A group of House Republicans, led by Representative Nancy Mace, introduced the States Reform Act on Monday, November 15, 2021.  This follows the passage the Marijuana Opportunity, Reinvestment and Expungement Act (the “MORE Act”) by the House Judiciary Committee, the passage of the Secure and Fair Enforcement Banking Act (the “SAFE Banking Act”) as part of a defense spending bill by the full House of Representatives, and the introduction of the Cannabis Administration and Opportunity Act ( the “CAOA”) and Clarifying Law Around Insurance of Marijuana Act (the “CLAIM Act”) in the Senate.

The States Reform Act, if passed, would:

  • Decriminalize cannabis at the federal level (states would still be permitted to criminalize cannabis);
  • Expunge federal convictions for people with non-violent cannabis convictions, which Rep. Mace expects would lead to 2,600 incarcerated people being released;
  • Impose a 3% federal excise tax on cannabis;
  • Empowers the US Department of Agriculture to regulate cannabis cultivation, the Alcohol and Tobacco Tax and Trade Bureau (to be renamed the Alcohol, Tobacco, and Cannabis Tax and Trade Bureau) to regulate interstate and international cannabis trade, the Bureau of Alcohol, Tobacco, Firearms and Explosives would regulate cannabis products, and the FDA to regulate medical cannabis only;
  • Allows the federal government to issue packaging and labelling requirements;
  • Permits the VA to recommend cannabis to veterans and prevents discrimination against veterans in federal hiring or for healthcare benefits. The States Reform Act does not protect non-veterans from discrimination based on cannabis use in federal hiring;
  • The creation of federal permits necessary to operate within the market, grandfathering in those who have already been licensed by states that allow for cannabis;
  • Sets the national cannabis consumption age at 21 years old, through a system similar to how the government set a national drinking age by withholding certain funds from states that utilize a lower age. People under 21 would still be eligible for prescription cannabis.

The States Reform Act does quite a bit and is much more ambitious than prior Republican proposals that would simply decriminalize cannabis.  There are a number of differentiators between the States Reform Act, the MORE Act, and the CAOA.

  • The States Reform Act imposes a significantly lower tax rate, with the MORE Act taxing cannabis at 5% and increasing to 8% over three years. Meanwhile, the CAOA taxes cannabis at 10% and increases to 25% over five years.  The tax revenue is also dedicated to different purposes, with the MORE Act and CAOA dedicating more tax revenue to social equity programs.  The States Reform Act lacks the dedication to social equity programs present in the MORE Act and CAOA.  However, the States Reform Act does dedicate some revenue to mental health, addiction, and second chance programs;
  • The States Reform Act does not protect immigrants from deportation for cannabis-related offenses and does not prevent non-veteran recipients of federal benefits from being disqualified due to cannabis use.

While there is still a gap between the States Reform Act and the Democratic-led proposals, the States Reform Act represents a significant step towards potential federal decriminalization and/or legalization.  Should the supporters of the States Reform Act, MORE Act, and CAOA reach a compromise, a bipartisan bill may emerge that could potentially pass in both chambers of Congress.

In addition to Rep. Mace, the States Reform Act is co-sponsored by Reps. Tom McClintock, Don Young, Brian Mast, and Peter Meijer.  Rep. McClintock previously voted in favor of the MORE Act.

We will continue to monitor federal legalization efforts and provide updates regarding any developments.

The New Jersey Cannabis Regulatory Commission (“CRC”) announced during its November 9, 2021 meeting the dates applications for licenses can be submitted for cannabis cultivators, manufacturers, and retailers.  Cannabis cultivators and manufacturers can begin submitting their applications on December 15, 2021, while cannabis retailers can begin submitting their applications on March 15, 2022.  Below is where you should be if you’re planning on applying:

Cultivators seeking an Annual or Conditional License:

With the statutory limit of 37 cultivators until February 2023 in place, we expect cultivation applications to be very competitive.  Cultivators should have already retained a cannabis attorney and application writer, assembled their complete team, and signed letters of intent with the contractors necessary to meet their regulatory obligations.  You should have secured a letter of support from your municipality, and received minority or women business enterprise certification if you meet those criteria.  You also should have entered into a labor and peace agreement with a union.  Further, cultivators seeking annual licenses should have property secured before December 15, 2021, while cultivators seeking conditional licenses should be identifying property and at least be in active negotiations with the owner or landlord.  Next on your to do list – plan on submitting all materials as soon as the CRC begins accepting applications.

Manufacturers Seeking an Annual or Conditional License:

There are no caps on the number of manufacturing licenses, so the need to file an application immediately is less necessary.  However, with the limited number of municipalities allowing manufacturing, and the limited real estate available, it will be preferable to apply sooner rather than later.

  • You should have already retained an application writer/consultant to assist in preparing your application. While an application writer is not necessary, we highly recommend retaining one as it will give you the best chance of securing a license.
  • You should have already retained a cannabis attorney to ensure your application and operations are compliant with New Jersey’s laws and regulations.
  • You preferably have secured property and ensured the property is compliant with all cannabis-related zoning, or you are close to securing said property. If seeking a conditional license, securing the property is not yet necessary, but you should be in negotiations with a landlord or seller.
  • You should be working with your municipality to secure a letter of support if you have not secured on already.
  • You have already filed for certification as a minority or women business enterprise if you meet the qualifications.
  • You should have entered into a labor and peace agreement with a union.
  • You should be prepared to line-up all of the contractors needed for the application, such as a security professional, in the coming weeks if you have not secured those services already.

If you have fallen behind, it may not be too late to seek a manufacturing license – just be aware that as more licenses are granted and less real estate is available, it will become harder to secure a license.

Retailers Seeking an Annual or Conditional License:

  • You should be looking to retain an application writer/consultant now if you have not already done so.
  • You should be looking to retain a cannabis attorney now if you have not already done so.
  • You should be looking to secure property now. There is limited suitable property available, so while there is some time before your application is due, the property may not be available closer to the application date.  Remember, there are many restrictions on what property you legally can use, and we therefore recommend retaining a real estate attorney with cannabis experience.
  • You should start vetting contractors to provide the services necessary for an application and entering into letters of intent with them.
  • You should be preparing your organizational documents, if you have not done so already.
  • You should be applying for minority or women business enterprise certification.
  • You should be negotiating with a union regarding a labor and peace agreement.

Microbusinesses:

Microbusinesses are unique in that there are no caps on microbusinesses, even cultivation microbusinesses, and many municipalities have created favorable local licensing for microbusinesses.  Still, it will be beneficial for applicants to get their applications in as soon as possible.  Therefore, microbusinesses should follow the above guidelines for cultivators, manufacturers, or retailers, depending on the license they are seeking, with the understanding that they have slightly more flexibility than applicants seeking annual or conditional licenses.

Other Cannabis License Classes:

The CRC has not issued any guidance regarding the timeframe for whole or distribution licenses.  However, we recommend those seeking these licenses begin preparations now, rather than waiting for an announcement.

There is no deadline for submitting these applications, and no hard cap on the number of licenses that will be issued for non-cultivation licenses.  However, due to the limited number of towns allowing cannabis enterprises, and the limited amount of eligible property available, we recommend those intending to enter this new market move swiftly to secure a license.

On Wednesday, July 14, 2021, Senators Schumer (NY), Booker (NJ), and Wyden (OR) introduced the Cannabis Administration and Opportunity Act (“CAOA”), a draft bill for the decriminalization and regulation of cannabis at the federal level.  The CAOA represents a comprehensive change to the federal government’s approach to cannabis, embracing state legalization and permitting shipping of cannabis across state lines.  As currently written, the bill is divided into the following six titles: 1) decriminalization of cannabis, public safety, and states’ rights; 2) research, training, and prevention; 3) restorative justice and opportunity; 4) taxation and establishment of trust fund; 5) public health, cannabis administration, and trade practices; and 6) miscellaneous.  Key components of the bill include:

  • Removes cannabis and THC from the Controlled Substances Act, any schedule under such act, and other laws and regulations related to the prohibition of controlled substances;
  • Transfers cannabis-related responsibilities from the federal Drug Enforcement Agency to the Bureau of Alcohol, Tobacco, Firearms, and Explosives (renamed the Bureau of Alcohol, Tobacco, Cannabis, Firearms, and Explosives), the Department of Health and Human Services, and the Department of the Treasury;
  • Permits states to continue to regulate cannabis use and possession, but prevents states from forbidding the shipping of cannabis through said state to a destination where cannabis has been legalized;
  • Authorizes federal studies by HHS on the impacts of cannabis on public health and its medicinal properties. Also authorizes studies by the Department of Transportation on cannabis-impaired driving and methods of detecting cannabis-impaired driving;
  • Establishes a Cannabis Justice Office in the Office of Justice Programs to administer the Community Reinvestment Grant Program. The Grant program shall administer services for those adversely affected by the war on drugs, including job training, reentry services, legal aid for civil and criminal cases, including expungement, literacy programs, youth recreation and mentoring programs, and health education;
  • Creates the Cannabis Opportunity Program to provide states and localities funds for issuing loans that would assist small businesses owned and controlled by economically disadvantaged individuals in the cannabis industry, as well as the Equitable License Grant Program to provide funds to states and localities with the goal of easing access to the industry for those adversely impacted by the war on drugs and to establish licensing boards that are reflective society and can serve as oversight of the equitable licensing programs;
  • Authorizes the Small Business Administration to make all programs available to cannabis-related businesses;
  • Expunges federal arrests and convictions for non-violent cannabis-related offenses and seals such records;
  • Prevents cannabis use, possession, or prior convictions from disqualifying individuals from federal benefits or from impacting one’s immigration status;
  • Taxes cannabis federally at 10% for the first two years after passage of the CAOA, 15% during the third year, 20% during the fourth year, and 25% during the fifth year, with the Department of Treasury performing studies to determine the applicable tax rate thereafter. Tax revenues would go to the Opportunity Trust Fund, 60% of which is appropriated to the Attorney General for use in connection to the Community Reinvestment Grant Program, and 40% to the Small Business Administration for the provision of services to cannabis-related businesses under the CAOA;
  • Establishes the Center for Cannabis Products under the FDA to regulate cannabis and CBD and ensure no adulteration or misbranding of cannabis products occurs;
  • Prohibits the selling of electronically delivered flavored cannabis products;
  • Establishes federal permitting of cannabis businesses granted state licenses;
  • Authorizes the Comptroller General to identify all instances of “marijuana” or “marihuana” in federal laws and regulations to be changed to “cannabis,” and to identify any further laws or regulations requiring amendment.

While the CAOA has the support of the Senate Majority Leader, and therefore can be placed on the docket for a vote, it is unclear if it will have the support necessary to be passed into law.  We will continue to monitor the CAOA and other attempts at federal legalization and will post updates as the bill progresses.

After a special legislative session, the Connecticut Senate passed An Act Concerning Responsible and Equitable Regulation of Adult-Use Cannabis on June 17, 2021, following the Connecticut House’s passage of the bill on June 16, 2021.  Governor Ned Lamont has indicated that he intends to sign the bill into law.  The law was previously passed by the Connecticut Senate but was filibustered in the Connecticut House, thereby necessitating the special session.  The new law will legalize adult-use cannabis for adults 21 and over and provides for the licensure of cultivators, retailers, manufacturers, and delivery services under the supervision of the Department of Consumer Protection.  Like other Northeast states, Connecticut’s law puts a heavy emphasis on social equity, requiring half of all licenses to go to social equity applicants.  Further, the state will provide assistance to these applicants in getting their business started.  Additional highlights include:

  • Adults 21 and over may possess up to 1.5 ounces of cannabis starting July 1, 2021, and may store up to 5 ounces in their residence or vehicle.
  • Automatic expungement of convictions for possession of under four ounces of cannabis. However, automatic expungement will not begin until 2023, and will apply only to convictions between January 1, 2000 and September 15, 2015, with others needing to petition to have their convictions expunged.
  • Adults 21 and over may grow up to three mature and three immature plants starting July 1, 2023. Medical patients 18 and over may begin growing plants October 1, 2021.
  • Employers may not take adverse action against workers for positive cannabis metabolite tests.
  • The smell of cannabis is no longer probable cause to stop and search individuals. Adults between 18 and 20 face a civil fine for possession.  Minors would be subject to a written warning for their first two offenses, but can face more severe penalties for subsequent offenses.
  • Localities may prohibit cannabis businesses.
  • Flower will be capped at 30% THC on a dry-weight basis, whereas all other products will be capped at 60% on a dry-weight basis. The 60% THC cap on other cannabis products does not apply to pre-filled cartridges for electronic cannabis delivery systems.
  • Cannabis sales will be subject to a THC-based excise tax, a 3% municipal tax, and Connecticut’s state sales tax. At first, the state-based taxes will go towards Connecticut’s general fund, but beginning June 30, 2023, 60% of tax revenue will go towards the Social Equity and Innovation Fund. That amount will gradually increase from 2026 to 2028.
  • Social equity applicants will pay only 50% of the standard application fee for licenses, while medicinal dispensaries can pay $1 million in order to operate as a hybrid dispensary.

House Majority Leader Jason Rojas aims to have legal sales begin in May 2022.

Following Representative Nadler’s introduction of the MORE Act, which would decriminalize cannabis at the federal level, Representatives Cori Bush and Bonnie Watson Coleman introduced the Drug Policy Reform Act (“DPRA”) on June 15, 2021, which would decriminalize all drugs, including cannabis.

Under the DPRA, regulation of all drugs listed in the Controlled Substances Act would be handled by the Department of Health and Human Services, who would be empowered to determine the amount of each drug that constitutes personal use as well as expand access to substance abuse treatment.  Further, the bill provides for the expungement of federal criminal records for simple possession of drugs and provides incentives to states who do the same. The DPRA also provides protections for employees who may have used drugs, preventing employment discrimination based on drug use convictions.  The DPRA forbids denying individuals certain federal benefits, the right to vote, or a drivers’ license based on prior drug use.  Drug use would also no longer be grounds for denying immigration status.  While drug possession below a certain amount would not be criminalized, civil fines could still be issued for such possession.

Oregon has already decriminalized drug possession.  While it’s unlikely the DPRA will be passed into law this legislative session, we may see some states follow Oregon’s lead.

House Judiciary Chair Jerry Nadler reintroduced the Marijuana Opportunity Reinvestment & Expungement Act (the “MORE Act”) on Friday, May 28, 2021.  The MORE Act seeks to remove cannabis from the Controlled Substances Act, expunge certain cannabis-related criminal records at the federal level, and create social equity programs via a federal sales tax on cannabis products.  Rep. Nadler had previously introduced the MORE Act in 2020.  At that time, it passed the House of Representatives but was never voted on in the Senate.

This year’s version of the MORE Act differs slightly from the 2020 version.  Key points contained in the act are:

  • Implementation of a five percent federal sales tax on cannabis products, that would increase to eight percent over three years. Tax revenue raised would fund the Opportunity Trust Fund, which would help communities impacted by the war on drugs.
  • Creation of the Office of Cannabis Justice to prevent penalizing cannabis users who receive social services from the federal government, as well as to oversee the social equity components of the bill.
  • Establishment of the Cannabis Restorative Opportunity Program under the Small Business Administration.
  • Expungement of low-level federal convictions for cannabis possession, as well as the creation of incentives for states to expunge similar convictions.
  • Permitting the prescription of medicinal cannabis to veterans through the VA system.
  • Preventing deportation of immigrants for minor cannabis infractions or for working for cannabis companies in states where cannabis has been legalized.

The MORE Act is co-sponsored by Representatives Barbara Lee, Earl Blumenauer, Sheila Jackson Lee, Hakeem Jeffries, and Nydia Velázquez.  While it is expected the bill will be passed by the House of Representatives, its future in the Senate is unclear.  Senators Chuck Schumer, Cory Booker, and Ron Wyden intend to introduce their own bill legalizing cannabis soon.

New Mexico Governor Grisham signed the Cannabis Regulation Act, legalizing adult-use cannabis on Monday, April 12, 2021.  The law legalizes possession of up to two ounces of cannabis by those 21 and over, and requires the newly-created Cannabis Control Division to release regulations by January 1, 2022, with the goal of having legal sales in New Mexico by April 2022.  Further, the law allows individuals to cultivate up to six mature and six immature plants, with a maximum of 12 mature plants per household.  The odor of cannabis is no longer grounds for a police officer to perform a search.  The legislation does not place a limit on the number of licenses that may be issued and prevents municipalities from banning the sale of cannabis.  There will be a 12% excise tax in addition to New Mexico’s sales tax, which will increase one percent each year from 2025 to 2030, maxing out at 18%.  Medicinal cannabis is exempt from the excise tax.

On the same day, Gov. Grisham also signed Senate Bill 2 into law, which will automatically expunge records of prior arrests and convictions for now-legal cannabis-related offenses, forbid the consideration of such cannabis-related records in determining employment eligibility for state positions, and release those currently incarcerated for now-legal activities within 30 days.

On April 7, 2021, Virginia legalized adult-use cannabis, allowing adults 21 and over to possess up to an ounce of cannabis beginning July 1, 2021.  Individuals will also be permitted to cultivate plants for personal use beginning on July 1, 2021.  Previously, the State Senate and House of Delegates reached a compromise between their two bills (S.B. 1406 and H.B. 2312, respectively) on Saturday, February 27, 2021.  This compromise originally would not allow for legal sales or possession until January 1, 2024.  Governor Northam initially did not sign the bill, and sent the bill back to the Virginia legislature requesting that they change the date on which possession and cultivation would be legalized to July 1, 2021.  The legislature adopted Governor Northam’s amendment, paving the way for legalization.  Sales will not begin until January 1, 2024.  The law provides for:

  • Possession by adults 21 and over of up to one ounce of cannabis beginning July 1, 2021;
  • The cultivation of up to four plants per household, of which at most two plants can be mature beginning July 1, 2021;
  • The expungement and sealing of certain cannabis-related convictions, and adjustment of sentences for other cannabis-related convictions;
  • The implementation of a 21% retail tax, as well as empowering localities to levy an additional 3% tax. Of the 21% excise tax, 40% will be dedicated to pre-school for at-risk children, 30% will be dedicated to an equity reinvestment fund, 25% will be dedicated to addiction prevention and treatment services; and 5% will be dedicated to public health;
  • The establishment the Virginia Cannabis Control Authority in order to regulate sales, cultivation, and manufacture of cannabis products;
  • Localities may opt-out of allowing retail establishments by referendum before December 31, 2022.

However, quite a lot of work has been left undone.  Decisions as to how the retail marketplace will operate have not-yet been made, nor have decisions regarding criminal penalties for underage possession and unlicensed cultivation and sale been finalized.  Additional action will need to be taken by the legislature to allow for licenses to be issued in time for retail sales to begin January 1, 2024.  The law received no votes from Republican legislators, and ultimately required Lt. Gov. Fairfax to cast a tie-breaking vote in the Senate, leading some to fear that if Democrats lose seats in this year’s elections Virginia will be unable to pass the needed legislation next year.  We will continue to monitor Virginia’s legalization process.

On Saturday, March 27, 2021, a bill was introduced which reflected a compromise between the New York State Legislature and Governor Cuomo.  The bill, an amended form of the Marijuana Regulation and Taxation Act (also known as the MRTA), contains the following provisions:

  • Legalization of possession of up to three ounces of cannabis by adults 21-years-old or older, and automatic expungement of all criminal convictions that would no longer be criminal.
  • Legalization of home cultivation of up to three mature plants and three immature plants per adult over 21, with a limit of six mature plants and six immature plants per household.
  • The establishment of the Cannabis Control Board, consisting of three members appointed by the Governor, one by the temporary president of the Senate, and one by the speaker of the Assembly. The Governor’s appointments shall need the consent of the Senate, with one of the Governor’s appointments serving as chairperson.  Each member of the board will serve a three-year term, and must be geographically and demographically representative of the state and communities historically affected by the war on drugs.
  • The Cannabis Control Board will have the ability to issue, or refuse to issue, registrations, licenses, and permits for cannabis businesses. This includes the ability to limit the number of registrations, licenses, and permits available within the state or any political subdivision.  The Board is to prioritize social and economic equity applicants with a goal of 50% of all registrations, licenses, or permits rewarded to such applicants.
  • The Cannabis Control Board will have the authority to revoke, cancel, or suspend for cause any registration, license, or permit.
  • The Cannabis Control Board shall set the standards for cultivation and processing of medical cannabis, adult-use cannabis, cannabis products, cannabinoid hemp, and hemp extract. This includes setting limits as to potency and the type of products which may be manufactured and/or processed.
  • The Office of Cannabis Management is to be established within the Division of Alcoholic Beverage Control, with the purpose of keeping records of registrations, licenses, or permits issued, perform inspections of cannabis-related businesses, and prescribe forms for all licenses and permits.
  • The creation of the role of Chief Equity Officer, who shall establish public education programming in communities historically impacted by cannabis policing and assist those in said communities in seeking licenses for cannabis-related businesses.
  • The establishment of the Cannabis Advisory Board, who will be empowered to approve grants from the Community Reinvestment Fund.
  • The expansion of the current medical cannabis program, including additional licenses, expanded patient access, and additional products.
  • The creation of an adult-use market, with cultivators and processors being prevented from owning retail stores.
  • Licensing for cultivation, processing, retail, delivery, on-site consumption, and cannabis research.
  • The creation of a 9% state excise tax and 4% percent local excise tax on retail sales of cannabis. Of the local excise tax, 75% would go to the municipalities while 25% would go to the counties.
  • The creation of a THC tax of 0.5 cents per milligram for flower, 0.8 cents per milligram for concentrate, and 3 cents per milligram for edibles.
  • 40% of tax revenue is to be dedicated to education, 40% to the Community Grants Reinvestment Fund, and 20% to the Drug Treatment and Public Education Fund, with 40% of all funds dedicated to those disproportionally affected by cannabis policing.
  • Municipalities may opt-out of allowing retail stores or on-site consumption locations, but cannot outlaw adult-use.
  • New York will fund studies to help determine when someone is driving under the influence of cannabis, and will implement additional regulations based on those studies.
  • Neither the scent of cannabis nor presence of cannabis shall constitute reasonable suspicion to be used to search an adult 21-years-old or older.

While it is anticipated that this bill will be passed with minimal changes, the foregoing provisions are subject to change by the New York State Legislature.  While the bill is expected to proceed on an expedited schedule, it will not move forward as a portion of the New York State budget process.  We will continue to monitor this bill as it moves through the legislative process.

Senator Bob Menendez introduced the Clarifying Law Around Insurance of Marijuana Act (the “CLAIM Act”) on Thursday, March 18, 2021.  The bill is co-sponsored by Senators Jeff Merkley and Rand Paul, and will be introduced in the U.S. House of Representatives by Rep. Nydia Velázquez.

The CLAIM Act would forbid federal agencies from discouraging insurers from providing insurance to a legal cannabis-related business or political subdivision regulating a legal cannabis-related business.  Federal agencies would also be prevented from taking actions against such insurers or taking any action that would incentivize an insurer to not engage in business with a cannabis-related business.  The bill also provides that insurers and their officers, directors, and employees will not be held liable pursuant to any federal law or regulation.  The bill directs the Comptroller General of the United States to carry out a study on the barriers to entry to the cannabis industry faced by minority- and women-owned businesses.

We will continue to monitor the CLAIM Act as it moves through Congress.