It is fair to say that 2018 was an exceptional year for marijuana. The year began in troublesome fashion when the Attorney General at the time, Jefferson Beauregard Sessions, rescinded guidelines protecting state’s rights to legalize weed. How much of it was down to Sessions’ hatred of weed, or the Trump Administration’s determination to remove all of Obama’s legacy is unclear.
Sessions’ announcement came on January 4, yet on the same day, just hours later, lawmakers in Vermont voted to approve a cannabis legalization bill. This action enabled Vermont to become the first state to legalize weed through an act of lawmakers. To that point, every other state had done so via ballot initiative.
The wins kept on coming as we saw the almost bizarre spectacle of some Republicans joining Democrats in a bid to make medicinal marijuana legal. During the 2018 midterms, Utah and Missouri approved medical cannabis, while Michigan approved recreational weed. This takes the count to 10 recreationally legal weed states plus D.C. and a further 23 states with legal medicinal marijuana. Oklahoma had previously joined the party by legalizing medicinal marijuana in the middle of the year.
With a sizeable majority of Americans and a slight majority of Republican voters now in favor of legal medical herb, the tide has turned strongly in favor of pot. Nonetheless, it is still federally illegal, and even in states where marijuana is freely available, dispensaries and growers alike face daily challenges. Here’s a look at some of the major cannabis issues we face in 2019.
There are still 17 states where marijuana is completely illegal. Of these states, Texas and Virginia are the most likely to change their laws in the next couple of years. As for the 23 states where there is medicinal weed only, it is hoped that a significant proportion will allow residents to use cannabis freely relatively soon.
In New York, for example, Governor Andrew Cuomo has made his intentions very clear. He said that his administration is making recreational marijuana a ‘high priority’ in 2019 and said so in a speech to New Yorkers. Cuomo has stressed that his decision is based on the rights or citizens more than the tax revenue.
Graham Boyd of New Approach PAC believes that more than half of adult Americans will have full access to weed within a few years. Other states likely to try and legalize recreational pot this year include Connecticut, Illinois, and New Jersey.
One of the biggest issues for marijuana businesses is access to banking. The vast majority of U.S. banks refuse to deal with cannabis companies. As a result, these firms have huge amounts of cash on hand, making them prime targets for thieves. Also, states publish the addresses of legal cannabis companies online which means prospective criminals have an easy time of finding stores ripe for the plucking.
The STATES Act has been introduced by Cory Gardner and Elizabeth Warren. If passed into law, the act would recognize the legalization of weed and the state laws that legalized it through ballot initiatives or state legislature. It would finally allow marijuana businesses to take tax deductions, get bank accounts, and stop worrying about possible criminal liability.
Tax deductions is another huge issue. Did you know that the United States Government will earn an estimated $5 billion if marijuana stays banned for the next ten years? The discrepancy between state and federal law means that weed companies are double taxed, and pay effective rates of up to 70%.
The reason for the extra tax is due to provision 280E in the 1970 Controlled Substances Act. It states that anyone who trafficks in Schedule I or II drugs can’t receive credits on their taxes or take deductions. It was created in the 1980s to stop drug dealers from cashing in, but now that marijuana is legal, it is a provision that is crippling the fledgling industry.
Anyone looking to fix the issue needs to get a Joint Tax Committee estimate if they wish to be heard in the U.S. Senate. Gardner toyed with the idea of introducing an anti-280E amendment but didn’t bother in the end. It is unclear whether repeal is even feasible given the gridlock on Congressional legislative action.
As a federally illegal substance, marijuana isn’t easy to research in the United States. The University of Mississippi is the only approved growing site by the government, and the weed grown there bears little relation to what you’ll find in a dispensary. Testing government marijuana hoping to find answers is analogous to testing cats in the hope of finding out the inner workings of penguins.
Those who are against marijuana legalization point to a lack of data. First of all, that isn’t strictly true. There are thousands of studies which suggest that there are therapeutic benefits from using weed. The issue is a lack of long-term data, plus minimal double-blind clinical studies. Of course, the legal status of cannabis the main problem.
According to Judith Hellman of the Department of Anesthesia and Perioperative Care, it took almost one year to get approval for 400mg of THC, CBD, and CBN. The DEA came to her research facility and performed detailed analysis of the lab to ensure the weed was safely stored.
Then there are the hurdles provided by the National Institute on Drug Abuse (NIDA). The body places limits on the varieties of drug used in research. As marijuana strains have different chemical components and impact clinical symptoms differently, it is tough to get approval for weed. For instance, THC, CBD, and CBN are all given different NIDA classifications even though they come from the same plant.
Yet another problem is lack of funding for research. The California state legislature has earmarked a couple of million dollars for research, a small fraction of what the state brings in from taxation. The Farm Bill of 2018 has effectively legalized CBD while the National Institute of Health’s HEAL initiative is looking at solutions to the opioid problem; marijuana is one of those possible answers.
The funding from the NIH exceeds what was available previously, and should hopefully provide us with more information on whether medicinal marijuana is effective.
Even in states where marijuana is legal for recreational use, there are dozens, if not hundreds, of illegal companies. A combination of high taxes, lax oversight, and oversupply in states such as Washington and Oregon, means that at least one-third of all legal weed is sold on the black market.
In states such as California and Michigan, and also in Canada, the number of illicit storefronts is getting out of hand. Again, it is a question of excessive taxation. As at early 2018, fewer than 250 dispensaries in California had temporary licenses. With a market estimated at $15 billion a year, the Golden State is laden with illegal dispensaries. It is believed that there are at least seven illegal stores for every legal one in California!
It seems obvious that reducing the ridiculous tax rate would enable a significant proportion of these businesses to turn legal. Given the revenue generated by the federal government due to the current state of affairs, we won’t hold our breath on full legalization and reduced taxation anytime soon.
Restrictions & Racial Inequality
It is sad to say that the marijuana industry is not a diverse one. The high taxes and licensing fees mean that the most likely cannapreneurs are white, middle-class men. Unfortunately, there is also a ridiculous stipulation in the Farm Bill which prevents thousands of people from ever opening a business in the industry.
According to the Bill, if you have a drug felony conviction in the last ten years, you will be forbidden from entering the legal hemp and CBD market. It is a crazy rule because as cannabis grower and former weed felon Bill Levers points out, there has never been a hemp cartel; no one has ever become rich from illegal hemp.
Going back to racial inequality, there is a severe lack of ethnic minority dispensary owners. Detroit’s population is 80% black, but only 5% of dispensaries are owned by African-Americans. As the industry becomes more corporate, this percentage will go down rather than up. It is a sad fact that many dispensary owners will have to close down or sell for pennies on the dollar.
One potential solution is to take money from Canadian investors, but that still doesn’t address the inequality. Cities such as Sacramento and Oakland tried to deal with the problem by introducing measures to reduce racial inequality but have been unsuccessful. Unfortunately, it appears unlikely that this issue will be dealt with in 2019, or at all.
While it is great news that a majority of Americans want legalization and that marijuana dispensaries are increasing, it is a sad fact that the cannabis industry has a lot of issues that need to be handled. The above is just an overview and does not include a multitude of other problems set to plague the industry for years, if not decades, to come.
It is inevitable that more cities will legalize weed medicinally and recreationally in the next five years. Extra funding should aid the cause of weed research, and we may even see a situation where marijuana businesses can finally gain access to banking. What we’re unlikely to see is a wholesale reduction in federal taxation, and equality in business. A lot of good has happened in the industry in recent years but let’s not be fooled, an awful lot of work has to be done to improve it, and I’m not sure it will happen.
This post first appeared on marijuanabreak.com