Decriminalization alone is not the silver bullet solution the market seems to believe it is. What does it even mean? After the mere mention of the word in the recent debate with Kamala Harris and Vice President Pence, cannabis stocks surged. If you sift through what the 2020 Democratic Party Platform has said at various points in the campaign, three constant points emerge as their definition of decriminalization: criminal justice reform, expungement, and rescheduling. Until we know how the change will be made, the true market potential remains unclear.
Criminal justice reform makes sense and allowing non-violent cannabis charges to be expunged is a good first step. Expungement — the actual deleting of a criminal record — must be automatic to be effective. Federal-only automatic expungement would be nice, but the vast majority of cannabis arrests occur at the state level. Automatic expungement at the federal and state levels must occur. Once it does occur, however, expungement will be a boost to the U.S. economy as a whole. Why is that? Because a lot of people are cut out of jobs because they got arrested for cannabis. More availability in the labor pool is good for the U.S. economy.
Rescheduling is Not the Answer
The U.S. Government deems cannabis a Schedule 1 Controlled Substance; dangerous and of no medical value. If cannabis were to be rescheduled, it could put a majority of control in the FDA’s hands, and take the industry down the road to pharmaceutical-based development. However, if cannabis were to be de-scheduled, there would be a greater opportunity to develop regulations more aligned with the liquor laws that many states have already adopted.
The Promise of the MORE Act
Decriminalization could take place through the passage of the MORE Act, currently being debated in the halls of Congress. It is the most important piece of drug policy legislation in 80 years. It will effectively deschedule cannabis, removing it entirely from the list of controlled substances and provide other key changes simultaneously.
- Legalize Cannabis Federally
It is important to keep in mind that federal legalization of cannabis does not change a thing at the state and local level. With that said, it does make it easier and much less contentious for states to follow suit. The majority of Americans still live in a state where access to cannabis is greatly limited.
- Open Access to Financial Services
Many cannabis businesses do not even enjoy the simple benefits of having a bank account. They can’t write checks, process payroll, or accept credit cards from their customers. More critical to these growing businesses is access to the capital market. There are some successful, thriving cannabis companies in the U.S. that have gone public in order to raise capital. Where are they listed? With few exceptions, most are listed on the Canadian or OTC stock markets. These businesses will be able to more freely list once prohibition ends.
- Allow for Interstate and International Cannabis Trade
Today, if a cannabis business in Colorado wants to sell its products in another state, that business must apply for a license and build a manufacturing facility in the new state. While the U.S. created the modern day cannabis industry, we have not been able to fully participate. Global export is something that the US has been missing out on yet we could easily become a dominant global player.
- End the 280E tax restrictions
Any business that sells cannabis products must endure the tax burden of section 280E of the U.S. tax code. Meant to punish illegal drug dealers, section 280E prevents many cannabis businesses from claiming basic tax deductions afforded to all other businesses.
Essential Business: COVID Recovery and Long-Term Benefits of the Next Great American Industry
There is no denying the many economic benefits of the strong national cannabis industry that would result from the end of prohibition. COVID-19 has already established cannabis businesses as essential, and many state governors are counting on cannabis tax revenue as part of their state’s recovery plans. The cannabis industry already accounts for over one billion dollars every year in labor income. New Frontier's report predicting the impact of federally legal marijuana suggests that nationwide legalization could generate 1 million jobs by 2025. Workers would be needed to cultivate, process, distribute, and sell cannabis-based products. Further, there would be an even broader impact with the ancillary businesses and the growth they would bring our economy. Let’s hope the next administration will understand the importance of finally bringing federal prohibition to an end in a way that will be meaningful and help our economy recover.
