On a sweltering July day in our nation’s capital, events took place that – figuratively speaking – may be the start of the largest drug deal in American history. Though not the kind of deal you may be envisioning. In fact, it may shatter every preconception you might have of what a “drug deal” is. The deal at hand: Cannabis legalization.

For the first time in history, all the competing interests – the power, the product and the people – had a seat at the table. In a landmark hearing, lawmakers, businesspeople, lawyers and medical professionals discussed the best ideas on how to end cannabis prohibition. Though only preliminary, the hearing could have lasting effects. It was the beginning of an ongoing conversation about, once it’s legal, the best ways the manage, structure and regulate the legal cannabis industry. Below is an outline of the forces that led to this moment and an account of what happened when it came.

The Industry Demands Clarity

The legal cannabis industry is growing at truly remarkable rates. According to a 2019 report by Grand View Research, the industry size was estimated at $11.9 billion and will expand by 24.1% annually until 2025, when they project it will be worth $66.3 billion. 

While this industry growth is certainly impressive, it is threatened by the confusing patchwork of federal, state and local regulations that make up the country’s cannabis laws. 11 states and Washington DC have legalized adult recreational use of cannabis, 33 have legalized one or more forms of the plant for medical use, and 15 more have moved to decriminalize cannabis, without fully legalizing it. 

That said, Federal prohibition still hangs over all this legislative progress, which leads to a long list of consequences. Because cannabis is still federally illegal, the investment and banking options available for businesses are severely limited, and in some cases, non-existent. Additionally, federal prohibition leads to nearly 600,000 arrests a year for cannabis possession only, which strains the justice system and costs taxpayers millions. 

It is becoming increasingly clear to members of congress that the inconsistencies in cannabis laws at the federal level are untenable, and those laws need to change. Business leaders, healthcare professionals and criminal justice reform advocates have joined forces to pressure congress to, after decades of prohibition, finally do something to correct it. Last week, Congress finally started to act.

On July 10, 2019, the House Judiciary Crime, Terrorism and Homeland Security Subcommittee held the first-ever congressional hearing on ending federal cannabis prohibition.

A first step in the right direction

On the heels of the FDA’s historic CBD hearing in May, the House of Representatives made history of their own. On July 10, 2019, the House Judiciary Crime, Terrorism and Homeland Security Subcommittee held the first-ever congressional hearing on ending federal cannabis prohibition.

The hearing, titled Marijuana Laws in America: Racial Justice and the Need for Reform, featured testimony from witnesses Marilyn Mosby Esq.; the State’s Attorney for Baltimore City, Dr. David L. Nathan MD, DFAPA; representing Doctors for Cannabis Regulation, Neal Levine; CEO of the Cannabis Trade Federation, and Dr. G. Malik Burnett MD, MBA, MPH; COO of Tribe Companies. Throughout the two-hour session, Democratic and Republican lawmakers asked questions to better understand the societal, medical and business implications of cannabis prohibition and find the best strategies for lifting it. 

There’s consensus on the problem, but not yet on the solutions

Rep. Tom McClintock (R-CA), acting as the subcommittee’s Ranking Member, used his opening statement to say that cannabis legalization, “may be one of the very few issues upon which bipartisan agreement can still be reached in this session.” This sentiment ruled the day, and led the discussion from both sides of the aisle to focus on how to legalize cannabis, rather than whether to legalize cannabis. That being said, the “how” of the matter is hardly settled yet, with several disagreements that still need resolution. These disagreements largely boil down to how aggressive cannabis legislation should be. Most Democrats agreed with the witnesses, advocating for a comprehensive plan that includes relief for businesses and individuals, while the Republicans in attendance preferred a more incremental approach, saying it would have a better chance at passing. Here are two ways these disagreements played out in the hearing.

The STATES Act

While the House’s hearing didn’t focus on any particular legislation, no piece of legislation was mentioned more than the Strengthening the Tenth Amendment Through Entrusting States Act, better known as the STATES act. If enacted, the act would amend the Controlled Substances Act (CSA) so that its cannabis provisions would not apply to any person or entity acting in accordance with state law, effectively legalizing cannabis at the federal level in states and jurisdictions that legalized the plant themselves. 

While this piece of legislation has strong bipartisan support, as well as from cannabis trade groups that see it as necessary relief for their day-to-day operations, that support is not universal. There are many criminal justice reform advocates who say that while they support the goals of the act, it does not go nearly far enough to undo the damage caused by the war on drugs. Those advocates argue that any cannabis legislation, particularly one that addresses business interests like the STATES act, must also address those who’ve suffered the most under prohibition, primarily poor people of color.  

Rescheduling vs. Descheduling

The CSA, which forms the foundation of US drug policy, breaks drugs down into five schedules, with schedule 5 being the least dangerous and schedule 1 being the most. Cannabis is currently designated as schedule 1, the same schedule as heroin, MDMA. This scheduling decision is the root of many of the logistical issues that face the industry. Because of this, cannabis can’t be prescribed by doctors, sold by retailers or studied in clinical trials. The scheduling also prevents banks from servicing the cannabis industry without risking their FDIC insurance.

Virtually everyone who participated in the hearing agreed that schedule 1 was not the appropriate schedule for cannabis, but everyone did not agree on where it should be scheduled. Republican lawmakers, like Reps Matt Gaetz (R-FL) and Greg Steube (R-FL), advocated that cannabis should be moved to schedule 3. Democrats and witnesses pushed back on this idea, arguing that while a schedule 3 designation would allow for clinical cannabis studies, it would not address the banking needs of business nor would it do anything to decriminalize the plant. They argued that the right approach was to completely remove cannabis from the CSA, not only to provide the greatest relief to the industry and individuals, but to help reduce the stigma surrounding a plant that is legal, regulated and taxed in more than half the country already. 

What comes next?

While this hearing demonstrated that there is considerable will behind the cannabis legalization movement, there is still much work to be done. Even among people who agree that cannabis should be legalized, there is no universally-supported path to get us there – yet. This hearing was not meant to find that path, but rather start a larger, longer dialogue on the subject, and it already seems to be working. On the morning following the House hearing, Senate Banking Committee Chairman, Sen. Mike Crapo (R-ID), told American Banker that they were “looking into” holding a hearing on banking in the cannabis industry. He added, “nothing is set but I think it should be relatively soon.” 

While the slow pace of progress in Washington leaves the cannabis industry and its customers waiting for change. The signs suggest that change is coming. There have already been two historic first-ever government hearings on cannabis, and more are sure to be on the way.  

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