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Cannabis Administration and Opportunity Act: WM Policy Analysis

by | Jul 28, 2022 | CAOA, Federal Policy

Last week, Senate Majority Leader Chuck Schumer (D-NY) and Senators Cory Booker (D-NJ) and Ron Wyden (D-OR) introduced the highly anticipated Cannabis Administration and Opportunity Act (CAOA)— a bill that would put an end to over 50 years of federal cannabis prohibition. 

A discussion draft of the CAOA was first released in 2021, and more than a year and 1,800 comments later, the official bill language is finally here. At a high level, the CAOA would remove cannabis from the Controlled Substances Act, establish federal authority over cannabis regulation, implement several restorative justice provisions to help repair the harms of criminalization and support an equitable cannabis industry, and expunge some cannabis-related records.

The CAOA would end federal prohibition and allow states to decide how to regulate cannabis within their borders. Legal states would carry on without fear of federal enforcement, and prohibition states could uphold their ban on medical and adult-use cannabis if they choose. In other words, the passage of the CAOA does not translate into cannabis suddenly being legal to purchase everywhere in America.

The Cannabis Administration and Opportunity Act marks a significant moment in cannabis history. If anything, it is a benchmark of progress— a step in the right direction toward federal cannabis reform. 

Next Steps for the Cannabis Administration and Opportunity Act
The biggest challenge the CAOA faces is getting enough votes- a difficult feat for any piece of legislation these days. Though the bill includes priorities from both Republicans and Democrats, it likely does not have the 60 votes needed to clear the Senate at this time. If the bill were to pass in the Senate, however, it would likely face a much easier path in the House. Just a few months ago, the lower chamber passed a similar cannabis decriminalization bill – the MORE Act – for the second time. It is unclear whether President Biden would sign the bill into law should it hit his desk, as he has not yet made any public comments on the CAOA or the MORE Act.

Though the CAOA faces an uphill battle in the Senate, it will likely now serve as a litmus test for what cannabis reforms are within the realm of possibility. Last week, Senator Schumer affirmed his commitment to getting “something done” this year on cannabis reform. Whether that means expanding medical cannabis research or passing banking reform, it is clear that Congress feels pressured to act on cannabis issues.

In summary, the Cannabis Administration and Opportunity Act is a federal decriminalization bill that includes several essential restorative justice measures, such as automatic expungement and community reinvestment grant programs. The bill reflects changing public opinion on cannabis and would put an end to the senseless and racially disparate criminalization of cannabis. The future of the CAOA is uncertain, but it is still likely to influence other federal cannabis reform efforts.

For a more in-depth summary and analysis of the CAOA from WM Policy, including the highlights of the bill and some areas of improvement, keep reading. 

Note: this analysis is not inclusive of every provision contained in the CAOA.

The Highlights

  • Removal of cannabis from the Controlled Substances Act. The most significant reform included in the CAOA is the removal of cannabis from the federal Controlled Substances Act (CSA). The Controlled Substances Act places substances into one of five schedules based on their propensity for abuse and accepted medical value. Cannabis is currently classified as a Schedule I substance- a designation reserved for substances with “no currently accepted medical use and a high potential for abuse.” Cannabis’ current classification is erroneous and outdated, and taking it off the CSA will eliminate barriers to research, improve access to banking and financial services, alleviate Section 280E tax restrictions, resolve legal uncertainty for state governments and the industry, allow patients to travel across state lines with their medical cannabis, and end the failed policy of cannabis criminalization.
  • Automatic expungement for some federal cannabis convictions.  Within one year of enactment, this bill would require each federal district to identify and expunge all eligible cannabis-related convictions. Eligible convictions include those that would no longer be considered a crime under the new law. Federal officials would also be required to notify individuals whose records were cleared and issue a certificate of proof of expungement. A certificate of proof will allow an individual to affirm their record was cleared in the event their conviction accidentally appears in an outdated background check database. Further, at any point following the enactment of the bill, individuals have the right to petition for expungement, and those who cannot afford counsel will be appointed legal representation. Expungement is essential to comprehensive cannabis reform efforts, allowing individuals to move on with their lives absent the collateral consequences associated with a criminal record. Further, expungement for cannabis-related records should always be automatic, meaning that the onus for record clearance falls on the appropriate government agency, not the individual. Automatic expungement ensures that all eligible individuals receive relief regardless of their income or access to resources. To date, there is no mechanism for record relief at the federal level (with some extremely limited exceptions), meaning that this bill could set a precedent for future drug-related record clearance efforts.
  • Resentencing for individuals serving time for federal cannabis convictions. Within 60 days following the passage of the CAOA, all individuals serving time in federal prison for cannabis-related charges that would no longer be considered illegal would be released, and any pending cases would be dropped. Those serving multiple sentences or those who received a sentence enhancement based on a prior cannabis conviction would be eligible to have their sentences reviewed and potentially reduced. Sentence modification, or resentencing, ensures that individuals no longer serve erroneous sentences for offenses that would not be considered a crime under the new law or would otherwise receive a lighter sentence.
  • Funding for local, state, and tribal governments to adopt automatic expungement. In addition to the automatic expungement of some federal cannabis-related convictions, the CAOA creates funding available to local, state, and tribal governments to create an automatic expungement process for cannabis-related offenses. Funding for local and state expungement efforts is critical, as most cannabis-related records exist at the state level.

  • Protections for immigrants. Under the bill, cannabis could no longer be a reason to deny benefits or protections to immigrants. This is noteworthy, as cannabis criminalization has historically been used as a mechanism for widespread detentions and deportations of undocumented immigrants. In 2013, minor cannabis possession was the 4th leading cause of deportations, and since 2008, nearly 40,000 people have been deported annually for drug violations.

  • Restorative justice grant programs. Throughout the CAOA are a number of restorative justice grant programs aimed at repairing the harms of the War on Drugs, allocating resources to the communities disproportionately impacted by cannabis criminalization, and encouraging the adoption of equitable cannabis licensing frameworks. The Community Reinvestment Grant Program would disburse funding to organizations that provide vital community services to those impacted by the War on Drugs, such as reentry services, legal aid, job training, literacy programs, youth recreation programs, and health education programs. The Cannabis Restorative Opportunity Program would provide loans and technical assistance to small cannabis businesses owned by socially and economically disadvantaged individuals. A minimum of 5% of all available funding in the Cannabis Restorative Opportunity Program would be dedicated to Indigenous-owned businesses. The Equitable Licensing Grant Program would create funding for localities, states, and tribal governments to develop and implement “equitable cannabis licensing programs that minimize the barriers to cannabis licensing and employment” for the individuals adversely impacted by cannabis criminalization. Finally, the CAOA includes a grant program for local, state, and tribal governments to address the housing and community development needs of individuals and communities adversely impacted by the War on Drugs. Restorative justice programs, such as the ones included in the CAOA, are critical for repairing the harms of the War on Drugs. Restorative justice efforts should not just be limited to prospective cannabis business owners, but should also address the needs of the broader communities impacted by cannabis criminalization.

  • Medical cannabis for veterans.  Within 180 days following the passage of the CAOA, the Secretary of Veterans Affairs would be required to update their internal policies regarding veteran cannabis use. VA physicians and other healthcare providers would be authorized to discuss and recommend medical cannabis with their patients in states with a medical program. Currently, VA physicians cannot recommend medical cannabis to veterans due to federal prohibition, and many veterans do not feel comfortable purchasing legal cannabis due to the incongruence between state and federal law. Though veterans living in states without a medical program would still be unable to purchase legal medical cannabis, this bill would be monumental in expanding access to safe, life-saving medicine for thousands of veterans across the country.  (To read more about why cannabis access is a veterans issue, check out the latest WM Policy blog post).

  • Data collection and reporting requirements. The CAOA includes a number of data collection and reporting requirements for the cannabis industry. The bill tasks several federal agencies with collecting and publishing information on the demographic data of cannabis business owners and employees, the societal impact of adult-use legalization, the economic and revenue impact of the industry, impaired driving data, and more. 
  • Research expansion and funding for new research. The CAOA would expand opportunities for cannabis research by making it easier to study the plant and funding studies on several important topics. The bill would require the federal government to “take steps to increase the availability and diversity of research-grade cannabis products,” as well as allow researchers to study cannabis available to consumers in legal states. Further, the bill provides funding and directs a number of federal agencies to study the medical effects of cannabis, best practices to prevent underage cannabis consumption, the impact of legalization on the workplace, the impact of medical cannabis on veteran health outcomes, and cannabis-impaired driving.

Due to the limitations of studying a Schedule I substance, there is a gap in cannabis research and data collection on the legal cannabis industry. The data collection, research, and reporting requirements outlined in the CAOA will be essential in producing much-needed research, gathering comprehensive demographic data on the industry, and evaluating the efficacy of existing cannabis policies— all essential building blocks of evidence-based public policy.

  • SBA loans for cannabis businesses. Due to federal prohibition, cannabis businesses are precluded from applying for funding programs through the Small Business Administration. The CAOA creates protections for all cannabis businesses and cannabis-related service providers that apply for loans, investment capital, disaster assistance, grants, and other federally-backed funding programs. Further, the CAOA would create a 10-year pilot program through the Small Business Administration for third-party servicers to provide loans to small cannabis businesses owned by socially and economically disadvantaged individuals and those adversely impacted by the War on Drugs. Lack of funding and access to trustworthy financing options is one of the largest barriers to entering the legal cannabis industry, and this pilot program would expand the number of non-predatory lending options available to small and social equity-owned businesses.
  • 280E tax reform and access to banking and other financial services. Because the CAOA would remove cannabis from the Controlled Substances Act, banks and other financial institutions would no longer be subject to the same risks and restrictions associated with working with businesses involved in a Schedule I substance. The Financial Crimes Enforcement Network (FinCEN) would be required to update its previous guidance, or issue new regulations, outlining how banks and other financial service providers could work with the cannabis industry. Currently, most banks are unwilling to work with cannabis businesses, despite guidance from FinCEN, leaving the majority of the industry unbanked and barred from accessing traditional financial services available to all other businesses. The CAOA would significantly improve banking access for the cannabis industry, reducing public safety risks associated with operating entirely in cash and bringing further legitimacy to the legal cannabis industry. Additionally, because cannabis would no longer be a Schedule I substance, cannabis businesses would not be subject to IRC 280E restrictions that currently prevent cannabis businesses from claiming ordinary and necessary deductions when paying federal income tax.

The Areas of Improvement

  • High federal excise tax rates. The CAOA would impose a federal excise tax starting at 10% that gradually increases to 25% over five years. Small and medium-sized “qualified domestic manufacturers” are eligible for a 50% tax credit. A 25% federal tax is notably higher than the 8% tax included in the MORE Act and would greatly exacerbate the already-high tax burden cannabis businesses currently face. Depending on the jurisdiction, cannabis businesses are subject to a state excise tax, state sales tax, and any applicable local taxes. High taxes raise the price of legal cannabis for consumers and patients, making it much more likely they will continue purchasing cheaper products from unregulated sources. Further, overly-high taxes will harm small and social equity-owned businesses struggling to stay afloat more than large, well-capitalized multistate operators. While a tiered tax scheme that includes lower taxes for small businesses is a good policy, the proposed 12.5% tax rate is still far too high. 
  • No tax exemption for medical cannabis patients. The tax scheme proposed in the CAOA does not include any exemptions for medical cannabis. The 25% excise tax would be passed onto medical cannabis patients, significantly increasing the price of their medicine. Medical cannabis patients already pay out-of-pocket for their medicine since insurance does not cover medical cannabis. In many states, registered patients are exempt from paying certain taxes when purchasing medical cannabis. Medicine should not be subject to excise taxes, including medical cannabis. Cannabis producers should be allowed to designate a portion of their inventory for medical patients, which would then be exempt from the excise tax.
  • Expungement provisions do not include non-conviction arrests. According to the language in the CAOA, it appears that the automatic expungement provisions do not include non-conviction arrests. Federal districts must expunge “each conviction” and “arrests associated with each conviction” for certain cannabis-related offenses. A conviction occurs when a formal declaration of guilt is made against an individual. However, in many cases, an arrest does not lead to a conviction, but a record of that arrest still exists in one’s criminal record. While a process exists to challenge one’s federal arrest record, petition-based expungement prevents many from having their record cleared because of a lack of resources or even awareness that the record exists. The automatic expungement language should be expanded to include non-convictions of cannabis-related offenses.

  • Ban on flavored vaping products. The CAOA would prohibit the manufacture and sale of flavored electronic delivery systems, commonly known as cannabis vapes or vaporizers. A ban on flavored cannabis vapes would not reduce demand for these products but instead would likely push consumers to seek out flavored vapes from unregulated, untracked, and unsafe sources. Instead of banning popular products that are widely available in both legal and illicit cannabis markets, the federal government should instead require that these products are subject to strict lab-testing requirements, in child-proof packaging, and not being advertised to children. Further, the CAOA prohibits the use of an artificial or natural flavor that is a “characterizing flavor,” such as orange, cocoa, chocolate, etc. Many vaping manufacturers add terpenes– chemical compounds found in cannabis that have distinct smells and flavors– to their vape products. It’s unclear if this process would be banned under the CAOA, even though terpenes are naturally occurring and some have distinct flavors, such as lemon or berry.

Recommendations and Future Considerations

  • Minimize federal permitting requirements and avoid cumbersome reporting rules. Any additional layers of federal permits and approvals should be easy to comply with and low cost. Cannabis businesses are already subject to a number of burdensome application and license requirements, such as high fees, exorbitant capitalization requirements, and rules requiring applicants to secure property before submitting an application. Federal permitting requirements should be kept to a minimum, allowing states to adopt more stringent rules if they wish. Additionally, any federal track-and-trace software should integrate with existing state track-and-trace programs, instead of creating duplicative tracking requirements for cannabis operators. 

  • Establish a cannabis antitrust and interstate commerce task force or commission. An antitrust and interstate commerce task force or commission should be formed to guide the federal government on how to regulate interstate commerce and best protect small and medium-sized cannabis businesses. Absent any safeguards to protect small cannabis businesses, many fear that a sudden allowance of interstate commerce will lead to rapid consolidation and the elimination of many small and social equity-owned businesses. A careful, measured approach to interstate commerce can avoid significant disruption to existing state cannabis programs.
  • Ensure all efforts to combat the unregulated cannabis market focus on bolstering the legal industry and transitioning legacy operators. The CAOA includes a number of grants for police departments to combat the unregulated cannabis market. The best way to minimize the unlicensed cannabis market is by supporting a robust, legal cannabis industry and creating pathways for legacy operators to transition to the legal market. (For more information on how to minimize the unregulated market, check out our policy paper).
  • Fund a national disparity study. The CAOA should include a requirement that the federal government fund a national disparity study to determine if racial, ethnic, and/or gender inequities exist in the provision of cannabis business licenses in states with legal cannabis programs. The study should also examine the efficacy of local and state programs designed to promote cannabis business ownership and employment opportunities for individuals adversely impacted by the so-called “War on Drugs” (commonly referred to as “social equity programs”). A national science-based study will help determine if and where inequities exist in cannabis licensing at the state level and whether social equity programs have been effective in increasing the market participation of communities disproportionately harmed by these efforts. 
  • Fund a national study to identify areas of disproportionate impact. The CAOA should also include a requirement for the federal government to conduct a national study to identify areas disproportionately impacted by cannabis criminalization. These disproportionately impacted areas should be at the census tract level and defined in terms of socio-economic factors and areas of concentrated over-policing of outdated cannabis enforcement policies. Several state and local governments have conducted similar studies to help inform the eligibility requirements for participation in their cannabis social equity program. A national study of disproportionately impacted areas should not serve to undermine existing social equity efforts. Instead, a national study could be used as the basis for future local and state social equity programs and to determine eligibility for federal programs and benefits geared toward the communities adversely harmed by the so-called “War on Drugs.” 

The Cannabis Administration and Opportunity Act is an important first step in federally decriminalizing cannabis and making much needed reforms to antiquated laws. We applaud the sponsors of this important legislation for introducing this comprehensive, meaningful legislation and we look forward to working with them to improve this bill for the benefit of all Americans.

 

When Less Isn’t More: A Review of the MORE Act

by | Apr 8, 2022 | MORE Act

Off to a good start but “more” needs to be done

The U.S. House of Representatives passed the Marijuana Opportunity, Reinvestment, and Expungement bill, commonly known as the MORE Act. If passed by the Senate and then signed into law by the President, the bill would, among other things, end federal cannabis prohibition by removing cannabis from the Controlled Substances Act (CSA) and expunging some cannabis-related criminal convictions.

Although many pundits are touting it as such, MORE is not a legalization bill. Instead, it removes criminal penalties for the cultivation, manufacturing, distribution, and sale of cannabis and allows states to decide how they wish to regulate cannabis.

The bill also attempts to address the unjust and racially-disparate enforcement of cannabis prohibition laws by including retroactive relief measures, community reinvestment funding, and social equity initiatives designed to encourage the market participation of the communities that continue to bear the brunt of cannabis criminalization.

MORE History

The MORE Act has now been passed twice in the House. The bill was first introduced in 2019 by House Judiciary Committee Chairman Jerry Nadler (D-NY) and passed the full House in December 2020. It passed for the second time on April 1st, 2022. Despite bipartisan support, however, the bill did not receive a hearing in the Senate in 2020. It is highly unlikely to be considered in the Senate, as the chamber is focused on a similar but different bill known as the Cannabis Administration and Opportunity Act (CAOA).

For perspective, MORE is the first cannabis decriminalization bill to pass any chamber of Congress since President Nixon began the so-called “War on Drugs.” The MORE Act’s passage in the “People’s House” reflects the sweeping changes in state-level cannabis policies and shifting public sentiment toward cannabis. In just the past decade, the number of states that legalized adult-use (21+) cannabis went from 0 to 18, and public support for legalization rose from 48% to 68%. A cannabis decriminalization bill even making it this far indicates that times have certainly changed.

“If states are the laboratories of democracy, it is long past time for the federal government to recognize that legalization has been a resounding success and that the conflict with federal law has become untenable.” – Rep. Jerry Nadler (Source)

Next Steps for MORE

So what’s next for MORE? The answer is: probably not much. Similar to its first go-around, the bill faces significant hurdles in the upper chamber. If taken up in the Senate, the bill is unlikely to receive the 60 votes necessary to make its way to the President’s desk. The votes in the House fell primarily along party lines, with only three Republicans voting in favor of the bill (two fewer votes than last time), indicating a troubled pathway in the Senate. But there is still hope as Senate Majority Leader Chuck Schumer (D-NY) is expected to introduce his own highly-anticipated legalization bill sometime in April.

The 30,000-foot view? MORE is a decriminalization, state’s rights, and expungement bill that is unlikely to pass in the Senate this year, though its passage in the House reflects recent changes in public policy and opinion regarding cannabis. 

For an additional in-depth overview of MORE from WM Policy, including the highlights of the bill and some areas of improvement, keep reading.

The Highlights 

  • Removal of cannabis from the Controlled Substances Act. MORE’s most prominent and sweeping provision is the removal of cannabis from the federal CSA. Cannabis’ classification as a Schedule I substance in the CSA- a designation reserved only for those substances deemed to have “no currently accepted medical use and a high potential for abuse” – is erroneous and outdated. Despite this, there are currently 37 states that regulate legal medicinal cannabis, many of which deemed the industry “essential” during the COVID pandemic because of medical reasons. Removing cannabis from the CSA will eliminate barriers to research, significantly improve access to banking and financial services, alleviate Section 280E tax restrictions, resolve legal uncertainty for state governments and the industry, allow patients to travel across state lines with their medical cannabis, and end the failed policy of cannabis criminalization.
  • Automatic expungement of non-violent federal cannabis convictions. This bill would enable the automatic expungement of non-violent federal cannabis convictions. If passed, each Federal district would be required to identify and expunge all eligible records within one year of the bill’s enactment. Expungement is a critical component of equitable cannabis policy reform, as it relieves individuals of the collateral consequences associated with a criminal record. Automatic expungement– as opposed to petition-based expungement– ensures that all eligible individuals receive relief, regardless of their income or access to resources. This provision is especially noteworthy as there is no existing mechanism for record relief at the federal level (with some extremely limited exceptions). If passed, this bill has the potential to set a precedent for future federal drug-related expungement efforts. 
  • Resentencing for individuals serving time for non-violent federal cannabis convictions. In addition to expungement, MORE allows for some currently incarcerated individuals to have their sentence reviewed and potentially modified. According to a report from the nonpartisan Congressional Budget Office, “thousands of current inmates” could be released if the bill were to pass. Sentence modification, or resentencing, ensures that individuals no longer serve erroneous sentences for offenses that would not be considered a crime under the new law or would otherwise receive a lighter sentence.

  • Community Reinvestment Grant Program. MORE creates a “Community Reinvestment Grant Program” to allocate funding to organizations that provide services to individuals impacted by the so-called “War on Drugs.” These services include job training, reentry services, legal aid for civil and criminal cases (including expungement); as well as literacy, youth recreation,  mentoring and health education programs. Directing funding from cannabis tax revenue to community reinvestment efforts can ensure that those adversely impacted by the criminalization of cannabis can meaningfully benefit from its legalization, even those that do not wish to participate in the legal cannabis industry.
  • SBA loans for cannabis businesses. The bill includes protections for cannabis businesses seeking programs and services through the Small Business Administration (SBA). Additionally, it directs the SBA to establish a “Cannabis Restorative Opportunity Program ” to provide loans and technical assistance to small cannabis businesses owned by “socially and economically disadvantaged individuals.” Access to funding is one of the greatest barriers preventing small operators from entering — and succeeding in — the legal cannabis industry, and creating legitimate, non-predatory funding options for these prospective business owners is essential.

  • Equitable Licensing Grant Program. MORE tasks the SBA with establishing an “Equitable Licensing Grant Program” to provide funding for the development and implementation of equitable cannabis licensing programs at the local and state government levels. These programs must focus on minimizing barriers to cannabis licensing and employment for communities adversely impacted by the so-called “War on Drugs.” To receive funding, the eligible state or locality must first have taken steps to establish an automatic record clearance process for cannabis-related convictions. 

In addition, grant funding is only available for recipients who agree to include four of the following elements in their cannabis licensing program: (1) an application fee waiver for low-income individuals; (2) a prohibition on denying an individual a cannabis license due to a prior cannabis conviction; (3) a prohibition on rejecting a cannabis business application based solely on a prior criminal conviction (except for criminal convictions related to business ownership); (4) a prohibition on cannabis licensees conducting “suspicionless” cannabis drug testing on prospective or current employees, and; (5) the establishment of a cannabis licensing board that reflects the racial, ethnic, economic, and gender composition of the community.

  • Protections for cannabis use and possession. Under MORE, individuals could no longer be denied any federal public benefit on the basis of cannabis use or possession or because of a past cannabis-related criminal conviction. The bill also establishes protections for immigrants, affirming that no immigration benefit or protection can be denied due to cannabis-related reasons. These protections are imperative, as cannabis use and possession should never result in a loss of rights or federal benefits.

  • Data collection, studies, and reporting requirements. A major benefit of legalization is the ability to direct cannabis tax revenue to fund studies and collect data on the impact and externalities associated with the regulated cannabis market. MORE tasks various government agencies with collecting and publishing data on the demographics of cannabis business owners and employees, the recipients of the newly-formed Cannabis Restorative Opportunity and Equitable Licensing programs, and individuals convicted of a federal cannabis offense. 

The bill also requires studies on the societal impacts of cannabis legalization, cannabis impairment, the workplace impact of cannabis, and the impact of legalization on schools and school-aged children. In part due to the limitations of studying a Schedule I substance, there is a lack of comprehensive research and demographic data on the cannabis industry. The research and data collection requirements found in MORE will be critical in tracking the progress and efficacy of existing cannabis programs and informing future public policy decisions and initiatives at all levels of government.

As Bridget Hennessey, my colleague and Weedmaps’ Vice President of Public Affairs, wrote the first time MORE passed, “..the MORE Act could be better. It should be better. And we can make it better.” While there is a lot to celebrate in the bill, there is always room for improvement. Below is a list of issues and recommendations that could help strengthen MORE.

Areas of Improvement

  • 8% federal cannabis tax. If signed into law, the MORE Act establishes an 8% federal excise tax on all cannabis products. The rate would start at 5% and gradually increase to 8% over five years. An 8% cannabis tax rate is certainly preferable to the proposed 25% tax rate in the Cannabis Administration and Opportunity Act, drafted by Senators Chuck Schumer (D-NY), Cory Booker (D-NJ) and Ron Wyden (D-OR). However, an 8% tax will further exacerbate the already-high tax burden of cannabis businesses and likely push out smaller operators. When high tax rates significantly raise the price of legal cannabis for consumers and patients, they are far more likely to seek out cheaper cannabis from the unregulated market. An 8% federal tax added on top of the already high local and state cannabis taxes will harm the legal industry and hinder the goals of transitioning the unregulated market to a fully regulated legal industry. Regardless, tax reform at all levels of government is a critical component of shifting cannabis consumption to the legal market.

  • No tax exemption for medical cannabis. Under the tax framework outlined in MORE, the 8% excise tax would be passed onto medical cannabis patients. While the bill technically exempts “FDA-approved articles” from the excise tax, no medical cannabis products have received FDA approval (note: Epidolex is an FDA-approved drug containing CBD, and Marinol, Syndros, and Cesamet are FDA-approved drugs containing synthetically-derived THC). In other words, all medical cannabis is taxable under MORE. 

In many states, cannabis is treated as medicine with respect to taxation, meaning that patients registered with their state’s medical cannabis program are exempt from paying cannabis taxes. Medical cannabis patients already pay out-of-pocket for their medicine, as insurance does not cover medical cannabis. An excise tax should not apply to medicine, and medical cannabis products should be exempt from any proposed federal tax. A possible solution would be allowing cultivators and processors to designate a portion of their inventory for medical patients, which will then be exempt from the federal excise tax

  • Absence of advertising language. There is no mention of advertising in MORE beyond a requirement for the Secretary of Health and Human Services to meet at least once to address “the regulation, safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.” While the removal of cannabis from the Controlled Substances Act would no longer subject cannabis businesses to the advertising restrictions imposed on Schedule I substances, explicit permission to allow advertising, with reasonable regulations, would provide clarity to both the cannabis and advertising industries. Advertising is a critical component of supporting a legal, well-regulated cannabis industry and allowing cannabis businesses to compete, build brand awareness, foster customer loyalty, and increase revenue.
  • Expungement provisions do not include non-conviction arrests. The expungement language in MORE only applies to those with a cannabis-related conviction on their record, leaving out many individuals who were arrested but never convicted. A conviction occurs when a formal declaration of guilt is made against an individual. In many cases, an arrest may not lead to a conviction, but a record of that arrest remains on one’s RAP sheet (Record of Arrests and Prosecutions). While there is a process for individuals to challenge a federal arrest record, petition-based expungement prevents many from having their record cleared due to a lack of resources or even awareness that the record exists. The automatic expungement language in MORE should extend to cannabis-related non-conviction arrest records.
  • Unclear process for resentencing. While the bill allows individuals incarcerated for nonviolent cannabis offenses to have their sentences modified, it’s unclear who is responsible for initiating the resentencing process. According to the bill, a sentence review hearing can be initiated on motion of “the individual, the Director of the Bureau of Prisons, the attorney for the Government, or the court.” In the spirit of the bill and to ensure that all eligible individuals have their sentences modified, the responsibility to identify and review all qualifying sentences should fall on the appropriate government bodies, not the incarcerated individual.

(Note: for an in-depth analysis of the criminal justice provisions in MORE, check out the Last Prisoner Project’s review of the first version of the bill) 

Recommendations and Future Considerations

  • National disparity study. MORE should include a requirement that the federal government fund a national disparity study to determine if racial, ethnic, and/or gender inequities exist in the provision of cannabis business licenses in states with legal cannabis programs. The study should also examine the efficacy of local and state programs designed to promote cannabis business ownership and employment opportunities for individuals adversely impacted by the so-called “War on Drugs” (commonly referred to as “social equity programs”). A national science-based study will help determine if and where inequities exist in cannabis licensing at the state level and whether social equity programs have been effective in increasing the market participation of communities disproportionately harmed by these efforts.   
  • National study to identify areas of disproportionate impact. MORE should also include a requirement for the federal government to conduct a national study to identify areas disproportionately impacted by cannabis criminalization. These disproportionately impacted areas should be at the census tract level and defined in terms of socio-economic factors and areas of concentrated over-policing of outdated cannabis enforcement policies. Several state and local governments have conducted similar studies to help inform the eligibility requirements for participation in their cannabis social equity program. A national study of disproportionately impacted areas should not serve to undermine existing social equity efforts. Instead, a national study could be used as the basis for future local and state social equity programs and to determine eligibility for federal programs and benefits geared toward the communities adversely harmed by the so-called “War on Drugs.” 
  • Direct funding for local and state expungement efforts. Funding for local and state expungement efforts is critical, as most cannabis-related records exist at the state level. However, MORE as written would do little to encourage local and state adoption of automatic expungement for cannabis-related offenses. The bill creates funding opportunities for local and state governments to develop and implement equitable cannabis programs that minimize barriers to licensing and employment for individuals adversely impacted by the so-called “War on Drugs,” but only if they’ve already taken steps to create an automatic process for expungement. In other words, funding is only available to local and state governments that have already adopted automatic expungement procedures for cannabis-related records. This incentive will likely have minimal-to-no effect on states without a legal cannabis program and conservative-leaning states that are less likely to apply for cannabis social equity funding.

Social equity programs and retroactive relief measures are both critical to equitable cannabis policy reform, but funding for one should not be contingent upon the existence of another. Not all states have social equity programs or have even legalized cannabis, but all states have individuals with cannabis-related criminal records deserving of expungement. Instead, the authors of MORE should consider creating a stand-alone direct grant program to aid local and state governments in implementing automatic expungement for cannabis-related records.