stocks in a range of companies in the marijuana industry. For the savvy investor, research into all companies is advised. The investor who does his or her homework can reap the benefits of future legislation as more and more states legalize medical and adult-use recreational marijuana.
Congressman Earl Blumenauer said it best. “Congress must act to put an end to the cycle of uncertainty and permanently protect state medical marijuana programs—and adult use—from federal interference. The American people have spoken. It’s past time that Congress catch up.”
Massachusetts cannabis growers, distributors, and consumers are not receiving any assurances at the state level concerning immunity from federal prosecution. After Attorney General Jeff Sessions released a memo last week stating that he was rescinding all federal protections outlined by the Cole Memo of 2013, the cannabis industry of Massachusetts was left wondering what this means for their industry going forward. Andrew E. Lelling, the U.S. Attorney in Massachusetts stated that he cannot, “provide assurances that certain categories of participants in the state-level marijuana trade will be immune from federal prosecution.”
Why Is the Cole Memo So Important?
The Cole Memo was created in 2013 when states began legalizing recreational marijuana. In it, then Deputy Attorney General James M. Cole, gave guidance regarding marijuana enforcement at the federal level. He advised federal law enforcement officials to focus on certain priorities, such as preventing:
- The distribution of marijuana to minors
- Criminal enterprises, gangs, and cartels from receiving revenue from the sale of marijuana
- States that do have legal recreational marijuana laws from diverting to states that do not
- Any state-authorized marijuana activity from being used as a pretext or cover for illegal drug activity or trafficking
- The use of firearms or any other type of violence in the cultivation or distribution of marijuana
- Any type of drugged driving or other public health consequences associated with marijuana use
- Marijuana from being grown on public lands
- The possession or use of marijuana on any federal property
He also advised federal law enforcement officials to focus on these priorities, rather than on those who possessed small amounts of marijuana and allow the states to police themselves. Part of the reason for this guidance was due to limited federal funds.
Why Should Congress Share the Blame?
Since Congress passed unambiguous federal law in the cultivation, distribution, and/or possession of marijuana, many in the Massachusetts marijuana industry have turned to Lelling for clarification and guidance. Lelling has made it clear that he has taken a “sworn responsibility to enforce that law,” but also stated that he would proceed on a case-by-case basis. He also alluded to the fact that there were limited federal resources to pursue any federal charges.
Lelling’s memo came less than a week after Attorney General Sessions’ announcement of the rescinding of the Cole Memo. Apparently certain people and groups sought additional guidance and clarification as regulators in Massachusetts are moving forward with adult-use recreational marijuana programs.
Why Some Wonder If Sessions Actions Are a Threat or Bluster
Eight states and Washington D.C. have implemented the legalization of recreational marijuana and other states are considering legalization. However, Congress has yet to discuss any laws that would make marijuana legal at the federal level. Since the cultivation, distribution, and possession of marijuana is still illegal at the federal level, federal prosecutors have been directed to approach it as such.
Many officials in states with legal marijuana, including U.S. attorneys, have indicated that they will not change their approach when enforcing marijuana laws, even after Sessions’ directive. This leaves many residents of Massachusetts wondering if Lelling will take the same stance.
In a statement last week, Lelling seemed to side with Sessions when he said that marijuana was a “dangerous drug,” and that he would “aggressively investigate and prosecute bulk cultivation and trafficking cases, and those who use the federal banking system illegally.” He also could not give assurances that any participants in the state-level marijuana industry would be “immune from federal prosecution.”
However, he went on to say that he would “proceed on a case-by-case basis,” leaving some to wonder if Massachusetts’ plans to distribute recreational marijuana in July would remain intact without fear of prosecution. He gave additional hope by stating that federal resources were limited. However, he would not explicitly state whether a certain group, such as state distributors, would be safe from federal prosecution.
Ultimately, it is up to Congress to provide the guidance and clarification that marijuana advocates are seeking. Congress could simply pass a federal law ending prohibition on marijuana. However, since Senator Cory Booker’s proposed bill to end marijuana prohibition has only one other co-sponsor and a Republican majority controlling Congress, a vote in the immediate future seems unlikely.
Brian Kelly, former assist U.S. attorney believes that “it’s mostly blunder.”
With a $40 billion market and a limited budget, it is not feasible to enforce cannabis laws. But, the U.S. Attorney’s office may have already made an impact without any arrests being made. Just this week, ten out of the seventeen medical marijuana dispensaries in Massachusetts had to revert to a cash-only system. A key payment processing company called Lelling’s statement “too risky to continue,” and pulled out of the market.
Massachusetts Lawmakers Are Backing the Voters
Many elected officials in Massachusetts, both Democrat and Republican, have had strong reactions to Lelling’s statement. Governor Charlie Baker, a Republican, suggested that Lelling focus his “limited resources” on battling the opioid crisis in the region rather than recreational pot users. He stated that there is a public health crisis with opioid addiction and street drugs. He did not include marijuana as an immediate concern to the public welfare.
In addition, the governor reminded Lelling that the voters of Massachusetts decided to create a “legal, regulated, recreational marijuana market,” in the commonwealth of Massachusetts. Even though Baker opposed the 2016 marijuana ballot initiative, he stands up for the new state law.
It appears that Attorney General Maura Healey, who also opposed the 2016 marijuana ballot initiative, also supports the people. Her department encourages the U.S. Attorney to provide guidance and clarification to “Massachusetts municipalities, residents, and businesses.”
Senator Elizabeth Warren is currently working on legislation to allows states to “enforce their own marijuana policies.” She called the Justice Department “reckless” for their actions that have created uncertainty in Massachusetts and other states. She posted on Facebook Tuesday that the state’s efforts to protect people’s health and safety by legalizing marijuana should be respected by the federal government.
The Massachusetts Marijuana Commission
The statements from Sessions and Lelling have not slowed down the state’s Cannabis Control Commission. They have continued to work in finalizing the rules and regulations of the recreational marijuana industry in Massachusetts.
The five-member panel is currently making decisions in relation to the soon-to-open markets with issues ranging from promoting diversity and advertising to whether to allow marijuana in particular bars, theaters, and yoga studios. Commission chairman Steven Hoffman stated, “We have a job to do and we’re going to continue to do the job.”
So, until there is some action taken by the federal government, if there ever is, it appears that the marijuana industry in Massachusetts will proceed with the plans approved by the people of Massachusetts.
Many states have already passed recreational marijuana laws and many more are considering passing legislation this year. For example, fifty-seven percent of Michigan voters are in favor of legalizing recreational marijuana.
Michigan Voters in Favor of Legalization
TV station WDIV Local 4 and the Detroit News conducted a survey that asked Michigan voters whether they were supportive of a proposal to legalize marijuana in their state.
The poll found that 56.6% of voters supported the proposal, 36.7% opposed it, and 6.7% were undecided. With the voters who supported and opposed legalization, there were subgroups within the supporters and detractors with regards to their level of support.
- Almost thirty-eight percent strongly supported the proposal
- Twenty-nine percent strongly opposed the proposal
Party lines have some influence on how voters believe:
- Those who identify as strong Democrats support legalization overwhelmingly with 71.5% in favor of legalization
- Those who lean toward Democratic beliefs support legalization by 675
- A little over half of Independents (51.1%) support legalization
- Voters who lean toward GOP support legalization with 44.7%
- Even strong GOP voters still support legalization with 43.5%
Surprisingly, the greatest indicator on a voters’ position is not party affiliation, but rather on past behavior. Forty-seven percent of voters polled stated they have smoked marijuana while forty-nine percent said they have not.
- For voters who have tried marijuana in the past, 72.7% were in favor of legalization
- For voters who have never tried marijuana, only 40.6% were in favor of legalization
However, with fifty-seven percent of Michigan voters admitting that they were in favor of some measure to legalize recreational marijuana, it seems that Michigan is heading toward a vote sometime this year. The Michigan Regulation and Taxation of Marihuana Act is likely to come to Michigan voters in November.
The Michigan Regulation and Taxation of Marihuana Act
The ballot measure proposes establishment of a statewide commercial marijuana production and sale licensing program. Adults 21 years old and older may possess up to 2.5 ounces of marijuana for personal use. They would also be able to grow up to 12 marijuana plants at home.
In addition to growing plants for personal use, there would be state-approved dispensaries. A 10 percent excise tax and 6 percent sales tax would accompany any sales from these dispensaries with the proceeds going to K-12 public schools, road construction, and local governments. Each local government would be given the option to allow marijuana businesses in their communities.
In addition to marijuana, hemp is part of the discussion for legalization. Hemp, a low tetrahydrocannabinol (THC) cannabis plant used for cultivation, is used to make textiles, food, clothing, and cannabidiol (CBD) hemp oil. Legal in all 50 states, CBD oil is already used by many people.
In order to secure a spot on the upcoming general election ballot, 252,523 signatures were needed. Last November, 363,000 signatures were submitted by the Coalition to Regulate Marijuana Like Alcohol. However, Michigan’s secretary of state has not yet approved the measure formally.
The Coalition to Regulate Marijuana Like Alcohol gains support from both national and local advocacy organizations such as:
- The Marijuana Policy Project
- The National Cannabis Industry Association
- The ACLU of Michigan
- The Drug Policy Alliance
- Michigan NORML
- The National Patients’ Rights Association
- MI Legalize
If passed in November, Michigan would be the tenth U.S. state to legalize recreational marijuana. As one of the 29 states to already have legalized medical marijuana, Michigan seems to be in step the with direction of U.S. voters.
Other States Considering Marijuana Legalization This Year
Michigan is not alone in putting forth marijuana legislation in 2018. Other states include:
- Vermont – In early 2018, Vermont lawmakers moved to approve recreational marijuana. Governor Phil Scott signed the law into effect January 22 of this year.
- New Jersey – Governor-elect Phil Murphy has pledge to sign legislation for adult use marijuana within his first 100 days in office. Although, this depends on a Democrat-led Legislature sending the new governor a bill to sign.
- Delaware – A 25-member panel called the Adult Use Cannabis Task Force is expected to release a report in February evaluating the impact of legal cannabis in the state.
- Rhode Island – As neighboring states Main and Massachusetts have implemented their own policies, Rhode Island lawmakers are hoping to have some type of legislation passed on recreational marijuana before July 2018.
- Connecticut – In 2017, the Hartford City Council approved legalizing recreational marijuana. Although this was a symbolic move, it was hoped to spur conversation in the statehouse of legalization.
- Ohio – Responsible Ohio, a group campaigning to legalize recreational marijuana, is currently collecting signatures for a ballot proposal for 2018.
- Oklahoma – Depending on Governor Mary Fallin’s decision, Oklahoma voters will get to decide whether to legalize medical marijuana in June or November.
- Kentucky – Secretary of State Alison Grimes is pushing legislation aimed at legalizing medical marijuana in her state. She created a task force to draft the bill that aids veterans and patients who suffer from severe illnesses.
- South Dakota – Currently, the secretary of state in South Dakota is reviewing collected signatures for a ballot imitative for limited medical marijuana legalization. Results are expected in March allowing voters to decide whether medical marijuana would be legalized in their state.
- Utah – Currently, activists in Utah are gathering signatures of a 2018 ballot initiative to approve medical marijuana. By April 2018, organizers need 113,000 in order to get the initiative on the ballot.
- Missouri – New Approach Missouri currently has 100,000 of the 170,000 signatures needed for a ballot initiative to legalize medical marijuana. There are two other initiatives backed by former state lawmakers that are also in the works.
With so many states changing their laws pertaining to recreational adult use and medical marijuana, the face of the United States is changing from red and blue to green. Democrats, Independents, Republicans, men, and women are in support of change in their state. Is your state included?
What could bring Democrats and Republicans together in this day and age? Apparently, Jeff Sessions has accomplished this gargantuan feat. Less than a week after Attorney General Sessions retracted the Cole Memo, Nevada lawmakers took action on two pieces of federal cannabis reform legislation. If approved, this legislation would allow cannabis to be used for research and medicinal use, along with allowing states to regulate recreational cannabis.
What Is the Cole Memo?
A document originally drafted in 2013 by then U.S. Attorney General James M. Cole, the Cole Memo was a memo sent to all U.S. attorneys on August 29, 2013. In it, the memo directed all prosecutors and law enforcement agents to focus only on the following priorities in relation to state-legal cannabis operations through the prevention of:
- Distribution of marijuana to minors
- Marijuana revenue from going to cartels, gangs, and any other criminal enterprise
- Marijuana sales to states where marijuana is still illegal
- State-authorized marijuana activity being a cover for illegal drug trafficking
- The use of firearms or other violence in the distribution and cultivation of marijuana
- DWI or other adverse public health consequences associated with marijuana use
- The use of public lands for growing marijuana
- Use or possession of marijuana on federal property
How Are Nevada Lawmakers Working Together?
Representative Dina Titus (D) and Mark Amodei (R) are working together on legislation with input from both sides of the aisle. Titus stated that she would oppose any legislation that did not include medical cannabis use in the final budget bill. Amodei stated that Congress should “get off its butt and start dealing with the issues.”
In a letter to Jeff Sessions, Representative Jacky Rosen from Nevada also condemned Sessions’ actions. He stated that this new guidance is in complete disregard of the “steps Nevada has taken to regulate both medical and recreational marijuana.” He went on to say that it “creates legal uncertainty” for medical marijuana patients and business owners. He feels that Sessions actions are a slap in the face to Nevada voters.
There have been at least two bi-partisan measures introduced that would end federal cannabis prohibition. None of these have made it to the floor of either chamber for a vote, however.
What Do Other Federal Agencies Know?
Even though Sessions has issued the recension of the Cole Memo, other government agencies may not be aware of the changes. According to Reuters, the federal Financial Crimes Enforcement Network (FinCEN) regulators have not yet been informed of Attorney General Sessions’ cannabis policy change. In fact, FinCEN spokesperson Stephen Hudack stated that the 2014 guidance in regards to dealing with states that have made marijuana legal are still in place.
Moreover, as of September 2017, FinCEN reported that more than 300 banks and 100 credit unions are providing banking services to cannabis industry operators with the agency’s guidance. Justice Department officials assisted FinCEN in 2014 to develop the guidance used in dealing with the banking industry. However, since that guidance was developed with a reliance on protection offered by the Cole Memo, it is unclear how the banking industry will be affected.
Where Does This Leave State Lawmakers?
Washington and Colorado Representatives Dennis Heck and Ed Perlmutter are sending a letter to FinCEN this week asking them not to rescind their guidance because it would bring “uncertainty into financial markets.”
Since the U.S. Justice Department failed to notify federal officials who oversee the banking industry in states where marijuana has been legalized, the $7 billion marijuana industry is looking to FinCEN for answers. However, FinCEN had no answers ready because it was unaware of the January 4th announcement by Sessions. This led to a flood of phone calls to FinCEN from lawmakers.
The effect on Nevada’s marijuana and banking industry would be harmed if the recension of the Cole Memo were to be enforced. The Justice Department’s decision would give prosecutors wide latitude to pursue criminal charges and could drive banks out of the cannabis industry. However, Sessions’ actions could potentially trigger “billions of dollars of cash from being unbanked,” stated Saphira Galoob from The Liaison Group who lobbies for cannabis clients.
Other States and Marijuana Legislation
Currently, there are thirty states and the District of Columbia that have some type of marijuana usage law in effect. Eight states and the District of Columbia have laws that legalize marijuana for recreational use. California approved the sales of recreational-use marijuana on January 1st of this year and Massachusetts will kick of retail sales of cannabis in July. The voters of Maine adopted the legalization of marijuana in 2016, but the state has not adopted any rules for licensure for growers or retailers.
Most of the states that have marijuana legislation on the books have allowed for limited use of medical marijuana under certain circumstances. Some laws are broader than others, allowing for different types of medical conditions to be covered. While other states, such as Louisiana and West Virginia, only allow cannabis-infused products, such as pills or oils.
There are a number of states where possession of a small amount of marijuana has been decriminalized. These states include:
States that have some type of medical marijuana laws on the books, include:
- North Dakota
- New Mexico
- New Jersey
- New York
- Rhode Island
- New Hampshire
Even Alabama (Session’s home state) and Mississippi have laws that permit medical marijuana for severe epileptic conditions.
Is There a Silver Lining?
Even though the Cole Memo has been rescinded, unnamed sources at the Justice Department have stated that Sessions wanted to basically make it clear that he was in charge of the agency and that no real changes would be made. Since the Cole Memo stated that even though marijuana was still illegal under Federal law, prosecutors would not pursue criminal charges in states that have set up regulatory regimes.
With states such as New Jersey, New York, and Kentucky introducing marijuana legislation this year, it is obvious that there is a disconnect between the U.S. Attorney General’s Office and what the people of these states want.
At the beginning of the legislative session, Maryland lawmakers introduced House Bill 2 (HB 2) which mandates certain changes to the current state medical marijuana commission’s operations and structure. The bill also includes several different provisions to encourage an increase in the number of minority owned businesses in the industry.
Governor Larry Hogan ordered a disparity study in January. This study determined that minorities and women lack representation in the medical marijuana industry. As of now, there is only one cannabis processing company owned by minorities that is licensed in Maryland.
Maryland lawmakers were hopeful that a certain portion of the medical marijuana licenses issued by the state would be set aside for minority ownership. However, Attorney General Brian Frosh advised that such a plan would open the state up for lawsuits and violate the state’s constitution.
Governor Hogan also added that reserving licenses for minorities leaves the state exposed to litigation from white businesses owners who be denied permits.
The governor told local media, “You can’t throw those guys out or the state will be subject to lawsuits from all of them, but if they can find a way to broaden it and be more inclusive, we are all for it.”
The Legislative Black Caucus’ chairperson, Baltimore City Delegate Cheryl Glenn stated, “We have a litany of people who are ready to apply for those licenses, who have the money to get these businesses up and running.”
Currently, Glenn suffers from arthritis and uses medical marijuana to treat her condition. She believes that the long road, with its many obstacles, is worth it in order to diversity the industry.
“I think we are going to finish the session with a product I’m going to be satisfied with,” Glenn stated.
House Bill 2
HB 2 directs changes to the structure and operations of the state medical marijuana commission, and also includes numerous provisions to encourage minority involvement in the marijuana industry. This will be accomplished by increasing the number of commissioners to eight. In addition, the racial and ethnic diversity of the state should be reflected in the board’s membership. Finally, members of the commission are forbidden from having a financial interest in the marijuana industry.
Outreach programs will also be crafted under the new regulations that require the newly diversified commission to perform outreach to current minority-owned businesses. They will inform these businesses who to participate in the cannabis industry.
Training programs for cannabis industry jobs will also be created to assist minorities in breaking through to obtain jobs in the cannabis industry. The state’s Department of Labor division will identify job opportunities for minorities and ex-offenders. With these measures in place, legislators hope that more minorities will be represented in the cannabis industry.
The bill also contains a Compassionate Use Fund for increased access to medical marijuana for patients. Administered by the commission, the fund would provide discounted or free cannabis to patients in need. They must first prove eligibility in order to receive the funds.
HB 2 Passes Maryland’s General Assembly
After many amendments were made to HB 2, legislators in the Maryland House of Delegates passed HB 2. The bill was then sent to the Senate where it was debated and more amendments to the bill were added.
Lawmakers worked late into the evening on the last day of the legislative session in order to receive final approval by the General Assembly. The medical marijuana measure increased the number of licenses approved for growers from 15 to as many as 22. In addition, two companies that sued the state over the licensing process were issued licenses with four additional licenses up for grabs. The bill also increased the number of marijuana processor licenses from 15 up to 28.
The bill is an aim to help minority-owned companies take steps to obtain these licenses. Earlier this year, Governor Hogan ordered a study to look at obstacles faced by minorities entering similar industries in the past. After the study concluded, state consultants determined that there is enough proof to conclude that minorities are at a disadvantage in Maryland’s fledgling medical marijuana industry.
Before the study, the state had issued 15 growers licenses, but none of them were to minority-owned businesses. To increase the number of minority licenses issued, the General Assembly is considering a bill that would require the commission to take an applicant’s race into consideration before issuing five new licenses.
The governor’s office released the consultant’s findings on Wednesday. The April study and its findings are a key step toward allowing officials to weigh race when awarding any new licenses.
Sharesse Churchill, spokesperson for the governor’s office, stated, “Today’s findings are clear and unequivocal evidence that there is a disparity in the medical cannabis industry. This study is an important part of the process to allow for increased minority participation in our state.”
Del. Cheryl D. Glenn, chairperson of the Legislative Black Caucus, believes that this is a step in the right direction towards having diversity in a growing multibillion-dollar industry.
Civil rights advocates found the lack of licenses awarded to any black-owned businesses galling due to the disproportionately number of African-Americans who have faced consequences from the criminalization of marijuana.
Since medical marijuana was legalized in December, growers have struggled to meet the demand of some 19,000 registered patients.