Summary of cannabis legislation 2021


Although Congress has not passed federal legislation legalizing cannabis in 2021, the pressure to end the federal ban on the ever-growing industry continues to mount. While Republican lawmakers have traditionally opposed decriminalization, more and more people are beginning to support or even introduce new cannabis legislation.[1] On top of that, recent polls indicate that about 68% of Americans now support legalization.[2] many consumers now consider cannabis to be less dangerous than alcohol.[3] Additionally, the industry’s total addressable market is expected to reach $ 84 billion by 2026.[4]

Federal efforts

At the federal level, Democrats have so far not received enough bipartisan support to overcome the threat of Senate obstruction. In 2021, neither the Cannabis Administration and Opportunity Act nor the Marijuana Opportunity Reinvestment and Expungement Act made much headway. Additionally, the SAFE Banking Act, which would have opened the door for cannabis companies to access commercial banking services, has so far failed in the Senate despite broad support in the House.[5]

However, the Republican-led state reform law could offer Congress the most realistic chance to decriminalize cannabis at the federal level. This “compromise” bill, introduced in November, would give states full powers to regulate or ban cannabis as they see fit. As a result, cannabis would be downgraded under the Controlled Substances Act, opening the door for cannabis companies to access commercial banking services. Additionally, the bill would allow cannabis to be transported in interstate commerce and also presumably nullify Section 280E of the Federal Tax Code, which currently prohibits cannabis companies from claiming federal tax deductions. In addition, the bill would allow cannabis companies to obtain loans and other relief from the Small Business Administration. While passing the States Reform Act would not result in federal legalization, it would remove many federal regulations currently weighing on cannabis companies.

Additionally, a new bipartisan bill recently introduced to the House seeks to force the FDA to regulate hemp-derived CBD as a food and drink ingredient. Given the lack of clear federal guidelines regarding how much hemp-derived CBD can be added to a food or drink, this bill would bring clarity to CBD companies by requiring the FDA to finally develop clear rules.[6]

States move forward

Despite Congress’ failure to enact cannabis legislation, the list of states allowing legal adult cannabis use grew in 2021. New York, New Jersey, Connecticut, New Mexico, and Virginia is now on the list of states that allow the recreational use of cannabis. These 18 states represent almost half of the American population.[7] Additionally, medical cannabis has become legal in several other states, bringing the total to 36 states. On the other hand, in a rare setback, the South Dakota Supreme Court overturned a state voting initiative that garnered 54% of the vote in favor of legalizing recreational cannabis.

As for hemp-based products, states have also started proposing and enacting laws to legislate on the use of hemp in consumer products. For example, Governor Newsom recently enacted California AB 45. This will allow growers to include hemp, hemp derivatives, cannabinoids (e.g. CBD) and extracts in food and drink products as well as dietary supplements, cosmetics and even pet food.[8]

Around 2022

The States Reform Act or the SAFE Banking Act could realistically be enacted in 2022. The midterm elections of 2022 will certainly have an impact if and when either of these bills becomes law, but the period of lame duck that immediately follows the election could provide reluctant lawmakers with a window for a bipartisan compromise. On the flip side, President Biden still appears to oppose the legalization of recreational cannabis, and it is still unclear whether he would veto any of these bills.[9]

Even if Congress does not act, states are beginning to introduce their own legislation to ease the barriers the federal ban places on cannabis companies. For example, the legislatures of New York, New Jersey, and Missouri recently introduced bills to circumvent Section 280E of the U.S. Tax Code by allowing cannabis companies to deduct business expenses from their state taxes. Additionally, Michigan recently introduced a bill that emulates California’s AB 45 and would allow hemp-derived CBD to be included in foods and dietary supplements.[10]

Although federal legalization did not take place in 2021, cannabis companies should stay on the lookout for new state regulations and also begin to prepare for possible federal legislation that would open the door to interstate commerce, to the ‘access to commercial banks and federal tax deductions.

* Skyler Hicks, lawyer in Sheppard Mullin’s San Francisco office, contributed to this article.

FOOTNOTES

[1] See the law on state reform; Here’s what’s in the new Republican marijuana legalization bill – Leafly

[2] Support for legal marijuana in inches up to a new high of 68% (gallup.com)

[3] Cowen-Research-Themes-2022.pdf (pcdn.co)

[4] Identifier.

[5] A previous article on the SAFE Banking Act is available here.

[6] What is the CBD Product Safety and Standardization Act? – CBD Retail Trends

[7] 18 States, DC Legalized Weed US – Where is 2021 Legal Marijuana? (esquire.com)

[8] A previous article on AB 45 can be found here.

[9] Psaki: Biden insensitive to marijuana legalization despite Schumer legislation – POLITICO

[10] Cannabis Bill Roundup: Pre-deposit season kicks off – Law360

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 4


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