Hashish Laws 12 months-in-Evaluate – Hashish & Hemp

Although Congress failed to pass federal legislation legalizing
cannabis in 2021, the push to end the federal prohibition of the
ever-growing industry continues to gain steam.  While
Republican lawmakers have traditionally opposed decriminalization,
more are beginning to support or even introduce new cannabis
legislation.1  On top of that, recent polls
indicate that an estimated 68% of Americans now support
legalization2 with many consumers now viewing
cannabis as less dangerous than alcohol.3  In
addition, the industry’s total addressable market has been
forecasted to grow to $84B by 2026.4

Federal Efforts

On the federal level, the Democrats have thus far failed to
receive enough bipartisan support to overcome the threat of a
filibuster in the Senate.  In 2021, neither the Cannabis
Administration and Opportunity Act nor the Marijuana Opportunity
Reinvestment and Expungement Act made much progress. 
Moreover, the SAFE Banking Act, which would have opened the door
for cannabis businesses to access commercial banking services, has
thus far failed in the Senate despite broad support in the
House.5

However, the Republican led States Reform Act might offer
Congress the most realistic chance of decriminalizing cannabis on
the federal level.  This “compromise” bill,
introduced in November, would give individual states the full
authority to regulate or prohibit cannabis as they see fit. 
As a result, cannabis would be descheduled under the Controlled
Substances Act, opening the door for cannabis companies to access
commercial banking services.  In addition, the bill would
allow cannabis to be transported in interstate commerce and would
also presumably void Section 280E of the federal tax code, which
currently bars cannabis businesses from seeking federal tax
deductions.  Also, the bill would allow cannabis companies to
obtain loans and other relief from the Small Business
Administration.  While passage of the States Reform Act would
not result in federal legalization, it would remove many of the
federal regulations currently burdening cannabis companies.

In addition, a new bipartisan bill recently introduced in the
House seeks to require the FDA to regulate hemp-derived CBD as a
food and beverage ingredient.  Given the lack of clear federal
guidelines ssregarding how much hemp-derived CBD can be added to a
food or beverage, this bill would bring clarity to CBD companies by
requiring the FDA to finally develop clear
rules.6  

States Push Ahead

Despite Congress’ failure to enact cannabis legislation, the
list of states allowing for legal adult use of cannabis grew in
2021.  New York, New Jersey, Connecticut, New Mexico and
Virginia now belong to the list of states that allow for
recreational cannabis consumption.  These 18 states account
for almost half of the U.S. population.7  In
addition, medical cannabis became legal in several more states,
raising the total to 36 states.  On the other hand, in a rare
setback, the South Dakota Supreme Court overturned a state ballot
initiative that garnered 54% of the vote in favor of legalizing
recreational cannabis.

As for hemp products, states have also begun to propose and
enact statutes aimed at legislating the use of hemp in consumer
products.  For instance, Governor Newsom recently signed
California’s A.B. 45 into law.  This will allow producers
to include hemp, hemp derivatives, cannabinoids (e.g. CBD), and
extracts in food and beverage products as well as dietary
supplements, cosmetics, and even pet food.8

Looking Ahead to 2022

Either the States Reform Act or the SAFE Banking Act could
realistically be enacted into law in 2022.  The 2022 midterm
elections will certainly impact if and when either bill becomes
law, but the lame-duck period immediately following the elections
could provide reluctant legislators an attractive window for a
bipartisan compromise.  On the other hand, President Biden
appears to still oppose recreational cannabis legalization, and it
remains unknown whether he would veto any of these
bills.9

Even if Congress fails to act, states are beginning to introduce
their own legislation to mitigate the hurdles federal prohibition
imposes on cannabis businesses.  For instance, legislatures in
New York, New Jersey, and Missouri have recently introduced bills
aimed at circumventing Section 280E of the U.S. tax code by
allowing cannabis companies to deduct business expenses from their
state taxes.  In addition, Michigan has recently introduced a
bill that emulates California’s A.B. 45 and would allow
hemp-derived CBD to be included in foods and dietary
supplements.10

While federal legalization did not take place in 2021, cannabis
businesses should remain on the lookout for new state regulations
and also begin to prepare for possible federal legislation that
would open the door on interstate commerce, commercial banking
access, and federal tax deductions.

Footnotes

1 See States Reform Act; Here’s what’s in the new Republican
marijuana legalization bill – Leafly

2 Support for Legal Marijuana Inches Up to New High
of 68% (gallup.com)

3 Cowen-Research-Themes-2022.pdf
(pcdn.co)

4 Id.

5 A prior article on the SAFE Banking Act can be
found here.

6 What Is the CBD Product Safety and Standardization
Act? – CBD Retail Trends

7 18 States, D.C. Legalized Weed U.S. – Where
Is Marijuana Legal 2021? (esquire.com)

8 A prior article on A.B. 45 can be found here.

9 Psaki: Biden unmoved on marijuana legalization
despite Schumer legislation – POLITICO

10 Cannabis Bill Roundup: The Prefiling Season Kicks
Off – Law360

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