From state ballot initiatives and presidential pardons to federal legislation both passed and pending, 2022 was a busy year for the cannabis industry. With 2023 projecting to be just as challenging for the industry, it’s wise to look back in order to best understand what’s coming down the pipeline.
On October 6, less than a month from November’s midterms, President Biden issued a presidential pardon of all prior federal offenses of simple cannabis possession. While this was a significant step toward broader decriminalization, many were underwhelmed by the implications of the pardon, as it will only affect about 6,500 U.S. citizens who carry federal cannabis-related convictions on their records from 1992 to present.
President Biden urged each governor to follow suit by issuing similar pardons for state offenses, and finished his media-grabbing three pronged announcement by directing the attorney general and secretary of Health and Human Services to “review expeditiously how marijuana is scheduled under federal law”. Cannabis is currently classified as a Schedule I Drug per the Controlled Substances Act (CSA), the same level as heroin. Even though “expeditiously” sounds promising, the reality is that this process is likely to take some time to accomplish the goal of properly schedule cannabis.
Soon after, the November 8th elections came with major implications for the cannabis industry in five different states via ballot initiatives.
Maryland and Missouri passed statewide amendments to legalize adult-use of cannabis. Both amendments also provide expungement opportunities for people with cannabis-related charges on their records. While these amendments were similar, the political dynamics in the states were not. Maryland’s ballot initiative passed with ease and required minimal spending from advocacy groups, whereas Missouri’s barely made it over the finish line and relied on a multimillion dollar advocacy campaign to drown out a well-funded counteroffensive to defeat the amendment.
Conversely, Arkansas, North Dakota and South Dakota voted on similar ballot initiatives, and each failed. In Arkansas, an aggressive pro-legalization advocacy campaign was no match for the political pressure levied by the most influential elected officials, as the statewide initiative to legalize adult-use recreational cannabis was easily defeated. Likewise, North Dakota rejected their statewide vote on recreational cannabis use for the second time in four years, with key stakeholders once again opposed.
Despite passing a similar initiative in 2020, South Dakota also rejected their 2022 ballot proposal to allow adults to purchase and possess cannabis in a narrow vote, with just 52% of voters opposed. Given the close margin and seesaw history of statewide cannabis initiatives in South Dakota, it would not be surprising to see this issue on ballots again in the future.
While the November ballots were a mixed bag for the cannabis industry, proponents of expanding the industry got a huge win in December as President Biden signed The Medical Marijuana and Cannabidiol Research Expansion Act into law. This bill, perhaps more substantive than the federal pardons, will establish a new registration process to facilitate cannabis research. Given cannabis’ Schedule I classification, this law eases regulatory restrictions under the CSA, opening the door to further research and potentially even descheduling. This law also allows additional institutions, such as universities, practitioners and manufacturers, to distribute and possess cannabis for medical research.
Pardons, statewide ballot amendments and new federal laws have had a profound impact on the cannabis industry, but there’s another pending development that could be just as meaningful heading into the new year.
After months of building momentum, the SAFE Banking Act – which has already passed the House of Representatives seven times – was not included in the 2022 National Defense Authorization Act (NDAA). The SAFE Banking Act would provide protections for financial institutions that work with state-legal cannabis businesses. Under current law, financial institutions providing banking services to legitimate and licensed cannabis businesses under state laws are subject to criminal prosecution under several federal statutes such as “aiding and abetting” a federal crime and money laundering.
These regulations have created a dangerous dynamic for law-abiding cannabis businesses, as they have limited access to the services provided by the banking system, forcing them to act as cash-only businesses. This has resulted in frequent robberies, or worse, in the cannabis industry.
As the SAFE Banking Act did not make it into last year’s NDAA, and with a new session Congress underway, there may be additional challenges in 2023 for SAFE Banking. However, as this initiative enjoys broad bipartisan support, it will be on the minds of many in the new Congress.
Outside of the United States, there were several developments internationally. Not the least of which, Germany released a position paper in October outlining its plans to legalize cannabis for adult use. All eyes will be on Germany this Spring when it releases a much-anticipated draft bill that will need input from the European Commission. The outcome of legalization in Germany is far from resolved, but many expect progress to be made this year.
2023 is likely to be another exciting year for the cannabis industry, with states across the nation already preparing to vote on ballot initiatives in the months ahead. Whatever the future holds, advocates for expanding the cannabis industry should look to the lessons learned and progress achieved in 2022 for guidance.
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