By Tracy A. Gallegos & Neville M. Bilimoria
In the last few years, there’s been lots of conversation regarding legalization that is federal of. Many cannabis operators had previously favored state legislation legalizing medicinal and adult use that is recreational of, as a result state guidelines preferred a number of the biggest cannabis organizations and tiny business owners, permitting their operations become extended a number of states and supplying extra platforms for the utilization and purchase of cannabis in various states. Now, with all the MORE Act (Marijuana chance Reinvestment and Expungement Act of 2019 – H.R. 3884) moving the House of Representatives on December 4, 2020, a brand new administration that is presidential place and the Democratic Party regaining control of the Senate, federal legalization of cannabis may happen sooner than some proponents expected.
Essentially, if passed as currently written, the MORE Act would legalize cannabis at the level that is federal getting rid of it through the Controlled Substances Act (“CSA”) and also by expunging criminal history records for many cannabis-related beliefs. In addition, the greater amount of Act would, among other activities, enforce a tax on cannabis products and work out business that is small loans and services available to legal cannabis businesses and businesses that provide ancillary products and services to the cannabis industry.
The MORE Act reflects the government that is federal US society’s evolving views in regards to the cannabis area. But, like the rest in life, there are two main edges to the whole story.
On the one hand, for years health care experts have been speaking about how ludicrous it is for cannabis to be a Schedule I controlled substance under the CSA, on par with heroin, and with “no currently accepted medical use,” when state legislatures and peer-reviewed studies have shown that cannabis can be quite medically therapeutic, a view now espoused by many in the community that is medical. But, getting rid of cannabis from Schedule we of this CSA will mean so it might be addressed as some other drug that is physician-prescribed. This means two things: (1) patients could now potentially avoid the plethora of various state medical cannabis laws and regulations and simply ask their doctor for a prescription; and (2) there could be a decrease that is corresponding and finally the reduction of, state medical cannabis dispensaries and only regional pharmacies possibly holding cannabis as merely another prescription medication on the racks. In the end, the illegality of cannabis during the level that is federal the reason why states adopted complex medical cannabis dispensary laws: because doctors and pharmacies were prohibited from prescribing and dispensing cannabis, respectively. Then doctors can prescribe cannabis, arguably removing the need for medical cannabis patient registration laws.
Moreover if the MORE Act or its equivalent is passed, pharmacies would now dispense cannabis, that could get rid of the significance of medical cannabis laws that are dispensary attendant dispensary licenses in each state. Furthermore, drug companies could manufacture cannabis products, which could have a impact that is negative cultivation or manufacturing facilities and laws during the state degree for such facilities. Finally, as soon as cannabis is federally appropriate, there is small to no significance of licenses that enable the distribution or delivery of cannabis. Conceivably, the only license that is state-regulated could endure will be those given to labs or testing facilities.
The foregoing situations might have a impact that is devastating the current medical cannabis industry. In fact, some operators of medical dispensaries have already expressed trepidation over the possibility of federal legalization of cannabis. Essentially, federal legalization could mean the end of the medical cannabis industry, as the state regulatory schemes developed over the last several years that promoted medical cannabis use also protected the market share of businesses in the industry. If those state medical cannabis laws are thwarted by the MORE Act or equivalent legislation that is federal while maybe gaining the right designation by eliminating cannabis from Schedule We, such legislation could drastically influence industry adversely for people who have actually gained share of the market by keeping different licenses for medical cannabis company in many states.
On one other hand, some operators see federal legalization as a avenue that is potential significantly increasing market share, as legalization would more than likely permit transportation of cannabis across state lines. This could perhaps allow cannabis operators, specifically retailers, manufacturers and cultivators, to sell their products in different states without having to obtain licenses or comply with the regulatory schemes of such states. Since cannabis currently cannot be transported across state lines, there are only two ways that a cannabis operator licensed in one jurisdiction could sell its products or promote its brand in another jurisdiction: either obtain a license in the jurisdiction that is second, with respect to the 2nd jurisdiction’s cannabis regulatory scheme, come into a white-labeling contract with an operator certified for the reason that jurisdiction to be able to establish its brand name for the reason that jurisdiction. Federal legalization could open the door up for a major increase in brand expansion to other states without the headache and cost of obtaining a license and complying with regulations of another jurisdiction.
The ability to expand into other states could be beneficial for many operators known as “legacy operators,” or those who previously operated in the medical cannabis space only and have been unable to continue operating in the space that is medical struggling to change towards the adult-use area. Such legacy operators have actually, in certain circumstances, been struggling to carry on within the space that is medical transition to the adult-use space simply because the costs of licensing and ongoing state regulatory compliance are too high. This has resulted in legacy operators entering into white-labeling agreements as discussed above. If cannabis is legalized federally, unlicensed legacy operators could potentially have a larger pool of licensed operators with which to enter into white-labeling agreements.
Perhaps most importantly for licensed operators, federal legalization could have a huge impact on the market that is black. The cannabis black market has continued to thrive, thereby affecting the revenues of licensed operators in bigger states such as California. One of the many reasons why the market that is black proceeded to thrive could be the prices of cannabis and cannabis items. Cannabis and cannabis items bought from licensed merchants are far more that is expensive significantly – than products purchased on the black market because black market products are not subject to excise, sales and other taxes imposed on licensed retailers. Arguably, federal legalization could drive costs down since there will be more competitors in the space who are able to sell or prescribe cannabis or cannabis products.
If the MORE Act or equivalent is slated to be passed in 2021 or 2022, the medical cannabis industry should look to state legislative initiatives to protect the current scheme that is regulatory set up, and look for legislation in each state to safeguard the prevailing share of the market and licensure structures gained by medical cannabis organizations through the years, frequently at great cost and loss as leaders within the area.
About the Author(s)Neville M. Bilimoria[email protected]
is somebody with Duane Morris LLP’s wellness Law Practice Group therefore the Cannabis Law Group. Neville recommends medical care consumers on business and litigation things and counsels hospitals, wellness systems, nursing facilities, assisted residing facilities, doctors, doctor teams, pharmacies and pharmaceutical organizations on many different problems. They can be reached at (*)