By: Ben Barlow  [10/31/22]

1932 was an exciting year if you happened to be interested in opening a brewery, distillery, bar – or were even a local government official.  In 1932, Franklin Roosevelt, Governor of New York, hit the campaign trail and promised that, if elected President of the United States, he would push to end prohibition.  For local governments facing financial shortfalls three years into the Great Depression, the idea of increased taxes from alcohol sales seemed like a pretty good idea – maybe the only financial good news they had heard in a while.

Everyone knows how that story ends, the 1932 campaign would be the election to mark the first of Roosevelt’s four terms.  He would keep that campaign promise, and in 1933, states ratified the 21st Amendment to the U.S. Constitution.  The United States turned off prohibition and turned on the flow of tax dollars into state coffers.

The parallels with the winding down of cannabis prohibition are striking.  Of course, there are differences.  Alcohol prohibition lasted just shy of fourteen years where federal cannabis prohibition is 85 years old (going into effect with the passing of the Marihuana Tax Act in 1937[1]).  Though scholarship increasingly attributes alcohol prohibition to anti-immigrant and anti-organizing sentiment, cannabis prohibition has glaring anti-Mexican roots – with leading proponents pushing racist ideologies.  Many individuals with questionable motives for prohibiting cannabis happened to earlier be on the front lines of alcohol prohibition with similar motives.[2]

There is a larger striking difference between alcohol and cannabis prohibition.  Alcohol prohibition turned off the legal alcohol faucet.  Section 2 of the 18th Amendment provided for the enforcement of Prohibition on both the state and federal level.  As people championed the end of prohibition and turned on that faucet, they weren’t living within a paradox of state legalization and federal prohibition.  It had, however, only been 14 years since alcohol sales were legal – so there was no need for a new regulatory and licensing framework.  The prohibition experiment simply ended.

With cannabis prohibition, there is no federal level playing field for businesses and individuals who would, but for prohibition, be interested in operating cannabis businesses.  Some states have well-established regulatory frameworks which have gone through almost three decades of testing.  Other states have newly created legal programs and administrative bodies are finalizing regulations and licensing requirements.  Other states fall between the two.

While businesses and individuals position themselves to best take advantage of their own states’ cannabis framework, they cast a side glance at the state of federal prohibition and wonder what will happen when the tower falls.  Would a federal regulatory and licensing scheme mirror that of one of the existing state markets?  Would it result in changes to state frameworks?  How will cannabis be treated in interstate commerce?

But first and foremost, when will the tower fall?

I would guess sooner than you think.  Those involved and invested in the cannabis market will understandably roll their eyes at such a forecast.  Afterall, federal cannabis probation is around 85 years old and while voices opposing prohibition have grown in number and volume, differences between those voices have, if anything, tended to make the perfect the enemy of the good and thwarted federal legalization.

For those closely following the question of cannabis business operation and banking, Senator Charles Schumer (D-NY) announced today that Congress is close to “introducing and passing a bill … covering banking access for legal businesses and expungements for past convictions.”[3]  As I have previously written, the issue of safe access to banking and financing is a paramount concern for cannabis business clients.[4]  Senator Schumer’s announcement, and the indication of bi-partisan support are connected to two additional factors showing federal cannabis prohibition is nearing an end.

First, the federal government announced pardons for qualifying federal cannabis convictions and directed federal agencies to review cannabis scheduling.[5]  That is the essential first step to descheduling – and, many would argue, can reach no other result as cannabis scheduling appears arbitrary and designed only to achieve prohibition without any intellectually honest consideration.

Second, with Election Day approaching next Tuesday, the anti-prohibition movement appears to have reached critical mass.  Five states will have cannabis measures on their ballot – and four of those states are among the most conservative states in the nation.  In addition, Oklahoma voters will face a ballot option to legalize cannabis in March after backers received enough support for a ballot measure but not in time for next week’s vote.  Currently, while 19 states have legalized cannabis for adult use and 37 states have legalized medical cannabis, there has been resistance in the most conservative states (usually in state leadership as polling indicates significant support for some degree of legalization).  On the ballot next week:

  • Maryland

Maryland’s ballot asks voters whether there should be a constitutional amendment legalizing adult use of cannabis for those over the age of twenty-one.  Recent polling in the state shows approximately 73% of Marylanders are in favor of the amendment.

  • Arkansas

Arkansas’ voters will also choose whether to enact a constitutional amendment allowing adult use.  Unlike Maryland, recent polls show only 51% in favor of legalization, down from a high of 59% following increased Republican opposition as Election Day nears.[6]

  • Missouri

In Missouri, citizens have placed an amendment before voters, bypassing elected leaders.  If passed, Amendment 3 would allow adult use of cannabis.  Recent polling shows prospective voters split on the measure with a large number still undecided.[7]

  • North Dakota

North Dakota also has adult use of cannabis on the ballot and scant polling shows a fairly even split between those in favor and opposed to the measure.

  • South Dakota

Adult use of cannabis is once again on the ballot in South Dakota.  In 2020, 54% of voters voted in favor of adult use only to have a lawsuit filed on behalf of the Governor block legalization due to an argument that the ballot initiative dealt with more than one subject.[8]

More important than whether all of the ballot measures pass next week is the fact that the measure is on the ballot in four conservative states (five if you count Oklahoma in March).  Given the past movement in states with ballot initiatives, the writing is largely on the wall for expanded access in those states in the near future.  If lightning were to strike and ballot initiatives were to pass in all those states, cannabis would be fully legal for over half the population in the United States.[9]

Perhaps the three pillars of federal cannabis prohibition are popular support (election initiatives), business hurdles (banking and finance), and the federal ban (cannabis scheduling).  For those remaining opposed to cannabis legalization, the popular support train has left the station.  It is not a question of if but whether when over half of the states will legalize adult use.  If that takes longer than the current election cycle and is a question next November, there will also likely be over 40 states with some sort of cannabis access.  Those numbers are huge.

In the face of public support, opponents of legalization have been able to rely on business hurdles and federal scheduling to slow legalization.  But now, it appears that the only question is whether descheduling (or changed scheduling) or safe banking and finance legislation occurs first.  For the past few weeks, it seemed that changes to the schedule might occur prior to banking legislation.  With the Schumer announcement today, that might not be the case.

For the first time, that uncertainty is good news to cannabis business clients.

To learn about how Dunlap Bennett & Ludwig can assist you with your legal needs, contact us by calling 800-747-9354 or by emailing clientservices@dbllawyers.com.

[1] https://www.cbp.gov/about/history/did-you know/.

[2] https://origins.osu.edu/article/illegalization-marijuana-brief-history?language_content_entity=en

[3] https://www.marijuanamoment.net/schumer-says-congress-is-very-close-to-passing-marijuana-banking-and-expungements-bill-after-work-with-a-bunch-of-republicans/

[4] https://www.jdsupra.com/legalnews/climbing-to-a-safer-high-are-we-finally-4346023/

[5] https://www.politico.com/news/2022/10/06/biden-to-pardon-marijuana-offenses-call-for-review-of-federal-law-00060796

[6] https://www.marijuanamoment.net/support-for-arkansas-marijuana-legalization-initiative-falls-to-slim-majority-as-gop-lawmakers-urge-opposition-poll-finds/

[7] https://news.stlpublicradio.org/government-politics-issues/2022-10-04/does-missouri-want-legal-marijuana-polls-show-voters-are-closely-split-on-ballot-issue

[8] https://abcnews.go.com/Politics/legalized-recreational-weed-south-dakota-election-redo-november/story?id=91344103

[9] https://www.jdsupra.com/legalnews/can-i-get-a-trademark-copyright-or-8318570/


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