Ask Our Experts: Federal Decriminalization of Cannabis
Q: Cannabis proponents have applauded the incoming Biden-Harris administration’s platform for decriminalization, but what are the results likely to be?
By Noah Tomares, Research Analyst, New Frontier Data
A: Decriminalization is not legalization. If a drug’s use and possession are decriminalized, it remains illegal to possess or use said drug. In a 2017 report, The Drug Policy Alliance defined drug decriminalization as “the elimination of criminal penalties for drug use and possession, as well as the elimination of criminal penalties for the possession of equipment used for the purpose of introducing drugs into the human body.” Thus, even if criminal penalties are eliminated, potential for civil penalties remains.
In the United States, modern cannabis prohibition is based on the 1970 Controlled Substances Act (CSA). Cannabis is federally codified as a Schedule I Controlled Substance, along with such drugs as heroin, lysergic acid diethylamide (LSD), and peyote. According to the CSA, those drugs are classified (i.e., scheduled) each as having no currently accepted medical use, a lack of accepted safety for use, and a high potential for abuse.
As a Schedule I Controlled Substance, cannabis remains federally prohibited even in states having legalized and operating markets. While there are several bills submitted to Congress to address that prohibition and the disconnects between state and federal policies, current state-legal operators are left working in a challenging gray space.
Cannabis businesses represent potential liability and jeopardy for federally insured banking institutions, which are at risk of penalties for providing banking services to cannabis companies even where established as state-approved cannabis or hemp-related businesses. Ergo, they are often denied professional services, a disconnect which is aspiringly addressed in H.R.1595: The SAFE Banking Act, which has passed the Democrat-led House but has been referred to committee in the Republican-majority Senate.
Additionally, cannabis businesses are also subject to U.S. Code §280E: Expenditures in connection with the illegal sales of drugs. In short, [simply], 280E forbids businesses from deducting otherwise ordinary business expenses from gross income associated with the trafficking of Schedule I or II substances. The legislative intent of S.2227: The MORE Act, in addition to decriminalizing marijuana, is both to remove marijuana from the list of scheduled substances under the CSA, and free cannabis businesses from the onus of 280E. While a floor vote in the House is planned for December, passage of the MORE Act, as with the SAFE Banking Act, faces major obstacles in the Senate.
Given those impediments, the incoming Biden administration faces immediate challenges regarding its decriminalization policies. Vice President-elect Kamala Harris, a sponsor of the MORE Act in the Senate, has pledged to keep decriminalization an administrative priority. President-elect Biden has been more measured about his stance for reforms. Even before Inauguration Day, much depends on the January Senate runoff elections in Georgia, and whether the administration will be joined with Democratic control of the Senate.
It has been suggested that Biden may direct the DEA & FDA to move cannabis to Schedule II of the Controlled Substances Act. However, such incrementalism would undermine his vice president’s pledge, and possibly stir more problems than it would solve. If moving cannabis from Schedule I to Schedule II would seem a step in the right direction, Schedule II drugs are nevertheless also subject to the aforementioned banking and tax challenges. Cannabis businesses would receive no relief, and simultaneously be saddled with additional regulatory oversight as dictated by Schedule II.
Pending the electoral Senate outcome, odds seem likely to favor Biden’s following in President Obama’s footsteps and claiming that federal rescheduling must come through Congress.
However the January elections play out, the legal cannabis industry has already been a decided big winner of the November elections, in which five states passed a total of six pro-cannabis ballot initiatives. Support for legal cannabis is broadly bipartisan, with public support increasing as new legal markets have formed and expanded. Most Americans now live in states with legalized medical or recreational cannabis markets. As contentious as the partisan gridlock in Washington, D.C., may continue to be, the overall outlook for cannabis reform looks promising.