States with legalized recreational marijuana all launched markets with a requirement that commercial licensees track the location of every marijuana plant or package containing marijuana products using seed-to-sale tracking software. Licensees would be responsible for affixing a unique radio-frequency identification tag to every plant or package and entering any changes to that unit of inventory into an online software program to which state regulators would have access.

While this type of system theoretically helps regulators monitor commercial marijuana activity, the granularity of these requirements imposes steep labor costs on commercial licensees that impede the ability of legal suppliers to compete on price with illicit competitors. Reason Foundation proposed in 2019 that states begin tracking inventory on a batch basis rather than on an individual product basis, and now states are beginning to implement that approach.

Maine has just introduced Flexible Standardized Batch Tracking (FSBT). Marijuana plants that are genetically identical, grown in the same location, and treated simultaneously with uniform dosing of nutrients or other permissible chemicals should be able to be tracked as a group. This change eases the tagging and data-entry requirements for licensees, which is an otherwise inefficient and labor-intensive task.

In many states that have legalized cannabis, each plant must be weighed individually upon harvest and after drying, and those weights must be manually recorded into a software application. This granularity of data arguably provides regulators with no more meaningful information about the disposition of inventory than could be gleaned by weighing a group of 25 or 50 plants together. Maine’s new FSBT system allows homogenous plants to be tracked in groups of 5, 10, 25, or 50.

The inefficiencies created by granular tracking systems have often gone for naught when regulators fail to even make use of the resulting data. In theory, regulators can run forensic data tools on the inventory-tracking database to ensure recorded shipments of marijuana match receipts and look for other signs of potential diversion of inventory to the illicit market. However, regulators have failed to perform these analyses in some high-profile cases.

California regulators were sued in 2021 under allegations that licensed distributors were purchasing legal marijuana from cultivators and then selling it to illicit interstate traffickers. A key point among the lawsuit’s allegations was that regulators were collecting data about the amount of marijuana legally cultivated and wholesaled to distributors but failing to match those totals among the quantities that distributors subsequently sold to licensed dispensaries. A California Superior Court found the plaintiff did not have standing to challenge the manner in which regulators chose to enforce compliance, but the state’s Fourth Appellate District overturned that opinion, and the case is awaiting a new trial date.

California isn’t the only state that has failed to capitalize on highly granular data that is expensive for licensees to generate. Washington legalized recreational marijuana in 2012, but over a decade later, its tracking system still doesn’t work. The current system, the Cannabis Central Reporting System, is riddled with data errors. When licensees are required to complete voluminous data entry every day, they are prone to make errors, and these errors make the database worthless if the software doesn’t have adequate safety protocols to identify potential mistakes.

For example, Washington’s system indicates there were $7.7 billion in total marijuana sales in 2022—five times the amount ($1.3 billion) the state’s Department of Revenue reported. The errors were due to misplaced decimals in reported sales prices, missing records, and incorrect entry of transaction dates. These shortcomings open the door to illegal trade and undermine public trust in the legal market.

Given that so many states have struggled to correctly implement tracking software or failed to capitalize on the resulting database, there is a clear argument for simplifying these programs through batch tracking. In Maine, where craft growers dominate the market, nearly 80% of harvests are less than 50 plants, and about 57% of harvests contain 25 plants or fewer, so batch tracking addresses the needs of most Maine cultivators.

In addition to labor-cost savings from data entry, licensees will bear fewer direct costs of purchasing radio frequency identification (RFID)tags from the approved state vendor. RFID tags are unique for every inventory item to which they are affixed and cannot be reused, so the savings can be substantial. Using fewer tags also generates less plastic waste.

Without accurate data, regulators can’t stop illegal activity or ensure consumer safety, while businesses waste resources attempting to comply with a system that doesn’t work. One of the biggest benefits of FSBT is its adaptability. While growers can use batch tags for efficiency, they still have the option to tag individual plants when needed. This flexibility supports both large-scale producers and smaller artisanal growers, ensuring the system works for everyone.

Maine’s pioneering approach to batch tracking is commendable, and other states that have legalized marijuana should be looking to replicate its approach.

The post Batch-tracking: The next wave of marijuana tracking systems appeared first on Reason Foundation.

Should Florida Amendment 3 pass with at least 60% of the vote, it would decriminalize marijuana possession for adults and allow existing medical marijuana dispensaries to sell non-medical marijuana temporarily until new licensure rules are established. Trulieve, one of Florida’s major existing medical marijuana vendors, is a supporter and one of the major financial contributors trying to get Amendment 3 passed. Trulieve’s involvement has prompted an ad campaign against Amendment 3 that claims that the measure would only benefit “Big Weed” and would not allow others to join the market or grow their own marijuana. Trulieve has filed suit over the ad, calling it “demonstrably false.”

The monopoly fears highlight the crucial role regulations play in creating competitive or monopolistic markets. If Florida lawmakers create a regulatory framework encouraging competition, keeping barriers low, and avoiding burdensome taxes and fees, industry consolidation risks remain minimal. On the other hand, restrictive rules—like limited licenses or excessive costs—could indeed lead to market concentration favoring large companies.

Any market can become monopolized if new competitors are blocked or unable to compete effectively. In government-granted monopolies, the state grants itself or a private intermediary exclusive access to a given market. For instance, some states operate alcohol “monopolies,” where hard liquor can only be legally purchased through state-run stores. In lottery monopolies, only the state or a company contracted by the state may offer lottery ticket sales. But, even when private actors can enter a market, a restrictive regulatory regime can make it nearly impossible for smaller companies to succeed, consolidating power among the largest players.

Poorly constructed regulatory schemes can artificially reduce the competitiveness of a given market, for example, by severely restricting the number of available licenses. This reduces the number of firms competing, ensures only those with the greatest resources or connections can get licensed, and then protects them from prospective new competitors who cannot procure licenses.

Excessive application and licensing fees can have a similar effect when they are prohibitively high for smaller, independent firms. For example, Gov. Ron DeSantis’ administration last year raised the two-year fee for a medical marijuana license from about $60,000 to $1.33 million. It’s rather ironic, then, that Gov. DeSantis is campaigning against the amendment using this monopoly argument when his own administration is responsible for making it harder for competitors to enter the market.

Overly complicated regulatory processes that take months or years can also prevent new or smaller firms from market success. Some marijuana farmers in New York, for example, had to sit on millions of dollars worth of perishable crops they could not sell because the state’s sluggish process for licensing marijuana retailers caused several years of delays. Only the most well-capitalized businesses could bear such costs and uncertainty resulting from this delay, forcing smaller firms to sell their businesses out to larger companies.

Excessive taxes and compliance costs can also make it challenging for companies to succeed, reducing their profits and limiting their ability to set retail prices low enough to attract customers from larger or illicit operators–an issue that California cannabis companies and regulators have struggled for years to resolve.

Fortunately for Floridians, if voters approve Amendment 3, their legislators will have a chance to avoid these mistakes by adopting a framework that promotes a competitive market. Preventing monopolization in Florida’s marijuana market requires focusing on creating accessible and fair conditions for all businesses, regardless of size.

Another important step is to streamline regulations. Heavy-handed rules that only big corporations can afford to navigate stifle innovation and growth among smaller businesses. Instead, regulations should be designed to protect consumers without placing an undue burden on any market participant. For instance, state rules with overly prescriptive testing requirements or that require testing at state-run laboratories can stifle innovation and lead to costly delays that raise the final cost of products. Basing testing requirements on objective third-party standards and allowing testing to be performed by accredited independent laboratories would afford businesses more flexibility and reduce costs.

Expanding market access by encouraging local businesses, small-scale growers, and cooperatives to participate will help prevent the concentration of power in a few hands. Policies that reduce compliance costs and support local ownership can lead to a more resilient and diverse marketplace. A few examples of such policies include making sure there are enough licenses to meet demand, such as offering a separate micro-license for small businesses and low application costs. Policies such as these will help Florida avoid the pitfalls experienced by other states and build a fair and open market for adult-use marijuana.

Monopolies almost never result from open competition but instead due to legal advantages enjoyed by one or more market participants. If Florida’s marijuana market were to operate under similar conditions, where only a few well-connected companies could navigate the complexities of the law, then the fears of monopolization might indeed come true.

The key to preventing monopolies in the marijuana industry is not to limit the market or impose heavy restrictions but to create a regulatory environment that encourages competition and innovation. This means setting clear, fair rules that apply to all market participants while minimizing unnecessary barriers to entry for new businesses.

The argument for regulated markets is not to stifle growth but to ensure that all players—large and small—have an equal opportunity to compete. If voters approve Amendment 3, it will be up to Florida lawmakers to embrace these lessons and safeguard consumers from monopolistic market concentration.

The post No, Florida’s marijuana measure won’t create a cannabis monopoly—as long as lawmakers don’t screw it up appeared first on Reason Foundation.

Hemp, a variant of the cannabis plant, was legalized at the federal level in 2018. Though hemp and marijuana both come from the same plant, the critical difference is that hemp must contain less than 0.3% tetrahydrocannabinol (THC). Anything higher is classified as marijuana.

Hemp has many commercial uses, from textiles to building materials, but one of its most significant applications is the extraction of cannabinoids. Cannabidiol (CBD) is a non-intoxicating cannabinoid, and clinical trials have proven it reduces seizures in epileptic children. However, extracting cannabinoids like CBD from hemp without trace levels of THC is nearly impossible.

Gov. Newsom is targeting intoxicating hemp products, including those made by chemically converting CBD into forms of THC. However, Newsom does not distinguish between intoxicating products and those with proven therapeutic value. As a result, the standard of “any detectable quantity” would remove CBD therapies from the market even though they pose no threat of intoxication.

The proposal would harm families like Paige and Matt Figi’s, who turned to CBD to treat their daughter, Charlotte, whose severe epilepsy resisted conventional therapies. By age 5, Charlotte was suffering 300 seizures a week and lost the ability to walk, talk, and eat on her own. Hospitals told Charlotte’s parents there was nothing more they could do. The Figis tried CBD, and from that first treatment until her death at age 13 due to suspected COVID-19, the Figis say Charlotte was virtually seizure-free.

Charlotte’s story helped spur medical cannabis legalization across the country. Today, 38 states have legalized some form of medical use, and nine have specifically legalized CBD. Yet, Newsom’s plan would block families like the Figis from accessing this life-changing therapy.

States that have legalized marijuana often impose onerous and costly restrictions due to ongoing federal marijuana prohibition. With federal hemp legalization, however, hemp manufacturers can operate free of both federal rules and state marijuana regulations. Ironically, restrictions on marijuana sales allow hemp manufacturers to offer intoxicating products that compete with marijuana at more outlets and lower costs.

In 2024, over 10 states enacted legislation regulating hemp-derived cannabinoids, and many states are considering similar proposals. Most of these bills have focused on barring sales to minors, ensuring product safety, limiting THC content, and restricting sales of intoxicating hemp to licensed dispensaries. But no state has gone as far as banning hemp products with any detectable THC, as Gov. Newsom proposes.

Newsom previously backed legislation that would have regulated hemp products, imposing rules on hemp similar to those governing marijuana, including manufacturing and labeling standards, limiting sales to dispensaries, and capping THC at 0.3% total or no more than 1 milligram per container. But that measure failed, in part due to concerns raised by patients and parents like the Figis, who feared that forcing all CBD sales into the dispensary system would lead to prohibitively high prices and strip access entirely for many patients since many Californians live more than 100 from the nearest dispensary.

Newsom’s concerns about consumer safety and youth access to intoxicating hemp products are valid. But a ban goes unnecessarily far and will undermine his goals. It would strip patients of access to vital therapies and push consumers toward illicit products without oversight.

If protecting consumers is the goal, California should heed the lessons it learned from legalizing marijuana. Rather than a ban, California should require hemp producers to adhere to the same testing and labeling standards as marijuana and limit sales of intoxicating products to retailers with track records of age-gating adult products.

At the same time, the state should reduce burdensome regulations on marijuana businesses, enabling them to compete in an evolving cannabinoid landscape. By striking this balance between safety, access, and fairness, California can protect patients, consumers and marijuana businesses without restricting access to life-changing cannabis therapies.

A version of this column first appeared in the Orange County Register.

The post California’s emergency hemp rules could block access to life-saving therapies appeared first on Reason Foundation.

South Dakota Measure 29 proposes a statutory initiative that would protect the right of adults aged 21 and older to possess up to two ounces of marijuana and up to 16 grams of marijuana concentrates without civil or criminal penalty. It would also allow individuals to grow up to six marijuana plants in a secure, locked location within their home. If multiple adults live within a single household, they would be able to cultivate no more than 12 marijuana plants. Smoking marijuana in public places would be prohibited. Employers would not be required to accommodate employees’ marijuana use, nor would employers be prevented from forbidding marijuana use by employees. 

Measure 29 does not authorize a commercial market for marijuana, nor does it require the legislature to do so. Passage of Measure 29 would, therefore, not result in the emergence of commercial marijuana growing facilities or dispensaries. Instead, Measure 29 protects the rights of individuals to deliver, transfer, or sell marijuana to each other. Presumably, individuals would procure this marijuana through their ability to grow a limited amount in their private residence. 

Fiscal Impact 

Legislative staff has not developed a fiscal impact statement for Measure 29. The measure should not affect state or local revenues because it levies no fees or taxes. However, it may result in cost savings for law enforcement, courts, and jails, which needn’t arrest, try, or detain individuals for possession of small amounts of marijuana. 

Proponents’ Arguments 

South Dakotans for Better Marijuana Laws is the organizer of Measure 29. It argues that marijuana legalization would: 

• Lead to less teen cannabis use if South Dakota follows the trend in other states that have legalized.  

• Improve the rate at which police solve violent crimes by freeing up resources from marijuana enforcement.  

• Lead to fewer accidents from marijuana impaired driving if South Dakota follows the trend in other states that have legalized.  

• Lower rates of alcohol, nicotine, and pain reliever misuse among young adults. 

• Allow people who have difficulty acquiring a medical marijuana card to gain access to marijuana products.  

Matthew Schweich, head of South Dakotans for Better Marijuana Laws, also told the Associated Press, “I think for me, the strongest reason at its core is that if we’re going to allow alcohol to be legal in our society, then it makes absolutely no sense to punish people for using cannabis because alcohol is more harmful to the individual and to society than cannabis.” 

Opponents’ Arguments 

The Catholic dioceses of South Dakota released a joint statement in opposition to Measure 29 warning that marijuana has become more potent since the 1970s and that it can lead to mental health problems. The diocese claims that “youth consumption of marijuana has increased significantly in states that have legalized recreational marijuana” and that this is a major public health concern. More broadly, the dioceses claim, “There is abundant evidence that marijuana contributes to a host of problems that weaken the social fabric of society.” 

Protecting South Dakota Kids is an advocacy organization formed to oppose Measure 29. It claims that Measure 29 is intended “to mislead voters on the ‘merits’ of legalizing a dangerous drug.” The organization continues by claiming that marijuana leads to child abuse, teen suicide, and traffic fatalities, and addiction. 

The South Dakota Republican Party adopted a resolution in June 2024 urging “all party members and Republican organizations to lend whatever practical support they can to assist in the campaign to defeat Initiated Measure 29.” 

Discussion 

This year will be the third consecutive ballot cycle in which South Dakota voters will consider recreational marijuana legalization. In 2020, voters approved a constitutional amendment that legalized possession of marijuana for adults and required the legislature to authorize sales of hemp and medical marijuana. After passage, Gov. Kristi Noem challenged that initiative in court, arguing that it violated the constitutional requirement for an initiative to only address a single subject. Circuit court Judge Christine Klinger struck down the approved amendment on that basis in early 2021, with the state supreme court later upholding her ruling. 

Organizers responded by qualifying Measure 27 for the 2022 ballot. That proposal was similar to Measure 29 this year in that it only legalized the possession and home cultivation of marijuana in order to avoid a challenge under the single-subject rule. Measure 27 was rejected by 52.9% of South Dakota voters. 

Twenty-four states now sanction a recreational marijuana marketplace for adults aged 21 and over, and 38 states sanction a medical marijuana market. Although California voters were the first to approve a medical marijuana law in 1996, regulated marijuana marketplaces now exist in states that lean both Democrat and Republican. Each market operates somewhat differently, but some conclusions can be drawn from the group of states that offer a recreational marijuana market: 

• Teen Use: A study published by the American Medical Association in April 2024 surveys data from 47 states, including responses from nearly 900,000 research subjects, and concludes that recreational marijuana laws are not associated with any increase in adolescent use. In fact, the data indicate that recreational marijuana laws are associated with “significantly lowered use” among teens. Similarly, the state-administered Healthy Youth Survey of teenage students in Washington State found overall declines in both recent and lifetime use of marijuana by teens since that state’s adult-use marijuana market was approved by voters in 2012. Students also indicated that marijuana has become harder to procure since legalization took effect. These results are consistent with the regulatory goal of age-gating marijuana products, which is not a common practice among illicit sellers. 

• Crime: There has not been a significant difference in the rates of violent crime between states where marijuana is legal for adults and states where it is not. According to FBI crime reports, crime rates in most states with legal marijuana markets have closely tracked the national average, while crime rates in Maine and Nevada declined faster than the national trend and crime rates in Alaska and Massachusetts increased relative to the national trend. 

• Economic Growth: As a group, states with recreational marijuana markets have not experienced a significant difference in economic growth compared to states without recreational marijuana. Economic growth improved slightly in some early legalization states, including Colorado, Oregon, Washington, Nevada and Alaska, but this effect seems to have dissipated as more states launch recreational markets. 

• Tax Revenues: States with recreational marijuana markets collected nearly $3 billion in marijuana-related tax revenues in 2022, according to the Tax Foundation. The Tax Foundation also estimates that nationwide legalization could generate $8.5 billion annually for all states. However, there is a clear tradeoff between generating tax revenue and the other policy goals of legalization, such as displacing illicit sellers and their often violent supply chains. High tax rates create a price difference that places legal marijuana at a disadvantage relative to illicit marijuana. Surveys show that marijuana users strongly prefer legal marijuana products when the prices are competitive but will revert to illicit sellers if the price difference becomes substantial. 

• Mental Illness: A 2020 study published by Yale University and other research institutions finds that recreational marijuana laws are not correlated with any increase in mental health disorders. However, the same study finds that suicide rates among men fell 3.3% following a state’s legalization of marijuana for recreational use, even during a time when suicide rates were rising nationally. This is the only statistically significant mental health outcome associated with recreational marijuana laws in the states. 

Many of these facts directly contradict the claims of opponents of Measure 29. Assuming South Dakota follows a path similar to other states that sanction recreational marijuana markets, youth use should decline while rates of violent crime, economic growth, and mental illness remain roughly the same.  

Despite proponents’ claims, Measure 29 does not authorize any tax or fee, so it would not result in increased tax revenue. However, Schweich has also noted that he hopes the South Dakota Legislature will subsequently authorize a commercial marijuana market if Measure 29 passes and this market could be subject to taxation. 

The post South Dakota Measure 29 would legalize the recreational use of marijuana appeared first on Reason Foundation.

Florida Amendment 3 proposes a constitutional amendment that would protect the right of adults aged 21 and older to possess up to three ounces of marijuana, including up to five grams of marijuana concentrates, without civil or criminal penalty. It would also allow existing licensees under Florida’s medical marijuana program to sell marijuana for recreational use. It would not allow any new businesses to begin producing or selling marijuana within the adult-use market unless the Florida Legislature passes a law to make additional marijuana business licenses available. 

Fiscal Impact 

The Florida Financial Impact Estimating Conference has evaluated the potential fiscal impact on state and local governments of Amendment 3 and concludes:

“The amendment’s financial impact primarily comes from expected sales tax collections…Based on other states’ experiences, expected retail sales of non-medical marijuana would generate at least $195.6 million annually in state and local sales tax revenues once the retail market is fully operational, although the timing of this occurring is unclear…Other potential costs and savings cannot be predicted.” 

Proponents’ Arguments 

Smart & Safe Florida is the advocacy organization supporting the initiative. It argues that legal cannabis can be a key contributor to Florida’s economic development, providing thousands of jobs and contributing to the tax base. The organization argues there is no evidence that marijuana legalization has resulted in greater underage consumption in the states that have authorized a legal marketplace, whereas the illegality of cannabis “perpetuates a culture of criminality.” Finally, in a fully legal marketplace, “Florida users will have accountability, transparency, and regulations in place to ensure products are not laced with or contain potentially deadly chemicals.” 

Country music stars the Bellamy Brothers have also argued in favor of the initiative, claiming that it increases personal freedom. “As we travel the country,” they say, “we see the benefits of adult use, and as Florida residents, we love the ‘freedom state’ moniker and believe that Florida needs to join the millions of Americans whose adults are free to use cannabis without fear of being incarcerated.” 

Opponents’ Arguments 

Florida Governor Ron DeSantis has opposed Amendment 3, calling it “very, very extreme.” He warns, “This state will start to smell like marijuana in our cities and towns” because there would be “no time, place and manner restrictions.” The Florida Freedom Fund, which DeSantis established, has registered to oppose the initiative. 

Florida Attorney General Ashley Moody also tried to get the state supreme court to disqualify the initiative from the ballot, acting at the direction of DeSantis. Moody raised three main arguments in opposition to the measure. First, she argued that the ballot summary is misleading because it gives voters the impression that possession of marijuana would become legal even though it would remain illegal under federal law. Second, she argued the initiative would permit unregulated sales of marijuana. Third, she argued the initiative could mislead voters into thinking Florida’s marijuana marketplace could become more competitive. The Florida Supreme Court rejected all three of her arguments.  

Another political action committee called Vote No on 3 argues that Amendment 3 will encourage crime and result in the unregulated sale of drugs in Florida communities. In a press release, the organization said,

“Amendment 3 will have disastrous downstream consequences that will turn our state into an East Coast version of California. It will threaten the health and safety of every community in Florida by allowing drug dealers to run rampant with zero consequences, creating a dangerous explosion in the black market, and forcing families to completely alter their lives to avoid exposure to secondhand smoke.” 

Discussion 

Twenty-four states now allow a legal recreational marijuana marketplace for adults aged 21 and over, and 38 states allow a legal medical marijuana market. Although California voters were the first to approve a medical marijuana law in 1996, regulated marijuana marketplaces now exist in states that lean both Democrat and Republican. Each market operates somewhat differently, but some conclusions can be drawn from the group of states that offer an adult recreational marijuana market: 

• Teen Use: A study published by the American Medical Association in April 2024 surveys data from 47 states, including responses from nearly 900,000 research subjects, and concludes that recreational marijuana laws are not associated with any increase in adolescent use. In fact, the data indicates that recreational marijuana laws are associated with “significantly lowered use” among teens. Similarly, the state-administered Healthy Youth Survey of teenage students in Washington state found overall declines in both recent and lifetime use of marijuana by teens since that state’s adult-use marijuana market was approved by voters in 2012. Students also indicated that marijuana has become harder to procure since legalization took effect. These results are consistent with the regulatory goal of age-gating marijuana products, which is not a common practice among illicit sellers. 

• Crime: There has not been a significant difference in the rates of violent crime between states where marijuana is legal for adults and states where it is not. According to FBI crime reports, crime rates in most states with legal marijuana markets have closely tracked the national average, while crime rates in Maine and Nevada declined faster than the national trend, and crime rates in Alaska and Massachusetts increased relative to the national trend. 

• Economic Growth: States with recreational marijuana markets have not experienced a significant difference in economic growth compared to states without recreational marijuana. Economic growth improved slightly in some early legalization states, including Colorado, Oregon, Washington, Nevada, and Alaska, but this effect seems to have dissipated as more states launched recreational markets. 

• Tax Revenues: States with recreational marijuana markets collected nearly $3 billion in marijuana-related tax revenues in 2022, according to the Tax Foundation. The Tax Foundation also estimates that nationwide legalization could generate $8.5 billion annually for all states. However, there is a clear tradeoff between generating tax revenue and the other policy goals of legalization, such as displacing illicit sellers and their often violent supply chains. High tax rates create a price difference that places legal marijuana at a disadvantage relative to illicit marijuana. Surveys show that marijuana users strongly prefer legal marijuana products when the prices are competitive but will revert to illicit sellers if the price difference becomes substantial. 

• Mental Illness: A 2020 study published by Yale University and other research institutions finds that recreational marijuana laws are not correlated with any increase in mental health disorders. However, the same study finds that suicide rates among men fell 3.3% following a state’s legalization of marijuana for recreational use, even during a time when suicide rates were rising nationally. This is the only statistically significant mental health outcome associated with recreational marijuana laws in the states. 

The Florida Supreme Court rejected Attorney General Ashley Moody’s legal arguments against Amendment 3, allowing it to proceed to the ballot. Moody first argued that the initiative would mislead voters into believing marijuana would be legal under federal law. In fact, the initiative expressly informs voters that it “does not change, or immunize violations of federal law” and only changes state law.  

Second, Moody argued Amendment 3 would authorize unregulated sales. In reality, Amendment 3 only authorizes existing medical marijuana licensees to produce or sell marijuana. Any unlicensed manufacture or sale of marijuana would remain criminal. One potential wrinkle is that the existing statutory framework for medical marijuana would expire six months after any new constitutional amendment related to marijuana is adopted. This is not a defect of Amendment 3, per se, but it does require the Florida Legislature to re-authorize or replace the existing regulatory framework. In fact, this parameter was adopted by lawmakers as part of a 2017 law with the idea that the legislature would create a single, unified framework to govern both medical and recreational marijuana sales. 

Third, Moody argued Amendment 3 might mislead voters into thinking there would be additional competition in the marijuana marketplace. However, Amendment 3 is clear that only existing medical licensees would be permitted to manufacture or sell marijuana for recreational purposes unless the legislature passes a law allowing for new entrants. 

Despite claims by Gov. DeSantis that the “time, place and manner” of operations for marijuana licensees would not be regulated under Amendment 3, the Florida Legislature can implement these regulations at any time. The language of the amendment expressly says, “Nothing in this amendment prohibits the Legislature from enacting laws that are consistent with this amendment.” There is also no limitation within the amendment that constrains a city or county from implementing these types of regulations. Indeed, it’s generally inadvisable to include such specificity within a constitutional provision, and these details are usually left to elected officials or regulators so they can respond to regulatory needs as they emerge. 

The post Florida Amendment 3 would legalize recreational marijuana appeared first on Reason Foundation.

In many states, the possession of marijuana is now permitted, but it remains illegal under the federal Controlled Substances Act. The federal Gun Control Act of 1968 also prohibits people who have unlawfully used controlled or scheduled substances from possessing firearms. Courts have been divided over whether a marijuana user complying with state law should be considered an “unlawful” drug user for federal firearm regulation.

Even if the federal Drug Enforcement Agency (DEA) moves marijuana from Schedule I to Schedule III in the Controlled Substances Act, as it seems poised to do, any user without a valid prescription could be considered an “unlawful” user by federal standards. Even state-registered medical marijuana patients may not be clear because prescriptions are also federally regulated.

There is no clear evidence that medical marijuana patients are any more disposed to engage in violent crime than other groups. On the contrary, the available evidence indicates that medical marijuana is associated with slightly lower crime rates.

While this issue continues to be debated in federal courts, many lawmakers at the state and federal levels have proposed legislation to resolve this apparent conflict. Several states have considered legislation that would either conform state firearm regulation to federal standards or instead protect a state-legal marijuana user’s right to own a firearm under state law.

Let’s explore the evolution of federal laws involving gun ownership for individuals using marijuana legally under state laws, and discuss recent efforts by state legislators to address and reconcile discrepancies between state and federal regulations.

Who is an “unlawful” marijuana user?

Federal courts have reached inconsistent conclusions about whether a person who uses marijuana following state law should be allowed to purchase or possess a firearm.

Federal courts’ understanding of the Second Amendment needed to adapt to the U.S. Supreme Court’s 2022 decision in New York State Rifle & Pistol Association Inc.  v. Bruen. The plaintiffs in Bruen, the New York State Rifle & Pistol Association and two individuals, challenged New York’s requirement that applicants demonstrate “proper cause” to obtain a concealed carry license.

In a 6-3 opinion written by Justice Clarence Thomas, the Supreme Court ruled that this requirement was unconstitutional, concluding that the Second Amendment protects an individual’s right to carry a handgun for self-defense outside the home. The majority decided that regulations on the right to bear arms should be consistent with the nation’s historical traditions.

This Supreme Cout decision has led to new questions about whether barring marijuana users from purchasing or possessing firearms is consistent with historical American approaches to firearm regulation. In at least one case, a federal district court has ruled that this ban is inconsistent with the standard set in Bruen.

In 2022, Oklahoma resident Jared Harrison was charged with unlawful possession of a firearm after an officer of the Lawton Police Department found marijuana and a handgun in his car. Judge Patrick Wyrick of the U.S. District Court for the Western District of Oklahoma dismissed the indictment, ruling that the federal statute banning “unlawful” users of cannabis from possessing firearms violated the Second Amendment. Wyrick emphasized that marijuana use lacks the consequences (like violent behavior) historically used to justify firearms regulation, stating that “mere use of marijuana does not indicate that someone is in fact dangerous, let alone analogous to a ‘dangerous lunatic.’”

In the case of United States vs. Daniels, a Mississippi resident, Patrick Daniels, was convicted of possessing a firearm after he was deemed an “unlawful user” of marijuana in 2022. Daniels admitted to smoking marijuana multiple days per month, leading to his conviction. However, the government did not provide evidence of his intoxication at the time of arrest or specify when he last used marijuana.

The Daniels case touches both the broad question over whether his conviction aligns with the historical tradition of firearm regulation in the United States, as well as the narrower issue of whether a person must be actively impaired for the prohibition to apply.

The Fifth Circuit Court overturned Daniels’ conviction in August 2023, arguing that disarming a sober citizen solely based on past drug use lacks historical precedent in American jurisprudence. More broadly, the court concluded, “… [M]ore generalized traditions of disarming dangerous persons [do not] support this restriction on nonviolent drug users.”

In other words, the Fifth Circuit concluded both that the government could not restrict gun ownership for marijuana users during periods of sobriety and that the government could not restrict gun ownership for marijuana users at all.

A fourth case decided before the Supreme Court’s decision in Bruen adds to the legal complexity: While individuals with medical marijuana cards are prohibited from purchasing firearms under federal regulations, those who already possess firearms are still able to obtain a state medical marijuana card.

In Wilson v. Lynch (2016), S. Rowan Wilson was denied the purchase of a firearm by a Nevada gun dealer because she held a state-issued medical marijuana card. This rejection came after a 2011 letter from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) directed gun dealers to consider medical marijuana cardholders as unlawful users of a controlled substance. Wilson filed a lawsuit alleging that the ATF rule violated her First, Second, and Fifth Amendment rights. The lower courts dismissed her case twice, and on her second appeal, the Ninth Circuit affirmed the lower court’s dismissal.

The court contended that under federal law, marijuana is a Schedule I controlled substance, and users are prohibited from purchasing firearms due to the increased likelihood of violence associated with drug use.

Wilson argued that she did not use marijuana but held the card to support the political cause of legalization. Wilson’s argument was rejected, as the court deemed the restriction on firearm purchases did not impede her ability to advocate for marijuana legalization through other means. Her Fifth Amendment claim also failed, as the court ruled there is no constitutional right to hold a medical marijuana card and also purchase a gun. The court concluded that Wilson could either forfeit her card to buy a firearm or keep her card and forgo new firearm purchases, prioritizing the federal government’s interest in regulating firearm sales over her individual rights in this context.

The same fight occurred in the U.S. District Court for the Northern District of Florida, where the Florida Department of Agriculture and Consumer Services commissioner and three Florida residents filed suit in April 2022. In the case Fried et al. v. Garland et al., pending in the U.S. District Court for the Northern District of Florida, plaintiffs challenged whether medical marijuana use under state law should prevent individuals from exercising their Second Amendment rights.

The U.S. Department of Justice has filed a motion to dismiss, arguing that medical marijuana patients are too dangerous to own firearms, citing concerns about public safety.

The two plaintiffs are registered medical marijuana patients and are barred from purchasing a firearm. One plaintiff owns a firearm and would like to use marijuana for medical reasons. Will Hall, an attorney with the Dean, Mead & Dunbar firm representing the plaintiffs, told The News Service of Florida that the Supreme Court ruling puts the onus on Garland’s office to justify the gun denial.

Last year, before the U.S. Court of Appeals for the Eleventh Circuit panel, Hall argued that banning people who use medical cannabis from owning guns is inconsistent with historical firearm regulations and the original context of the Second Amendment. The Department of Justice (DOJ) argued in response that early laws restricting gun rights over drunkenness and mental illness provide a historical basis for the ban.

“Our reading of the case is [that] the federal government has to show that this regulation, which is basically treating medical marijuana patients as if they are just, per se, too violent to possess guns, has some kind of historical tradition, and we just don’t see it,” Hall said.

Hall said Fried’s legal team scoured the issue to see if there was “any equivalent regulation” in the distant past, but they couldn’t find any. “There’s really no equivalent for what we have in medical marijuana now, which is that the states have made it legal and the federal government has, not just through a letter or some promise but through law, said we will protect those programs from interference.”

Although an opinion hasn’t yet been delivered, during oral arguments the judges questioned the DOJ’s classification of these state-registered medical cannabis patients as not law-abiding.

States considering legislation to allow firearm possession by marijuana users

In 2024, several states introduced bills that directly challenge the DOJ’s position, though, as with drug legalization, states cannot stop the federal government from continuing to enforce its ban.

In Minnesota, where adult-use marijuana is legal, state legislators introduced companion bills House File 657 and Senate File 89. According to the Minnesota legislation, a patient enrolled in the medical cannabis registry will not be considered an “unlawful user” of a controlled substance under state law. Participation in the medical cannabis registry does not disqualify individuals from possessing firearms and ammunition.

The bills specify that a sheriff cannot deny a permit to carry solely based on the applicant’s enrollment in the medical cannabis registry or use of medical cannabis for a qualifying condition. Further, any state paperwork used to approve or disapprove a person’s eligibility to purchase, own, possess, or carry a firearm must allow qualifying patients to refrain from reporting their use of medical cannabis.

However, the bill adds that individuals enrolled as patients in the medical cannabis registry who use medical cannabis and know or have reason to know that it can cause impairment will still be prohibited from carrying a pistol in a public place.

A Maryland House committee heard testimony on House Bill 0296, which seeks to ensure that registered medical marijuana patients in Maryland can purchase, own, and carry firearms, regardless of their cannabis use.

Testimony during the hearing on Maryland’s bill largely featured veterans and advocates, including Army veteran Randall Cody Floyd, who emphasized the disparity between firearms policies for medical cannabis users and those using prescription opioids. Floyd stated, “Basically I chose my medical cannabis card over my gun rights, and I should not have to do that. I can get my carry permit with prescription opioids or painkillers, but for something that I choose that’s a less harmful route, I can’t own a gun. Why is that?”

Mark Pennak, president of Maryland Shall Issue, a gun rights advocacy group, cautioned that even if H.B. 0296 passes, federal law still criminalizes cannabis users’ firearm ownership, exposing them to arrest and potential felony charges. Gun dealers may also refuse sales to individuals acknowledging marijuana use, regardless of state law.

The companion legislation, Senate Bill 0348, passed the Maryland Senate with strong bipartisan support. If enacted, the law would take effect on October 1.

In Kentucky, where marijuana use is permitted solely for medical purposes, lawmakers proposed Senate Concurrent Resolution 44, urging the United States Congress to “repeal federal restrictions that prohibit the possession and use of firearms by individuals who use marijuana in compliance with state or tribal laws.”

States seeking to conform to federal law

On the other hand, some lawmakers have worked to align their states with the federal ban, introducing bills that ensure medical marijuana users will not be permitted the right to bear arms unless marijuana is federally legalized.

South Dakota and West Virginia both introduced bills that, if passed, would require that each application for a medical marijuana registry identification card and renewal card include a notice that informs medical marijuana applicants that “[U]ntil marijuana is legalized under federal law, an individual who is a current user of marijuana is, under federal law, an unlawful user of a controlled substance; and, Federal law does not exempt the use of marijuana for medicinal purposes.”

South Carolina lawmakers also affirmed these federal gun restrictions in proposed legislation to authorize a medical marijuana market. That bill, H. 346, passed the state Senate this spring but stalled in the House. This legislation was carried over from prior sessions and is likely to be reintroduced again next year. If eventually passed, medical marijuana patients will receive a flier notifying them of their inability to possess a firearm. Additionally, legislators will require a statement signed by qualifying medical cannabis applicants declaring that the individual is not employed in, or contracted to perform, any job in which the person will carry a weapon, including a firearm.

Elsewhere, Idaho legislators introduced a bill that explicitly states, “a license to carry concealed weapons shall not be issued to any person who is an unlawful user of marijuana.” Idaho is one of only five states that prohibits the use of marijuana of any kind, including for medicinal purposes.

Federal bills

There have also been attempts in the U.S. Congress to alter the federal approach to firearm regulation for marijuana users, particularly for veterans.

Last year, Rep. Alex Mooney (R-W.V.) introduced House Resolution 363: The Second Amendment Protection Act, while Rep. Brian Mast (R-Fla.) introduced House Resolution 2772: The Gun Rights and Marijuana (GRAM) Act. Both seek to remove federal firearms-related restrictions for individuals who live in a state or on lands where adult marijuana use is legal under state or tribal law, given that an individual’s marijuana use does not violate state or tribal laws.

Rep. Mast stated, “Addressing this issue is of particular importance to the veteran community,” adding, “No veteran that I know wants to be forced to choose between a viable treatment option for conditions like PTSD, and the ability to protect themselves and their families. The GRAM Act is about ensuring no one has to make that choice.”

Both bills were referred to the House Committee on the Judiciary and have not seen further progress. However, it is not uncommon for legislation addressing issues like cannabis and firearms to face hurdles in the legislative process.

Conclusion

Federal case law around the Second Amendment has generally prohibited the possession of a firearm by a person who is considered a risk to themselves or others, as well as by a person convicted of committing or threatening a violent crime.

Many states are recognizing that marijuana is safe to consume with minimal abuse risk. The mere use of marijuana does not indicate that someone is dangerous or suffering a mental health condition that would inhibit them from gun ownership.

There is no clear basis for restricting an individual’s right to possess a firearm due to marijuana consumption, particularly in light of the Supreme Court’s new standard that firearm regulation remains consistent with historical precedent. Alcohol users do not confront a blanket prohibition against firearm ownership; they are barred from carrying a firearm while actively intoxicated. A similar standard should be applied to marijuana users, and this standard should be consistent at the state and federal levels.

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We applaud President Joe Biden for requesting the Drug Enforcement Administration (DEA) to initiate a rescheduling hearing for marijuana on October 6, 2022. We are further pleased with the review of scientific literature subsequently undertaken by the U.S. Department of Health and Human Services (HHS) that resulted in a series of binding conclusions that marijuana has accepted medical use and holds lesser potential for abuse than other substances currently listed in Schedules II under the Controlled Substances Act (CSA). The Attorney General’s Office of Legal Counsel has advised that any requirements imposed by international treaties to which the United States is a party to make a substance contraband cannot supersede the scheduling procedures set forth elsewhere in the Controlled Substances Act. In other words, the DEA holds impeded authority to determine the proper scheduling of marijuana under the criteria outlined in 21 U.S.C. 811(a) through (c). HHS has recommended marijuana be moved to Schedule III, and we are commenting on the DEA’s regulatory hearing to consider this recommendation.

The DEA has specifically solicited public input on the possible “unique economic impacts” of rescheduling, given that “marijuana is subject to a number of State laws that have allowed a multibillion dollar industry to develop.” Reason Foundation has published extensive research on the possible economic impacts of moving marijuana to Schedule III and is uniquely positioned to inform this request by the DEA.

Full comment: A Schedule III designation is still overly restrictive for marijuana

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When Alaska voters approved an adult-use recreational market for marijuana in 2014, the initiative they approved included a wholesale excise tax of $50 per ounce, or $800 per pound, which places Alaska among the highest taxed states for legal marijuana. As originally proposed, HB 119 would have reduced this tax rate by 75%, down to $12.50 per ounce and imposed a new 3% retail sales tax on marijuana products. An amendment adopted on the House floor prior to passage increased the proposed retail sales tax to 7%.

The amended bill garnered overwhelming support in the House, passing with a vote of 36-3, and has been assigned to the Senate Finance Committee. The legislation reflects the recommendations of a task force convened by Gov. Mike Dunleavy in 2022 to study the state of the industry and recommend improvements. Brandon Emmett, a task force member who works in the industry, told the House Labor and Commerce Committee:

I can tell you with a high degree of certainty that [marijuana] is still much cheaper on the black market. Alaska’s taxes and the burden on businesses from the Marijuana Control Board is causing prices to stay high and businesses to be uncompetitive.

Emmett went on the say he believes 40 to 50 percent of marijuana sold in Alaska is from unlicensed vendors because the illicit market offers better prices.

A legislative aide also told committee members that marijuana tax revenue is declining in Alaska and that lower tax rates could eventually result in greater tax revenue as a greater proportion of transactions migrate to the legal market in response to lower prices and become subject to taxation.

These observations highlight two common, but conflicting, goals of marijuana legalization. Legalization advocates aim to displace an unregulated and potentially dangerous illicit market with an orderly legal market. Many policymakers are focused instead on generating substantial new tax revenues on legal marijuana sales. To the extent that the cost of taxes and regulations raise the price of legal marijuana goods relative to competing illicit goods, however, consumers and producers may choose to remain in the illicit market, undermining legalization entirely.

A recent large-scale survey published in the Journal of Studies on Alcohol and Drugs of consumers across the United States and Canada found that marijuana users prefer legal products when prices are comparable to those in the illicit market. However, if the price of legal products increases above that of illegal products, consumers tend to revert to the illicit market. Among 50,000 respondents, 17,000 had purchased marijuana in the past year, and 12,000 of these had bought illegal marijuana, citing price as the primary reason.

In 2022, Reason Foundation analyzed the impact of state and local cannabis taxes in California on the decisions of producers and consumers to participate in the legal market. The analysis revealed that the total effective tax per pound of cannabis ranged from $677 to $1,440, depending on the jurisdiction. These taxes exceeded the estimated wholesale production cost of $564 per pound, pushing two-thirds of marijuana transactions in California to the illicit market in 2021, resulting in no tax revenue from these transactions. Our modeling indicated that eliminating California’s statewide cultivation tax would accelerate market growth for legal retailers, increasing transactions subject to retail excise and sales taxes. By December 2024, we projected that cannabis tax revenues would grow to 223% of their March 2022 levels, even without the cultivation tax. California adopted this change, eliminating the cultivation tax in June 2022.

A key lesson is that taxes influence behavior and excessive taxes can lead to reduced revenues by encouraging individuals to avoid the taxed behavior altogether. In the case of marijuana, individuals may simply choose not to buy legal goods.

Reason Foundation acquired proprietary data from market analytics firm New Frontier Data that estimates the size of the legal versus illicit market in Alaska. This data, plotted below, shows that illicit sales in Alaska still account for 62% of the state’s overall marijuana market. Roughly $200 million in illicit sales are forecast to occur in 2024 compared to only $125 million in legal sales.

Alaska has a long way to go for its orderly and legal marijuana market to displace the illicit market. A critical plank in its strategy should be to reduce the tax-induced price disparity between legal and illicit goods. Legislative staff has recognized this reality, affirming testimony submitted by Reason Foundation. It’s encouraging that Dunleavy and House lawmakers have supported the effort to reduce Alaska’s punitive taxes on legal marijuana.

The post Alaska considers much needed reduction in marijuana taxes appeared first on Reason Foundation.

First, drugs currently in Schedule I are those deemed to have no “medically accepted uses” and a high potential for abuse. A move to Schedule III serves as a recognition of cannabis’ medicinal value and relatively low potential for abuse compared to substances in Schedule I, like heroin, and Schedule II, like fentanyl. This acknowledgment aligns with mounting scientific evidence supporting the therapeutic utility of cannabis for various medical conditions. Rescheduling could lead to increased access to medical cannabis for patients suffering from chronic pain, epilepsy, PTSD, and other ailments, potentially improving their quality of life, particularly those living in one of the 13 states that have yet to authorize legal cannabis sales in any form. Moreover, by easing barriers to medical research, the move may lead to an increase in the number of conditions cannabis may treat, as well as improvements or innovations in its effects, safety, and efficacy. 

In the immediate term, the cannabis industry would be the greatest beneficiary of the move. By placing cannabis in Schedule III, cannabis businesses would gain increased access to traditional banking services and investment capital. More importantly, perhaps, a move to Schedule III would allow licensed cannabis businesses to deduct business expenses from their tax burden, an allowance afforded to other lawful industries. The increased investment and reduced costs could increase financial stability and stimulate spending within the industry, leading to more jobs, reinvestment into local economies, and increased tax revenue.

Lastly, one little-discussed positive effect of reclassifying cannabis is the future impact it may have on other controlled substances, such as psychedelics. Traditionally, federal agencies have used FDA approval as proof that a drug has “medically accepted uses.” In fact, in previous attempts to reschedule cannabis, both the FDA and the DEA determined that only FDA-approved drugs with cannabis components could be moved to a lower schedule, not the entire plant. That federal health and drug agencies now recommend moving the entire cannabis plant to Schedule III signals a significant shift that could open the door for reform regarding other Schedule I substances, such as psilocybin and MDMA. 

Despite the positive impact of moving cannabis to Schedule III, there are also possible drawbacks. For one, the move does not “legalize” cannabis at the federal level nor would it bring state-authorized cannabis industries into compliance with federal law, leaving consumers and businesses open to criminal penalties. While the move would reduce schedule-specific penalties, it would not eliminate them or adjust penalties that apply specifically to marijuana, such as quantity-based mandatory-minimum sentencing requirements. 

Similarly, while Schedule III drugs, unlike Schedule I, can be lawfully dispensed, a valid prescription is required. Traditionally, drugs in Schedule III — like anabolic steroids and ketamine — may only be legally prescribed after receiving FDA approval. How feasible this approval process might be will depend largely on how the FDA chooses to exercise its regulatory authority over cannabis products. If the FDA opts to treat cannabis like other pharmaceutical drugs, the approval process for which can take up to 15 years and cost over $1 billion, it would likely devastate state cannabis markets and drastically reduce the products available to consumers. FDA may choose to adopt an alternative pathway for cannabis product approval that would better balance requirements for efficacy and safety against consumer access, but this would likely require action by Congress. 

The prospects and perils of cannabis’s reclassification are profound. It may unlock significant benefits for patients, businesses, and the broader economy. Yet, it does not address the ongoing conflict between state and federal law, continues to leave consumers and state-authorized cannabis markets vulnerable to federal prosecution, and raises a host of new complexities surrounding regulatory oversight of cannabis.

In this pivotal moment, it is increasingly evident that responsibility for resolving the ongoing uncertainties surrounding cannabis’ legal status ultimately rests with Congress. If anything, the move to reschedule cannabis demonstrates a need for and interest in comprehensive drug reform. An easy first step that could resolve many of these complexities regarding cannabis would be for Congress to remove it from the list of controlled substances entirely and leave its regulation to the states. 

A version of this commentary first appeared in The Hill.

The post The prospects and perils of rescheduling cannabis appeared first on Reason Foundation.

The recent news that the Drug Enforcement Administration plans to reclassify cannabis into a less restrictive category under federal law could provide some much-needed financial relief to licensed California cannabis businesses. However, more action is needed from state and local lawmakers if the industry is to serve Californians better and reach its full potential.

If cannabis is rescheduled under the federal Controlled Substances Act, legal marijuana businesses in California will see a reduction of federal tax burdens and improved access to investments. Currently, cannabis is federally prohibited as a Schedule I drug, the most restrictive category, locking state-licensed cannabis businesses out of many traditional banking services and limiting investor interest. Moving marijuana to the less-restrictive Schedule III could grant cannabis businesses greater access to financial services.

Perhaps more importantly, the move would finally allow state-sanctioned cannabis businesses to deduct ordinary business expenses–such as payroll and rent–from their federal corporate income taxes. Such deductions are afforded to other legal businesses but barred for those trafficking in federally controlled drugs categorized as Schedule I or Schedule II substances. As a result, state-licensed cannabis companies have been paying an effective tax rate upwards of 70%.

While California’s marijuana businesses may gain critical relief from lower federal tax burdens, rescheduling cannabis won’t address the myriad of other taxes, fees, and compliance costs imposed by state law. California’s cannabis dispensaries must also pay a statewide marijuana retail tax of 15%, a general sales tax of 7.25%, and local taxes in most jurisdictions.

A Reason Foundation analysis compared local tax assessments across California counties and showed the cumulative local taxes per pound of marijuana range from $51 in Santa Cruz County to $814 in Solano County. Cannabis companies also pay licensing and application fees. State and local laws also impose elaborate rules on cultivation, retailing, transportation, manufacture, testing, facilities, security, environmental compliance, and other aspects of cannabis operations, all of which add to high start-up and operation costs that make it harder for new businesses to enter the market and nearly impossible to earn a profit.

Those tax and compliance costs get passed onto consumers. According to some estimates, taxes alone account for upwards of upwards of 40% of the final price of legal marijuana in California. Legal producers compete directly with illicit ones that have established market share over decades. Illicit cannabis operations are not subject to the taxes and compliance costs faced by their licensed counterparts and often offer lower prices to consumers. As a result, years after legalization, illegal sales continue to account for around two-thirds of marijuana sales in California.

Fortunately, Gov. Gavin Newsom and the legislature began addressing these problems with significant reforms in 2022. The state followed the Reason Foundation’s recommendations by eliminating the wholesale cultivation tax and restructuring the state’s retail excise tax. However, reducing the statewide excise tax and local taxes is necessary for cannabis legalization to succeed.

Lawmakers should also refrain from creating costly new regulatory hurdles they’ve recently considered, such as prohibiting modular buildings on the premises of marijuana businesses or creating an ever-expanding list of banned words that cannot be used in cannabis product branding.

The DEA’s rescheduling of marijuana would be a welcome step in helping the state’s legal cannabis market compete and succeed. Still, California lawmakers need to do their part by reducing taxes and unnecessary regulations on legal cannabis products.

A version of this commentary first appeared in The Orange County Register.

The post Marijuana rescheduling is good news, but California still needs to reduce state taxes and regulations appeared first on Reason Foundation.

Now, in 2024, several more states are considering the legalization of recreational cannabis, the medicinal use of cannabis, or the decriminalization of marijuana.  

Big action states with proposed bills to legalize recreational cannabis use 

New Hampshire: New Hampshire is the only northeastern state that has not yet legalized and regulated the adult-use marijuana market. The New Hampshire House of Representatives recently passed House Bill 1633 a bipartisan proposal that would license private entities to engage in commercial cannabis activities. That legislation is competing with a proposal backed by Gov. Chris Sununu and state Senate Republicans that would see the state’s liquor commission operate a retail monopoly over adult-use cannabis. 

North Carolina: North Carolina’s House Bill 626 would legalize the possession and sale of cannabis. Its preamble declares, “[C]annabis prohibition, like alcohol prohibition before it, has been a wasteful and destructive failure.”

The bill would authorize an unlimited number of cannabis licenses for qualifying entities and would not allow application fees to exceed $5,000. However, it would levy a relatively high retail excise tax on cannabis products of 30% and would allow local governments to ban any commercial cannabis activity. 

Hawaii: Hawaii came very close to enacting an adult-use market for marijuana earlier this year. After lawmakers debated multiple proposals for legalization the year prior, the Hawaii attorney general’s office hosted a working group with leaders from the legislature during the interim to develop language that might secure a legislative consensus. Reason Foundation consulted with key lawmakers throughout this process and made extensive recommendations on the language contained in the ultimate bill, Senate Bill 3335, and also published an analysis of the existing cannabis market in Hawaii to help inform the debate. This legislation was ultimately voted down in its final committee of jurisdiction, the House Finance Committee, although it advanced farther than any prior legalization proposal in Hawaii. 

Pennsylvania: In Pennsylvania, House Bill 1080 and House Bill 1082 are competing proposals to legalize and regulate cannabis sales for adults aged 21 and older.  Both bills were assigned to the House Health Committee in May 2023 and remain alive but have not received a committee hearing.   

House Bill 1080 would allow individuals aged 21 and above to possess, consume, cultivate, and purchase cannabis from state-operated stores under the management of the Pennsylvania Liquor Control Board. Retail cannabis sales would be subject to a 19 percent tax rate, with all generated revenue directed towards the state general fund. HB 1080 also introduces a specialized regulatory framework for industrial hemp. 

Pennsylvania HB 1082 would create a recreational cannabis market with licenses granted to farmer-growers and grower-processors. It would limit licensing fees to $2,500 and impose only a modest 1% excise tax on the gross receipts of licensees. However, the bill would empower the regulatory authority to impose minimum capitalization requirements for licensure, which can be a significant barrier to entry into the marketplace. 

West Virginia: West Virginia’s Senate Bill 386 and House Bill 4873 would legalize and regulate cannabis for adults. These measures are identical and would allow counties to create a ballot question proposing cannabis legalization within their jurisdiction. If local voters then approve the ballot question, counties could begin to license commercial cannabis entities and charge a 5% excise tax on retail sales. The state would also establish a regulatory structure and issue licenses that cost no more than $5,000 and charge an additional 15% excise tax.

Senate Joint Resolution 8 is an alternative that proposes a statewide ballot question to create a constitutional right for West Virginians to possess up to two ounces of marijuana. None of these proposals has received a committee hearing yet.  

Medium action states introducing bills to legalize medical cannabis 

The first state to effectively legalize medical cannabis was California in 1996 when voters approved Proposition 215. Shortly after, in 2000, Hawaii became the first to legalize medical cannabis through an act of the state legislature. As of today, medical cannabis legalization has spread to more than two-thirds of the states, and more could be poised to join those ranks this year. 

South Carolina: In February, the South Carolina Senate passed Senate Bill 423, which would permit medical marijuana use, mirroring a similar effort in 2022. The 2022 effort failed because that version contained a proposed tax on medical marijuana, and tax bills must originate in the House rather than the Senate. The current version of the bill does not contain a tax but is otherwise highly restrictive. It would not permit home cultivation or smokable marijuana products and would sunset after five years. 

Meanwhile, a separate South Carolina Senate proposal, which has not advanced, proposes an advisory ballot question for the Nov. 2024 general election ballot, allowing voters to weigh in on the legalization of medical marijuana. 

Wisconsin: In Wisconsin, Gov. Tom Evers pushed for full legalization of recreational cannabis going into this legislative session. However, Republican lawmakers have repeatedly rejected calls from Gov. Evers and other Democrats to legalize all uses of marijuana, including medical and recreational.

In response, Gov. Evers conveyed openness to a more limited medical marijuana proposal if it has Republican support. Evers told the Associated Press:

“I would think that getting it all done [marijuana legalization] in one fell swoop would be more thoughtful as far as meeting the needs of Wisconsinites that have asked for it. But if that’s what we can accomplish right now, I’ll be supportive of that.” 

For their part, Assembly Republicans proposed to restrict the sale of medical marijuana solely to state-owned dispensaries. Under the proposal, individuals with qualifying medical conditions could obtain a state-issued medical card to purchase non-smokable marijuana products from only five retail locations across Wisconsin. This limitation, in addition to the prohibition on home cultivation of medical marijuana, would severely restrict patient access and choice. The proposal would also extend the state’s prescription drug monitoring system to the medical marijuana market, adding another layer of regulation and monitoring. 

By contrast, 36 Senate Democrats sponsored legislation to license private entities to engage in commercial cannabis activities and automatically expunge past marijuana convictions. 

Both measures failed to advance before the legislative session concluded in March, although lawmakers have expressed a willingness to hold additional hearings on medical cannabis legalization. 

Indiana: In Indiana, lawmakers have introduced several bills that would permit the use of medical marijuana by individuals with serious medical conditions determined by their physicians. The bills would establish programs for the cultivation, processing, testing, transportation, and dispensing of medical marijuana or cannabis, with oversight from state agencies. In addition, the bills require proper labeling, child-resistant packaging, and testing of products, prohibit packaging appealing to children, and authorize research on medical marijuana or cannabis.  

Tennessee: Tennessee’s Senate Bill 1104, presented by Republican state Sen. Janice Bowling, recently failed in the Senate Judiciary Committee on an almost a party-line vote of 6-3. Both Memphis Democrats on the committee, state Sens. London Lamar and Sara Kyle, were joined by one Republican, Springfield Sen. Kerry Roberts, in support of the bill. 

Georgia: Lawmakers in Atlanta introduced Senate Bill 350, which aims to increase the minimum age for purchasing medical marijuana in Georgia from 18 to 21. 

In 2021, Georgia Gov. Brian Kemp signed legislation to create a unique low-THC medical cannabis program. Patients suffering from debilitating illnesses. such as seizures, terminal cancers, Parkinson’s disease, and post-traumatic stress disorder can apply for a low-THC oil registry card. These registered patients are only permitted to purchase cannabis oils that contain no more than 5% THC. The legislation authorized up to 30 licensed retailers of these products statewide.

Seven Georgia dispensaries are operational, with the first opening in April 2023. Last year, Gov. Kemp authorized regulations that allow traditional pharmacies to sell these products as well, although the federal Drug Enforcement Administration (DEA) warned that dispensing cannabis by pharmacies would violate federal law, potentially leading to arrests or fines. 

Kansas: Kansas Republican Sen. Robert Olson proposed Senate Bill 135, which would allow patients access to medical marijuana with the state, charging a 10% retail excise tax. However, Republican leadership has refused to advance the bill in the Senate and removed Olson from his chairmanship of the State and Federal Affairs Committee after he held hearings on the medical cannabis bill. Although Olson found an ally in Democratic Gov. Cindy Holscher, Olson believes state Senate leadership does not want a bill to pass. 

“The majority of the state [does] want medical marijuana,” Gov. Olson said, according to Marijuana Moment, “and I don’t see a reason why we don’t pass a bill.”

Smaller action states with marijuana decriminalization bills 

In addition to states considering the legalization of cannabis for recreational or medical use, a few have considered decriminalization.

Florida: In Florida, Senate Bill 94 would have reduced criminal penalties for a first, second, or third violation if the offense is the possession of 20 grams or less of cannabis. However, it died in the Senate Criminal Justice Committee on March 8.  

South Carolina: In addition to South Carolina’s medical marijuana bill mentioned above, the House is currently considering a bill to decriminalize possession of 28 grams—one ounce or less—of marijuana, or 10 grams or less of hashish, and to authorize law enforcement to issue a civil citation for possession of that same quantity of marijuana or hashish.   

Conclusion 

State legalization of marijuana continues to gain momentum. In the 26 years since California voters first approved a medical marijuana market and the 12 years since Colorado and Washington voters first approved the legal recreational use of marijuana, numerous states have iterated and developed different governing structures for these markets.

In looking at best practices, some states’ legalization efforts have proven more successful than others in displacing illicit cannabis markets and improving public safety, and it is clear the details of legalization policy matter immensely. 

While marijuana legalization itself is an important step in the right direction, policymakers should ensure marijuana markets are open and competitive and offer legitimate pathways to entrepreneurship for individuals from all walks of life. 

The post Examining the 2024 state marijuana legalization proposals appeared first on Reason Foundation.

We applaud the overall intent of Louisiana House Bill 54, which would create a regulated cannabis market for adults aged 21 and older. Following the passage of an initiative last fall to enact a regulated cannabis market in Ohio, 24 states and the District of Columbia have now legalized the possession of cannabis in amounts reflecting personal use. Nearly all these jurisdictions also provide for a regulated commercial industry to supply consumers with safe and legal products. There is no sign that these states intend to rescind their legal cannabis markets. Polls indicate overwhelming public support for cannabis legalization. In other words, the movement toward marijuana legalization is expected to continue and Louisiana has many legal state marketplaces from which it can glean insights. 

Certain provisions of House Bill 54 are troubling because they would establish substantial barriers to entry that would result in a less dynamic marketplace offering fewer opportunities to entrepreneurs and professionals and fewer options to consumers.

In particular, §4765(A)(1)(a) would limit the total number of producer licenses statewide to 10, while §942(B)(1) would limit the total number of retailer licenses statewide to 40. These limits are arbitrary.

Similar limits in other states have led to public corruption of some state and local officials who award these licenses. Moreover, arbitrary license caps tend to result in market concentration by well-heeled license applicants while entrepreneurs of modest means are frozen out of the industry. As in the markets for all consumer goods, demand is the best regulator of supply. 

In the bill, §4767(C)(1) and §943(B)(1) would allow regulators to charge up to $100,000 for the award of a producer or retailer license. Similarly to license caps, these fees establish a high barrier to entry into the marketplace that ensures only well-capitalized firms gain access.

Together license caps and high fees can impair market dynamism and social equity within the regulated cannabis industry. We recommend that states like Louisiana actively seek to minimize these barriers to entry when legalizing cannabis.

The producer licenses described in §4765(A)(1) would require vertical integration from cultivation to the packaging of retail goods. In most states, cultivation and manufacturing are separate license types because each function requires different forms of capital equipment and expertise to accomplish.

By contrast, a proposal for vertical integration of these functions further elevates the capital requirement necessary to participate in the market because a licensee must have the wherewithal to construct multiple types of facilities and retain the expertise to operate them. Again, this structure would make the market less dynamic. We recommend allowing licensees to operate at the size and scale they can manage by separating these functions into multiple license types. 

In the proposal, §4765(A)(1)(b) would require producer licenses to be geographically apportioned throughout the state. Louisiana lawmakers may be concerned about consumer access to lawful products because so-called “cannabis deserts” can result in a proliferation of illicit activity. However, access can’t be addressed through geographic apportionment of retailers alone. Consumers could not purchase directly from wholesalers so wholesaler location is irrelevant to consumer access.

Cannabis producers often prefer to cluster their operations nearby for two reasons: (a) they can share services like farm labor or security, and (b) they can reduce costs and experience synergies by locating closely to other members of the supply chain. We recommend eliminating the geographic apportionment of producers. 

§4765(A)(1)(d) would require the majority of ownership in a cannabis licensee to belong to individuals who have resided in Louisiana for at least five years. Federal courts have been clear that residency requirements or preferences violate the Dormant Commerce Clause of the United States Constitution, which prohibits state barriers to the free movement of people, capital, and goods. The federal First Circuit Court of Appeals recently struck down residency requirements in Maine.

§947(3) would make it unlawful for a cannabis retailer to sell or give away any consumable product that is not a cannabis product, including pre-packaged food or water. At a minimum, retailers should be able to sell or give away pre-packaged non-alcoholic beverages to prevent dehydration of consumers or employees. 

§947(5) would forbid “entertainment of any type on the premises of a retail location.” Other jurisdictions have shown that retailers can safely provide entertainment and the provision of this entertainment may be a way for licensees to establish their competitive positions. In any case, the language used in §947(5) is overly broad and could be interpreted to mean a retailer cannot display a television set, for instance. 

Many of the provisions contained in Louisiana House Bill 54 are reasonable to achieve the objectives of a regulated cannabis marketplace, including the general powers and duties of the commissioner described in §4764. However, the bill’s scope could also be expanded in positive directions, such as by facilitating financial services, clarifying the regulatory authority and taxing power of local governments, or accommodating home grows.

Key provisions missing from House Bill 54 also include a clarification that cannabis-related contracts are enforceable under Louisiana law, protections for holders of professional licenses who work with cannabis clients, and protections for parents who lawfully consume cannabis. 

The post Louisiana bill would enact a legal cannabis market with high barriers to entry  appeared first on Reason Foundation.

Reason Foundation is committed to ensuring that state-regulated cannabis markets are designed in such a way that they remain dynamic and offer genuine economic opportunity to individuals from a range of backgrounds. Hawaii Senate Bill 3335 contains many constructive components but also would impose unnecessary restrictions on licensing that will raise barriers to entry, limit entrepreneurial opportunities, and inhibit the transition of legacy cannabis suppliers into the regulated marketplace.

We have outlined both the bill’s constructive components as well as potential areas for improvement:

Constructive Provisions

• Basis of licensing decisions: Sec. A-17(3) stipulates that the qualifications for licensure should be “directly and demonstrably related to the operation of a licensed business.”
• Change of ownership: Sec. A-17(17) makes clear that regulations must be designed to facilitate a change in ownership of a licensed business. Many entrepreneurs develop a business with the hope of later selling it to realize their financial goals. This is an important market function.
• Local control: Sec. A-25(a) strikes an appropriate balance for local control of commercial cannabis activity by allowing counties to use zoning ordinances to “place reasonable restrictions on the location of licensed businesses.” This stops short of allowing counties to ban commercial cannabis activity. In other states, local bans on legal sales have created opportunities for illicit sellers to thrive.
• Outdoor cultivation permitted: Sec. A-17(12) makes clear that security requirements cannot preclude cultivation in a greenhouse or outdoor area. These methods of cultivation are less costly and consume less energy. This results in savings to both producers and consumers and makes the legal market more price-competitive with the illicit market.
• Automatic expungement of prior cannabis convictions: SB 3335 has been amended to include Sec. A-63, which provides for the automatic expungement of past convictions for the distribution or possession of marijuana by January 1, 2026. In the interim, individuals can petition to have these convictions expunged. Society should not continue to penalize individuals for actions that are legal today.
• New license types: Sec. A-118 grants the board flexibility to create new types of cannabis licenses not currently specified within the bill. This flexibility is important because it allows regulators to address emergent market needs. For instance, regulators in Michigan used a similar provision to create a temporary cannabis event license once it became clear that such a license type would be necessary.
• Training for drug recognition experts: Sec. A-161(b)(1) directs a portion of cannabis tax revenues to be used for training of drug recognition experts within law enforcement. Research indicates this is the best available method for law enforcement to determine inebriation from marijuana.
• Banking protections: Sec. A-171 protects financial institutions from liability under state law for servicing marijuana licensees as account holders. Subsection (c) also authorizes the cannabis authority to enter into data-sharing agreements with financial institutions once consent has been obtained from a licensee. These agreements will allow financial institutions to access the licensee’s application documents and transaction histories so they can complete know-your-customer requirements and verify that all transactions are legitimate. This form of data sharing is the best measure states can enact to facilitate financial services for cannabis licensees because it eliminates the administrative burdens facing financial institutions to comply with guidance from the U.S. Treasury Department.
• Competitive retail excise tax: Sec. 26 outlines a retail excise tax against cannabis goods at the rate of 10%. Cannabis goods would also be subject to the statewide sales and use tax of 4%. Medical cannabis products would be exempt from excise tax. As can be seen in the table on the following page, this tax structure would be among the most competitive in the nation. Limiting the tax burden is crucial if policymakers hope to displace the illicit market because taxes create a price disparity between legal and illicit goods.

Provisions Needing Improvement

• Residency requirements: Sec. 72(b)(2) and Sec. 72(c)(1)(B) stipulate that any applicants for a commercial cannabis license must have been legal residents of Hawaii for five years. Sec. 72(c)(2)(A) also stipulates that the majority of ownership interest must continuously be held by Hawaii residents. These provisions are clear violations of federal case law regarding the Dormant Commerce Clause and would be subject to injunction. In New York, a federal injunction against similar requirements delayed the issuance of any retail licenses for two years. During this time, unlicensed sellers proliferated and captured significant market share. Art. 1 Sec. 8 of the United States Constitution grants Congress the authority to regulate interstate commerce. The U.S. Supreme Court has interpreted this as an exclusive jurisdiction that prevents states from imposing any barriers to interstate commerce. In 2019, the Supreme Court struck down a Tennessee requirement that applicants for a liquor retail license must be legal residents of the state for at least two years as an unlawful barrier to interstate commerce. This rationale has resulted in injunctions against state cannabis rules by federal courts in Maine, Missouri, and New York. Hawaii should not include similar language.
• License caps: Sec. A-13(6) directs the cannabis control board to study market conditions so it can “determine the maximum number of licenses that may be issued to meet estimated production demand.” Sec. A-75(b) also makes clear that the board will only make a limited number of licenses available at specified times. Limiting the availability of licenses creates an artificial barrier to entry into the legal marketplace and reduces competition among legal providers in a manner that may damage consumer welfare. States that have been most successful in displacing the illicit market, such as Michigan and Oregon, impose no license caps. Moreover, the notion that supply must be targeted narrowly to meet estimated demand incorrectly assumes that cannabis products are fungible. There is a wide variety of product types and quality within the cannabis industry and no two products are identical. Consumers should be free to choose which products succeed in the marketplace. Meanwhile, makers of products consumers choose not to buy will disappear from the marketplace to balance supply and demand. This natural market process should not be overridden by regulators.
• Licensee selection criteria: Sec. A-75(b) directs the board to open a distinct application period each time it plans to make a license available. The board is permitted to change the selection criteria for these licenses in every application period. These criteria could be chosen capriciously and, in the worst case, could enable corruption if criteria are written to benefit a particular applicant. Instances of this form of corruption have proliferated in California, where local governments can establish their own licensing criteria, and these instances of corruption have prompted federal investigations. All licensing decisions should be based on a standard set of qualifications that meet the standard in Section A-17(3) as “directly and demonstrably related to the operation of a licensed business.”
• Licensing fees not specified: Sec. 17(2) delegates the entire fee structure for commercial cannabis licenses to agency rulemaking. Lawmakers should clearly establish the initial fee structure at rates low enough to minimize the barrier to entry and allow illicit producers to easily transition into the legal and regulated market.
• Canopy restriction: Sec. A-112(d) establishes a maximum canopy size for licensed cultivators at 2,000 square feet for an indoor facility and 5,000 square feet for an outdoor facility. These limitations are too small to allow licensees to achieve an economy of scale and will thus result in high production costs relative to illicit cultivators. No state has canopy limitations this small. In Massachusetts and Illinois, the limitation is 100,000 square feet. California has no canopy restriction but regulators assess larger licensing fees for larger facilities. Michigan also assesses higher licensing fees based on the number of plants. Other states, like Nevada and Colorado, impose no limitation on canopy size or plant count, instead allowing producers to expand per their ability to satisfy consumer demand.
• Packaging restrictions: Sec. A-84(a) restricts all packaging of cannabis products to include only black lettering on a single-color background. No graphics or images would be permitted on the packaging. The stated intent of this provision is to ensure products are not marketed to minors. However, nearly all state cannabis programs are able to more narrowly restrict marketing to minors by precluding the use of cartoon characters or other images that would be appealing to children. Cannabis products are not interchangeable, and producers need a way to clearly communicate their marks and branding to consumers to facilitate an efficient market.
• Potency limits: Sections A-17(20) and A-84(a) direct the board to establish potency limits for cannabis products. However, research indicates that cannabis consumers tend to self-titrate their use of higher-potency products to achieve a similar psychological effect. As a result, high-potency products like concentrates may be beneficial for public health relative to smoking marijuana flower because individuals consume less plant material that contains potential carcinogens.
• Pre-market product approval: Sec. A-84(a) also appears to require registration of every product with the cannabis control board before it can enter commerce. This pre-market approval can significantly delay product development and increase costs to both producers and consumers. Most state cannabis markets allow licensees to innovate with new products so long as they fit within an existing, defined set of rules. Violation of the rules can result in regulators ordering the products to be destroyed. Hawaii should follow this trend.
• Social equity definitions: Sec. A-141 defines a qualified social equity applicant as an entity of which 51% of ownership is held by individuals who have lived 5 of the past 10 years in a disproportionately impacted area, or for whom most employees live in a disproportionately impacted area. If the purpose of Hawaii’s social equity program is to provide opportunities for victims of the drug war, then social equity treatment should only be available to individuals who have been arrested or convicted of a nonviolent marijuana offense. Basing eligibility on residency within a given neighborhood allows nonvictims to access these benefits on equal standing with victims.
• Social equity grants: Sections A-142 and A-143 direct the board to make grants of public funds to social equity applicants. This direct financial support of a marijuana enterprise would implicate the state as a participant in a federal criminal enterprise. The state could face liabilities for aiding and abetting a federal crime or under federal racketeering laws. States can impose a well-designed regulatory structure for marijuana but cannot invest directly in these markets.
• Per se driving limit: Sec. 5 establishes a per se limit for the presence of THC in a driver’s blood as indicative of driving under the influence. This limit is specified as 10 nanograms of THC per millimeter of blood. THC accumulates in human fat cells and may be present in the blood even when a person is not under the influence of marijuana. This means that a per se measurement will incorrectly implicate some drivers as driving under the influence. Instead, law enforcement should rely on certified drug recognition experts to determine inebriation.
• Employee registration: Sec. 79(g) requires licensees to register every employee with the Hawaii cannabis authority and to notify the authority of any discontinuation of employment within one business day. This reporting requirement is unnecessarily restrictive and may cause licensees to run afoul of regulations even when acting in good faith. At a minimum, licensees should have five business days to report staffing changes. Many states, like California, do not require every employee in the industry to be registered with the state and instead charge licensees with keeping logs of employees and providing identification credentials to those employees.
• Annual audit requirements: Sec. A-23(3) requires all licensees to undergo an independent financial audit each year using generally accepted auditing standards in the United States. No other state imposes this requirement for licensure. Paying for a financial audit would be financially burdensome for small licensees. Moreover, the general lack of financial services within the cannabis industry makes it difficult for auditors to issue an opinion on the financial statements of licensees because they lack a sufficient audit trail.
• No protection of parental rights: Sec. A-26 clarifies that contracts are enforceable under Hawaii law and Sec. A-27 protects holders of professional licenses from censure for working with cannabis licensees. There should be a similar provision to clarify that the legal use of marijuana by adults cannot be a primary cause for removing a person’s parental rights.
• Regulatory authority doesn’t need its own police unit: Sec. A-20 would create the cannabis enforcement unit within the Hawaii cannabis authority. The unit would be composed of armed law enforcement officers with the authority to execute searches, seize property, arrest individuals with or without a warrant, and perform other duties as assigned. No other state cannabis regulator hosts its own police force. These functions can be carried out by traditional law enforcement and, indeed, Sections A-21 and A-22 make clear that traditional law enforcement agencies also have jurisdiction to enforce state cannabis laws.

Reason Foundation commented on several cannabis legalization proposals during the 2023 legislative session and was thrilled to see several of its recommendations adopted as amendments. We are committed to ensuring that Hawaii’s future market for adult-use cannabis is a success. We hope the legislature will consider the recommendations made herein and view Reason Foundation as a key resource as this bill progresses through the legislative process.

Read the full comment: Hawaii Senate Bill 3335 Contains Important Protections and Stringent Overregulation

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Attorney General Ashley Mood and anti-marijuana groups have filed briefs arguing the court should reject the measure. Moody is joined in opposition by the Florida Chamber of Commerce and the Drug Free America Foundation. But these briefs present several spurious arguments.

First, Moody (along with the Drug Free America Foundation) claims that the summary is misleading because it states adults 21 years or older could purchase, possess, or use marijuana. Moody argues that the claim is misleading because those actions would remain illegal under federal law.

In reality, the initiative is a proposed amendment to the Florida constitution and has no direct relationship to federal statutory law but would instead govern Florida statutes. More than a dozen states have legalized marijuana by initiatives containing similar language. Florida’s high court should not adjudicate the validity of a state constitutional provision based on an appeal to federal statute. Moreover, the summary expressly states it “does not change, or immunize violations of federal law.” Nobody is being misled.

Second, Moody argues the initiative would permit unregulated sales because the initiative doesn’t specifically grant the state health department regulatory authority over recreational marijuana sales. In truth, the initiative does state that only existing medical marijuana treatment centers (MMTCs) would be able to engage in recreational sales, along with other entities to whom the department may grant licenses in the future. The health department regulates all MMTCs, so this claim is not accurate.

Third, the attorney general argues the initiative might mislead voters into believing there will be more competition in Florida’s marijuana market. The initiative is clear that it restricts any commercial marijuana activity to medical marijuana treatment centers but would allow the legislature to authorize additional adult-use licenses in the future. It’s difficult to see how this is misleading, but it does highlight the self-serving nature of the initiative.

The initiative is entirely financed by Trulieve Cannabis, one of the largest publicly traded cannabis companies in the world by market capitalization. Trulieve has contributed all of the $40 million that has been received by Smart & Safe Florida, and the company controls 125 of the 571 medical marijuana dispensaries currently operating in Florida. The initiative would restrict any new entrants from coming into the marijuana market unless the state legislature passes a law allowing for the award of new commercial licenses. Based on history, Florida lawmakers appear unlikely to do this, so existing licensees are unlikely to face substantial competition from new entrants to the market.

Florida politicians have consistently slow-walked implementation of a medical marijuana law that was approved by voters in 2016. Following the adoption of that initiative, Florida lawmakers first declined to consider implementing the statutes the initiative required them to adopt until then-Gov. Rick Scott called them into a special session to complete their constitutional responsibilities. They then adopted a statute that banned smokable products—a move that state courts later ruled violated the intent of the initiative.

Gov. Ron DeSantis’ administration later fell years behind in awarding licenses to operate legal marijuana businesses, drawing further admonishment in state courts. Most recently, the DeSantis administration raised the fee for these licenses more than 20 times, from $60,000 to $1.33 million.

Attorney General Moody is reportedly acting at the direction of Gov. DeSantis in trying to get the initiative kicked off the ballot. This move appears to be a continuation of years of efforts by Florida conservatives to circumvent the voters’ will by limiting the legalization of marijuana.

But the arguments presented by Moody and allies shouldn’t pass legal muster. Voters should be able to freely decide on the initiative based on its merits, giving due consideration to its potentially anti-competitive nature.

The post Florida’s attorney general challenges marijuana initiative with spurious arguments appeared first on Reason Foundation.

In October 2022, President Joe Biden unveiled plans to reevaluate the federal classification of cannabis, aiming to address its restrictive treatment under federal law and the growing conflict between federal and state cannabis law. This move prompted evaluations by the Drug Enforcement Administration (DEA) and the U.S. Department of Health and Human Services (HHS) to potentially alter cannabis’s Schedule I status under the Controlled Substances Act (CSA).

Established in 1970, the CSA categorizes drugs into five schedules based on their potential for abuse, medical uses, and other criteria. Since the CSA’s enactment, cannabis has held a Schedule I designation, the most restrictive of the five categories, hindering medical research and creating conflicts between state and federal laws. In August 2023 the HHS completed its review and recommended that the DEA reclassify cannabis to Schedule III, a departure from previous opinions issued on the matter, marking a significant shift in federal policy.

This study explores the potential implications of moving cannabis to Schedule III, examining its impact on consumers, businesses, and local markets. Investigating the historical context surrounding cannabis’s Schedule I status, the mechanics of the rescheduling process, and the current HHS recommendation, the study also considers possible repercussions for other federally-controlled substances in light of changing perspectives on cannabis.

Should the DEA adopt the HHS recommendation, the cannabis industry and research community stand to gain immediate benefits, including potential relief for medical cannabis patients, reduced barriers to research, and a reduction in federal penalties for cannabis-related crimes. Specifically, the study addresses the financial relief this change might provide to state-authorized cannabis businesses through issues related to taxation and banking.

Alongside the potential benefits, this study also explores possible drawbacks of moving cannabis to Schedule III, such as the failure to fully address criminal penalties against cannabis users in compliance with state law. Moreover, the study considers the possibility that reclassification may stimulate regulatory interest in the medical cannabis market, possibly subjecting cannabis to greater oversight from the Food and Drug Administration (FDA).

Analyzing potential outcomes, the study delves into the intricate regulatory challenges associated with rescheduling, including the FDA’s role, potential pathways for approving state-licensed cannabis-derived medications, and the impact these different approaches may have on existing cannabis markets.

The study concludes that, while the optimal solution would be to remove cannabis from the list of controlled substances entirely, moving it to Schedule III presents both immediate and long-term advantages over its current Schedule I designation. However, challenges would persist were cannabis to remain federally controlled, perpetuating conflicts between state and federal law, and leaving consumers and markets vulnerable to regulatory uncertainty. In particular, an aggressive interpretation of the FDA’s regulatory scope following a shift to Schedule III could impose costs and barriers for existing state-licensed cannabis markets far in excess of the status quo. As federal authorities take this pivotal step, collaborative efforts among policymakers, researchers, and advocates are crucial to ensuring decisions align with evolving scientific understanding, social implications, and the needs of all stakeholders.

Full Brief: The Implications of Federal Cannabis Rescheduling

The post The implications of federal cannabis rescheduling appeared first on Reason Foundation.

Interstate commerce in marijuana is likely inevitable. Twenty-four states have legalized marijuana for recreational use by adults, and 38 states have legalized its medical use. But these states all ban the import of marijuana products made outside their borders. A consumer in Massachusetts may not legally purchase a product made in California or Oregon, even though those locations offer better growing conditions.  

As a result, state marijuana markets are entirely balkanized, preventing the emergence of regional specializations. States with poor growing conditions nevertheless bar consumers from purchasing products that might otherwise be offered at lower cost or higher quality because they were grown elsewhere. Marijuana companies that operate in multiple states must inefficiently allocate their capital to build duplicative production and distribution facilities in every state where they operate. Innovative upstart marijuana companies that produce unique and sought-after products may find that their commercial success is impeded by an inability to access markets outside their home state. 

These state bans against interstate commerce violate a legal concept known as the dormant Commerce Clause. The U.S. Constitution reserves to Congress the exclusive jurisdiction to regulate commerce between the states. Because this jurisdiction is exclusive, states cannot erect barriers to interstate trade. These precepts are foundational to the American republic because eliminating state-level protectionism was among the primary motivations for abandoning the Articles of Confederation in favor of the U.S. Constitution,  which ushered in a nationwide free-trade zone. 

State policymakers may have mistakenly believed that they could shield state-licensed marijuana companies from federal prosecution by permitting only intrastate commerce in marijuana. However, the U.S. Supreme Court has been clear that even purely intrastate commerce in marijuana invokes Congress’s regulatory authority under the Commerce  Clause. Although marijuana’s status under the federal Controlled Substances Act makes its possession, manufacture, and distribution illegal, if a state chooses to sanction these activities within its borders, it cannot exclude marijuana products made in other states solely on that basis.

Federal courts have already struck down several state regulations that restricted the freedom of commerce in marijuana across state lines because those regulations violated the dormant Commerce Clause. More of these state-imposed barriers to interstate commerce are likely to be struck down in the future. Although two federal district courts have declined to strike down state restrictions on interstate commerce in highly publicized cases, a close inspection of those rulings reveals that there were confounding factors, and each court recognized the underlying dormant Commerce Clause claims. It appears a matter of time before courts invalidate all state rules barring the import of marijuana products made in other states.

Such a decision could usher in mass confusion. There is currently no regulatory framework to govern interstate shipments of marijuana goods. These products remain criminal at the federal level even if the relevant laws remain largely unenforced. It would be prudent for Congress to proactively establish a regulatory framework for interstate shipments of marijuana products and to remove marijuana from the Controlled Substances Act. Failing that, states should at least start to relax their own unconstitutional bans on interstate commerce and work to foster a coordinated mechanism for facilitating trade in these goods. 

Congress has considered several proposals that would remove marijuana from the auspices of the Controlled Substances Act or establish a federal regulatory structure to govern interstate transfers. Federal regulation of the alcoholic beverage industry offers key insights into how a federal regulatory framework might be structured. Like marijuana, alcohol enjoyed a long period of federal legality, followed by a period of federal prohibition and then a period in which states took the lead in the regulation of products and businesses. Federal agencies had to learn how to respond to and work within the regulatory apparatus that had already been erected by the states in order to facilitate orderly commerce. These same agencies should take the lead in regulating interstate commerce for marijuana products and work to minimize technical barriers to trade that result from disparate state approaches to regulation.

Introduction

When California voters legalized marijuana for medical purposes in the fall of 1996, they set in motion a slow-moving freight train in which increasingly more states would enact marijuana laws in direct conflict with federal law. This metaphorical momentum accelerated in the fall of 2012, when voters in Colorado and Washington approved initiatives to legalize marijuana for recreational purposes. As of early 2024, 38 states now authorize the medical use of marijuana while 24 of those states authorize marijuana for recreational use. These changes to state law have all occurred despite marijuana’s strict illegality under the federal Controlled Substances Act. 

An interesting and underappreciated aspect of the resulting state-regulated marketplaces is that they also conflict with provisions of the U.S. Constitution that reserve to Congress the exclusive jurisdiction to regulate interstate commerce. State policymakers may believe that their wholly intrastate markets are shielded from Congressional regulatory authority, but the U.S. Supreme Court has been clear that even wholly intrastate commerce in marijuana falls within the congressional ambit to regulate commerce between the states. Meanwhile,  every state-regulated marijuana market expressly excludes the import of marijuana products produced beyond state borders. This is a clear violation of a legal concept known as the dormant Commerce Clause.  

This paper reviews the legal theory and history of the dormant Commerce Clause as well as recent case law, which largely affirms that existing state barriers to interstate commerce in marijuana are unconstitutional. Essentially, once multiple states had legalized marijuana,  they had the obligation to permit an interstate marketplace regardless of the federal illegality of the underlying goods. 

The paper examines possible pathways to establishing an interstate marketplace for marijuana.

First, states could voluntarily remove their existing barriers against interstate commerce.

Second, Congress could make its regulatory authority explicit by establishing a  system to govern interstate transfers of marijuana inventory. Federal courts could continue to strike down state barriers to interstate commerce, resulting in cross-state trade even if political leaders fail to make changes to the law.  

Finally, the paper outlines proposals recently considered in Congress to regulate interstate trade in marijuana goods and makes recommendations based largely on how alcoholic beverages are regulated.

Full Brief: The Case for Interstate Marijuana Commerce Right Now

The post The case for interstate marijuana commerce right now appeared first on Reason Foundation.

All other marijuana would remain criminal at the federal level.

This legislation bears the same name as prior legislation from 2018 introduced by then-Sen. Cory Gardner (R-Colo.) and Sen. Elizabeth Warren (D-Mass.). The original STATES Act was introduced in response to then-Attorney General Jeff Sessions’ decision in 2018 to rescind the Cole Memorandum, an important guiding document that discouraged federal attorneys from prosecuting marijuana businesses operating under state law. The original STATES Act broadly declared that marijuana businesses in good standing with state law would not violate the federal Controlled Substances Act.

How is STATES Act 2.0 different from the original STATES Act?

The original STATES Act was extremely limited in scope. Section 2 declared that “any person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marijuana” would be exempt from penalties under the federal Controlled Substances Act. The other sections clarified transportation safety offenses, created criminal offenses for the distribution of marijuana to persons less than 21 years old, and required the Comptroller General of the United States to conduct a study on marijuana legalization and traffic safety.

STATES Act 2.0 retains all these provisions but goes further by outlining a framework for interstate commerce in marijuana. Specifically, Section 3 provides safe passage for marijuana products in transit “if the originating and destination States or territories permit, as applicable, the manufacture, production, possession, distribution, dispensation, administration, or delivery of marijuana.” In other words, local law enforcement could not impound a truck carrying marijuana products even if marijuana is illegal in the state where the truck was pulled over if the driver can demonstrate that the products are legal at both the places of origin and destination.

In addition, Section 6 clarifies federal rulemaking authority to regulate commerce in marijuana products, naming the Food and Drug Administration (FDA) as the primary regulator of these products.

Would there be federal licensing of marijuana companies under STATES Act 2.0?

STATES Act 2.0 does not affirmatively set forth any parameters for the federal licensing of marijuana companies and does not name a lead federal agency to regulate these companies. It describes how marijuana would be regulated at the product level rather than at the enterprise level.

However, STATES Act 2.0 opens with a congressional findings section that should be read as a declaration of congressional intent, even though it does not enact law. Several of the findings are relevant to federal regulation and taxation. The act states, “A Federal regulatory program for marijuana should require a framework that supports critical components such as proper administration and oversight, consumer safety protections, and enforcement.” It later names the Alcohol Tobacco Tax and Trade Bureau (TTB), a division of the Treasury Department, specifically as an agency that should take a lead role in regulating cannabis businesses. The States Reform Act also names TTB as the lead federal regulator of marijuana companies.

Would there be a federal tax on marijuana products under STATES Act 2.0?

STATES Act 2.0 does not directly impose any federal tax on marijuana products.

However, its congressional findings section signals an intent to find a way to impose an excise tax on marijuana that should be collected by TTB. The findings section laments that “[e]xcessive taxation in licensed markets has caused the price of legal marijuana products to exceed that of illegal products by two to three times, contributing to the growth of the illicit market.” It further laments “a punitive tax structure” at the federal level “that harms the ability of licensed operators to sell marijuana products”—a reference to marijuana companies’ inability to deduct ordinary and necessary business expenses from their corporate income tax liabilities under Internal Revenue Code 280E.

These cautions frame the section’s call for a federal excise tax to pay for a federal regulatory program. It calls for a tax that would not be high enough to drive buyers toward illicit sellers, that would allow for timely collection by TTB as the primary regulator of marijuana businesses, and that would “be low enough to not exacerbate the level of taxation set by States, thereby avoiding the pyramid effect of adding Federal taxes on top of high State taxes.”

Nowhere does the act suggest a proposed tax rate nor a specific taxing mechanism for marijuana products or businesses. However, the findings section suggests an intention to ensure any federal tax is simple to administer and carries a low rate.

What powers would the FDA gain over marijuana products?

The FDA already has the authority to regulate cannabis products under the Food, Drug and Cosmetics Act, but has generally deferred enforcement against Schedule I and Schedule II substances to the Drug Enforcement Administration. Since the STATES Act 2.0 would remove marijuana products created in compliance with state law from the scope of the Controlled Substances Act, it also guides the FDA regarding how it should exercise its regulatory authority over marijuana products.

The act instructs the FDA to regulate any product that makes medical claims as a drug, subject to the new drug application process. The FDA would also regulate food or dietary supplements containing marijuana in the same way it regulates foods containing alcohol and would regulate cosmetics containing marijuana or its derivatives in the same way it regulates other cosmetics.

All other product types (including raw marijuana flowers) would not be regulated through these pathways. Instead, the FDA commissioner would have 180 days from passage to promulgate new proposed rules to regulate these products. Those rules must include requirements for contaminant testing, manufacturing processes, marketing practices, and post-market reporting. No premarket approval would be required for these products.

Could people purchase marijuana products across state lines if STATES Act 2.0 passes?

The STATES Act 2.0 makes clear that if a state elects to retain a legal prohibition on marijuana, then federal prohibition will continue to apply within that state. The legislation also stops short of expressly allowing marijuana companies to engage in any form of cross-state commerce, even if their products are legal in both the place of origin and the place of destination. The bill does contain a provision protecting the right of transport of marijuana products in interstate commerce, but it does not expressly state that marijuana can be sold across state lines at either the wholesale or retail levels.

However, the Congressional findings section contains an allusion to the dormant Commerce Clause, which restricts states from erecting barriers to interstate commerce. It says:

While States have the power to determine what happens within their own borders, they cannot make laws permitting or restricting interstate commerce unilaterally. In the absence of Federal movement, the illicit interstate trade in cannabis has persisted even in the face of significant State policy changes. The Federal Government should be responsible for regulating and tracking this interstate trade to ensure cannabis does not end up where it does not belong.

Would STATES Act 2.0 ease banking restrictions for marijuana businesses?

The PATRIOT Act and other anti-money laundering laws specifically intend to prevent people from converting the proceeds of trafficking in a Schedule I or Schedule II substance into a financial instrument. Financial institutions chartered in the United States are responsible for implementing an effective anti-money laundering program to demonstrate compliance with these laws, or they can face significant penalties. In practice, many financial institutions have developed policies even more conservative than required to protect themselves from federal prosecution.

Although the Financial Crimes Enforcement Network promulgated rules in 2014 to ostensibly permit financial institutions to offer accounts to state-licensed marijuana businesses, those rules impose steep administrative costs on financial institutions. As a result, most financial institutions simply choose not to offer these accounts.

The STATES Act 2.0 would remove marijuana produced following state law from the auspices of the Controlled Substances Act. Technically, this means businesses operating in compliance with state law would no longer require extra scrutiny under anti-money laundering provisions. In practice, however, it may be difficult for financial institutions to determine that a business is fully compliant with state law. Moreover, large banks that transact business across multiple states may find it difficult to police their account holders’ status by jurisdiction—an activity that is legal in one state or city may not be legal in the neighboring state or city. This means large financial institutions may be reluctant to relax their policies regarding accounts for marijuana businesses.

Does STATES Act 2.0 expunge prior cannabis convictions?

Unlike the States Reform Act, which expunges practically all nonviolent federal marijuana convictions, the STATES Act 2.0 contains no provisions for expungement of prior convictions. It also contains no mention of social equity programs or other restorative justice efforts.

Conclusion

The STATES Act 2.0 represents an incremental but meaningful improvement over the status quo of federal prohibition or even prospective rescheduling. It also contains some key improvements from the original STATES Act, which gained an impressively bipartisan sponsorship in the U.S. Senate. Reason Foundation was proud to provide feedback on early drafts of both this legislation and the States Reform Act.

Observers should be clear, however, that the STATES Act 2.0 is only an incremental step toward full federal legalization of marijuana. This version signals key intentions of prospective follow-up legislation in its congressional findings section. This bill is not intended to offer a comprehensive solution for federal regulation of cannabis or other related issues. It should be viewed as an incremental change that could garner the bipartisan support needed to move a marijuana bill through a deeply divided Congress.

The post Frequently asked questions about STATES Act 2.0 appeared first on Reason Foundation.

Assembly Bill 1207 would add new definitions to the phrase “attractive to children,” as used in the state’s commercial cannabis laws. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), passed in 2017 to implement the state’s adult-use cannabis market and integrate its rules with the medical marijuana market, already stipulates that “packages and labels [used on cannabis products] shall not be made to be attractive to children.”

Regulations promulgated to implement that law elaborate on what this means, saying:

Any advertising or marketing … shall not use any images that are attractive to children, including, but not limited to: 

• Cartoons; 
• Any likeness to images, characters, or phrases that are popularly used to advertise to children;
• Any imitation of candy packaging or labeling; or 
• the terms “candy” or “candies” or variants in spelling such as “kandy” or “kandeez.”

So, while the existing state statute might be open to interpretation in terms of what is “attractive to children,” the regulations that lawmakers approved to implement the statute make it fairly clear exactly what is prohibited from appearing on the label of a cannabis product.

Nonetheless, AB 1207 would clarify in statute that “attractive to children” includes a wider array of items soon to be forbidden. These include:

1. Images of any of the following:

• Cartoons, toys, or robots;
• Any real or fictional humans;
• Any fictional animals or creatures; or
• Fruits or vegetables, except when used to accurately describe ingredients or flavors contained in a product.

2. Any likeness to images, characters, or phrases that are popularly used to advertise to children;
3. Any imitation of candy packaging or labeling, or other packaging or labeling or cereals, sweets, chips, or other food products typically marketed to children;
4. The terms “candy” or “candies” or variants in spelling such as “kandy” or “kandee”;
5. Brand names or close imitations of brand names of candies, cereals, sweets, chips or other food products typically marketed to children;
6. Any other image or packaging that is easily confused with commercially available foods that do not contain cannabis and are typically marketed to children;
7. Anything else that the department [of cannabis control] determines in regulation to be attractive to children; or
8. Anything else that is attractive to children in light of all relevant facts and circumstances.

While some of the items included in this new definition overlap with those found in California’s existing regulations, others present potential problems or introduce legal uncertainty.

For instance, item eight, which bans “anything else” that prospectively could be interpreted as “attractive to children in light of all relevant facts and circumstances,” is a nebulous and arbitrary legal standard that could be used to penalize disfavored cannabis licensees even when they act in good faith to avoid marketing to children. Regulatory standards this vague can create more havoc than order.

In other cases, the changes could result in a regulatory taking by depriving cannabis licensees of the right to use existing marketing schemes into which they have invested significant money. For instance, the proposed ban on using any images of human beings would prevent a label from depicting farmers cultivating cannabis. Numerous existing brands use this kind of image on their label, including family farms that portray images of their own families farming cannabis. Under the new proposed rules, no farm owner would be able to appear on their own label.

It is unclear why state lawmakers believe that the appearance of any form of human being on a label would make the item attractive to children. Interestingly, many California wine labels display an image of the owner or a brand ambassador, such as 19 Crimes does with Snoop Dogg. MAUCRSA was written, in part, to parallel some aspects of the California wine industry by including the appellation of origin on the packaging to distinguish one growing region from another. Yet, California lawmakers have not banned images of human beings from wine labels.

California Attorney General Rob Bonta warned last year that cannabis products had been sold in packaging “nearly identical to…Cheetos, Fruity Pebbles, and Sour Patch Kids.” Senate Floor snalyses of the bill indicate proponents of the legislation are concerned child exposure to cannabis products has increased. However, legislative staff preparing the analyses note that the products highlighted by the attorney general may exist primarily in the illicit market. “For unlicensed products,” said staff, “this bill doesn’t have an effect, as unlicensed cannabis cultivators, manufacturers, retailers [and] distributors are already in violation of the law.”

California’s cannabis market structure has suffered from many problems, including over-taxation and overregulation that have made it difficult for legal businesses to compete with the black market. Lawmakers ameliorated some of those problems last year when they followed Reason Foundation recommendations to change some of the state’s marijuana tax structure. The new bans included in Assembly Bill 1207, however, would only add to the problem of overregulation without resolving the concerns of bill sponsors.

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