Ask Our Experts: U.S. Federal Election Outcomes 2020
Q: Beyond the various state-level cannabis initiatives in play this Election Day, how might the outcome of federal elections impact the legal cannabis industry?
By Josh Adams, Ph.D., Senior Industry Analyst, New Frontier Data
A: The 2020 elections are poised to provide another historic watershed for the cannabis reform movement. Voters in five states will go to the polls to vote about adult-use and medical cannabis initiatives. If adopted, newly legal markets by 2022 are projected to generate $1.2 billion in revenue, a figure expected to reach $3.3 billion by 2025. Further, with two-thirds of Americans supporting federal legalization of cannabis, and a general sense that the liberalization of drug laws are closely tied to other civil rights issues, cannabis reform has seized some public attention during this election cycle. That noted, the direction of any reform and the legal cannabis industry as a whole depend on a variety of possible electoral outcomes.
Pending implications for the industry and stakeholders depend on four possible scenarios:
Blue Wave: A Biden Presidency and Democratic Control of Congress
Going into the final weekend before Election Day, the polls were trending toward a blue wave. In that scenario, Joe Biden would win the presidency, and the Democratic Party would hold the House while also taking control of the Senate. A sweep would significantly remove barriers to the passage of pro-cannabis legislation. The Biden campaign has pledged to decriminalize cannabis, while Sen. Kamala Harris (D-CA) spoke directly to the issue during the vice presidential debate. Additionally, Congressional Democrats have already identified criminal justice reform as a key initiative, and pledged to pursue broad expungement programs as well as federal legalization of cannabis during a Biden-Harris administration.
Beyond those campaign pledges, are more direct implications for legislation: the MORE Act and the SAFE Banking Act. Broadly, the MORE Act would remove federal penalties for cannabis, allow for expungement of criminal records, and dedicated funds to support communities directly impacted by the war on drugs. Plans for a September floor vote in the House were delayed until after the election, though passage was essentially precluded by opposition in the Republican-controlled Senate. Should the Democrats complete a sweep, the MORE Act’s passage will be greatly improved.
Similarly, the SAFE Banking Act was designed to bring regulatory clarity to cannabis banking by creating an environment where banks are comfortable providing financial services to cannabis businesses. The SAFE Banking Act would afford safe harbor to banks and credit unions working with legal cannabis companies, sparing them of federal legal jeopardy or revocation of FDIC deposit insurance. Without resistance from President Trump or the Senate, the SAFE Banking Act would have a clear path toward passage by the new Congress.
Status Quo: Trump’s Reelection as Republicans Hold the Senate
With the Democrats overwhelmingly favored to hold the House, maintenance of the status quo could yield renewed interest in the SAFE Banking Act in the aftermath of the campaign season. Additionally, should state-level decisions expand legalized markets throughout the U.S., loosened banking regulations would enable cannabis business to thrive amid local economies disrupted by the COVID-19 pandemic and shutdowns. Regardless, federal reforms would remain unlikely, and the MORE Act unable to find solid support from either the Senate or the White House. In that political environment, the cannabis industry would almost certainly continue to expand via state level initiatives, governed by local regulations, without appreciable support from the federal government.
Presidential Transition: Biden Wins While Republicans Hold the Senate
Much as in a Status Quo scenario, opposition from a Republican-controlled Senate would likely prevent passage of the MORE Act and other legislation, though the SAFE Banking Act might be viable. However, given the stated commitment of the Biden-Harris campaign to criminal justice reform, with a focus on decriminalization of cannabis and an expungement of drug-related convictions, the administration might pursue actions via executive order, circumventing resistance from the Senate.
Opposition Government: Trump Wins As Democrats Take the House and Senate
The scenario from the least likely outcome would see Democrats continuing to push for cannabis legislation including the MORE and SAFE Banking acts despite resistance from minority Republicans in the Senate. In that event, Democrats would be even less likely to see it with a veto-proof majority in the Senate, so any legislation unsatisfactory to President Trump would be subject to veto. In such a case, industry stakeholders and advocates would likely press for expansion via state-level initiatives and regulations, without support from the federal government. Given examples demonstrated during Trump’s first term, more negative outcomes might face the legal cannabis industry, given a more intolerant Justice Department and Trump’s previous warnings to cities and states run by political opponents. Should those be followed up, state cannabis markets under Democratic governors may prove subject to punitive executive orders of indeterminate consequence.