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Federal Legalization of Cannabis in 2 Years?
It seems increasingly likely that the U.S. will legalize cannabis on a federal level.
Welcome to Four PM — a daily newsletter that delivers cannabis industry analysis, interviews with industry leaders, and all of the latest news.
Several major events have occurred in the cannabis industry in recent days, from Jazz Pharma‘s acquisition of GW Pharmaceuticals for some $7.2 billion USD (the largest acquisition in the history of cannabis) to the news that plans for federal legalization are in the works in the U.S.
Given the implications of the latter, I will be focusing on what I anticipate happening when the first version of federal cannabis legalization is put into effect.
Some context to set the stage ⬇️
In spite of cannabis being federally illegal in the U.S., a majority of all the legal cannabis that’s sold in the world is sold within the United States.
Individual states have decided to take matters into their own hands, providing adults with a system to access legal cannabis.
With an ever expanding list of states legalizing cannabis for medical and adult use purposes, there is increasing pressure on the U.S. government to take action to remove cannabis from the list of Schedule I drugs.
“Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse.” — Drug Enforcement Agency
Recent events 🕑
America is waking up to the realization that the war on drugs was racially motivated, and in light of recent events, people are now demanding change.
With the Democrats now in control of the full stack of government, it’s their job to deliver this change. That is, if they would like to be re-elected.
After all, a politician’s primary goal is to win re-election.
Why Cannabis? 🌱
The cannabis industry has the potential to rectify some of the wrongs of the past, given the opportunity for many successful businesses to be built. As things stand today, however, we will see a severe concentration of accumulated wealth from cannabis as a result of the financial barriers that make it very difficult for most to participate in the industry.
A huge problem for American cannabis companies right now is their inability to access capital, which is why many companies choose to go public in Canada so early in their life-cycle. Meanwhile, many people of color are having a very hard time accessing capital.
This as a problem that we absolutely must solve. It does raise a much bigger question, though, namely what legislative changes we as an industry must prioritize to ensure we get the version of cannabis legalization we would like to see.
What Are the Changes We Could See? 👀
1. The expungement of past convictions: The federal government could strongly encourage each state to rectify the wrongs of the past by putting an end to the racially biased policies that led to the prohibition of cannabis, in addition to clearing the criminal records of those who have been punished for it.
2. Inter-state commerce: For any existing cannabis multi-state operator, this policy change is likely top of mind, such that they can avoid the need to build cultivation facilities for each state in which they are seeking to operate.
3. Access to traditional banking: This is a HUGE problem within the cannabis industry, as many operators are currently prohibited from accessing traditional banking infrastructure—something just about every other business takes for granted.
4. FDA regulations: This is the change many current operators will NOT want to see, as it has the potential to hold the industry back. For all of the attention the FARM bill received in 2018, the lack of communication by the FDA on what types of products CBD can or cannot be added to is of major concern should the same regulatory body be placed in charge of THC.
What Are the Changes We’re Likely to See? 💡
Based on the joint statement delivered by Senate Majority Leader Chuck Schumer and Senators Cory Booker and Ron Wyden last week, there will likely be two items prioritized in the first version of legalization.
1️⃣ The expungement of past cannabis-related convictions:
This first change is likely the most important.
According to the ACLU, Black people are 3.6 times more likely to be arrested for cannabis possession, despite the same rate of usage as the general population. Cannabis enforcement is racist, full stop.
If we have any hopes of building an equitable cannabis industry, we have to start here.
2️⃣ Access to traditional banking infrastructure:
Building a successful business in cannabis is currently much harder than it needs to be.
One of the primary issues continuing to plague the industry is the inability to access traditional banking infrastructure.
Should the MORE (The Marijuana Opportunity Reinvestment and Expungement) Act pass, which seems increasingly likely, this problem will be solved.
When this goes into effect, we will see cannabis companies listing on U.S. stock exchanges and banks lending to cannabis companies, resulting in a surge of capital becoming available to American cannabis companies.
When Will These Changes Occur? ⏳
I’m increasingly convinced that these changes will occur within the next four years.
There has never been a better opportunity to pass federal cannabis legislation, and although it may take many tries before the perfect set of regulations are put into place, I’m incredibly excited for the coming years.
The cannabis industry is only just getting started. 🚀
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