Articles & Publications 02.27.23

Current Status of Cannabis Law: Is Federal Legalization Still Just a Pipe Dream?

It seems that nearly every day you can open the newspaper and read about another state working towards the legalization of cannabis use, and surely cannabis activists and advocates rejoiced when the COVID-19 pandemic moved cannabis from a “controlled substance” to an “essential service” in certain states, but in the excitement of all these developments, it can be easy to forget that the pivotal issue in the long journey towards cannabis legalization still has not been resolved – the ongoing federal prohibition of cannabis. 

California was the first state to legalize medical marijuana in 1996. Over the course of the next 25 years, California’s action sparked a trend that spread to a majority of states by 2016. Since California’s legalization of medical marijuana, the medical use of cannabis has been legalized in 37 states, with the recreational or adult-use of cannabis also being legal in 21 of these states, Washington, D.C., and Guam.

However, cannabis remains classified under the federal Controlled Substances Act as a Schedule I Substance — a category that is defined by a high potential for dependency and no accepted medical use. The Supremacy Clause of the U.S. Constitution gives federal statutes primacy over state laws. Therefore, states that have legalized either recreational or medical marijuana have done so in direct conflict with the federal government, creating tension between the rights of states to create their own laws and the authority of the federal government. The federal government’s classification of cannabis as a Schedule I Substance is not just factually inaccurate (see, 39 states’ legalization of medical marijuana), but through the Supremacy Clause, the federal government has created a constitutional crisis.

A growing majority of Americans believe that recreational marijuana should be legal. A CBS News/YouGov poll released in April 2022 found that two-thirds of Americans want recreational marijuana use to be legalized under federal law and in their own state. Further, cannabis has become a major source of legitimate economic activity nationwide and billions of dollars are currently pouring into the legal cannabis industry. Combined U.S. medical and recreational cannabis sales could reach $33 billion by the end of 2022, largely driven by the opening of new adult-use markets. Retail cannabis sales are projected to be upwards of $52.6 billion by 2026, according to analysis from industry experts.

The absurdity of the federal government’s criminalization of a substance that is legal in three quarters of the states came to a head during the pandemic when cannabis dispensaries were designated by the federal government as “essential” businesses. However, as a result of federal prohibition, the various state laws legalizing cannabis lack any kind of interstate consistency. The patchwork of state-level regulations has been born out of necessity, but the lack of federal authorization or consensus causes a myriad of issues for the cannabis industry. For instance, licensed vendors lack access to the federal banking system, and consequently transact in cash, which raises security costs and risks for employees in the cannabis industry.

Despite the overwhelming support for the legalization of cannabis among the American public, which cuts across political, racial, and gender lines, as well as the billions of legitimate dollars that are pouring into the nation’s economy and tax stream, the federal government has steadfastly refused to move off of its outdated position on cannabis.

In light of the federal government’s inaction on this issue, one cannot help but ask, is the quest for federal legalization of cannabis still just a pipe dream?  It is a fair question, as all three branches of the federal government have failed in recent years to challenge the cannabis prohibition status quo.

The executive branch, driven largely by the policies of the sitting President, has generally taken a hands-off approach to cannabis prohibition enforcement in states where cannabis is legal. Notable action to protect the legalized cannabis industry in the executive branch began in 2009, when the Obama administration told federal prosecutors to consider not prosecuting people who distributed marijuana in accordance with state medical marijuana laws.

In 2013, the Justice Department issued the most influential directive on federal marijuana enforcement, which was known as the Cole Memorandum. Through this memorandum, the Justice Department said it would not challenge states’ legalization laws at that time and expected states to have robust enforcement efforts of their own. For the first time, it appeared that there was some movement towards removing the federal cannabis prohibition.

However, the Cole Memorandum was rescinded in 2018 by then-Attorney General Jeff Sessions, who told prosecutors to use established prosecutorial principles and their own judgment when prosecuting, or declining to pursue, marijuana charges. While the Justice Department has generally declined to pursue cases where individuals are acting in compliance with state law, every business owner in the cannabis industry continues to live with the fear of knowing the federal government can swoop in, arrest them, and seize every asset at any time they so choose.

More recently, President Biden issued a proclamation on October 7, 2022, which included a request for the Secretary of Health and Human Services and the Attorney General “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.” However, as President Biden was once the architect and champion of the controversial 1994 crime bill that some allege increased mass incarceration for marijuana offenses (and because of his prior refusal to support pro-cannabis policies), many remain skeptical that the Biden administration will effectuate meaningful change at the federal level as it pertains to cannabis prohibition. 

The judicial branch has similarly disappointed cannabis activists in recent years. The U.S. Supreme Court was recently asked to address whether the federal drug law that criminalizes possession of marijuana invalidates state orders requiring employers and their workers’ compensation insurers to pay for medical marijuana prescriptions for employees injured on the job. The Supreme Court’s involvement in this matter is related to two cases from Minnesota, Bierbach v. Digger’s Polaris et al. and Musta v. Mendota Heights Dental et al., in which injured employees challenged their employers and their insurers for refusing to reimburse them for their medical marijuana prescriptions. Musta suffered a neck injury in her work at a medical facility while Bierbach was injured in an accident while working for an all-terrain vehicle dealer.

Five state Supreme Courts had previously addressed whether the reimbursement of medical marijuana costs is permissible, with two ruling yes and three ruling no. The U.S. Supreme Court was asked to resolve this split in authority.

However, before it would fully take on the question, the high court asked the Solicitor General for guidance considering the Supremacy Clause of the U.S. Constitution. On June 21, 2021, the U.S. Supreme Court denied certiorari petitions filed by Daniel Bierbach and Susan Musta after the Department of Justice, in the requested amicus brief, urged the high court to refuse the question because the federal Controlled Substances Act preempts Minnesota’s workers’ compensation law.

Of the three branches of government, it can be argued that the Supreme Court’s failure to challenge the status quo of federal cannabis prohibition is the most understandable. Afterall, the Supremacy Clause is clear, and it is the job of the legislative branch to draft laws, not the judicial branch.

If the judicial branch’s failure to challenge the federal government’s cannabis prohibition status quo is the most understandable, then the failure of the legislative branch to effectuate changes in these laws is unquestionably the most disappointing. The federal Legislature is elected to represent the people and the people overwhelmingly support cannabis legalization, yet Congress has failed time and time again to make any changes to the classification of cannabis under the Controlled Substance Act or to even effectuate smaller, but important changes, such as extending banking privileges to cannabis businesses operating within legal markets. 

In recent years, a number of federal bills to deschedule and decriminalize cannabis have been proposed, passed the House and then died in the Senate. The Marijuana Opportunity Reinvestment and Expungement (MORE) Act, proposed originally in September 2019, was the first cannabis law to find success on a federal level. It sought not only to legalize and deschedule cannabis, but also legislate remedies for the damage done by the War on Drugs. It passed the House in December 2020 by a 228-164 margin before dying quietly in the Senate.

In addition to the MORE Act, other measures to legalize and deschedule marijuana have been proposed in Congress, as have bills addressing different aspects of legalization from banking to veterans’ access to research. However, the failure of Congress to pass even these much more limited cannabis-related bills only highlights the frustrating legislative gridlock pertaining to cannabis at the federal level.

One such bill, the Veterans Medical Marijuana Safe Harbor Act, was introduced in April 2021. The Veterans Medical Marijuana Safe Harbor Act would allow veterans to “use, possess, or transport medical marijuana and to discuss the use of medical marijuana with a physician of the Department of Veterans Affairs as authorized by a state or Indian tribe, and for other purposes.” Veterans who qualify for medical marijuana on a state level are currently caught between federal and state law and are often stigmatized with a “cannabis use disorder” diagnosis that can put them at odds with the VA health care system. Disappointingly, the Veterans Medical Marijuana Safe Harbor Act has not had a hearing or a vote since it was introduced in 2021.

Another bill, the Secure and Fair Enforcement (SAFE) Banking Act has been around in one form or another since 2019. In 2021, an attempt was made to attach the bill to the National Defense Authorization Act for 2022, but it was stripped out before final passage. In an attempt to move it forward again in 2022, the SAFE Act was attached to the America COMPETES Act, an unrelated bill that addresses technology and trade in the U.S.

The legislation would allow licensed cannabis businesses to operate like any other legal business, with access to banking services, including the use of ATMs, credit cards, access to loans and the ability to make deposits and write payroll checks. The SAFE Act enjoys broad support from business groups, cannabis activists, and large swaths of the banking industry, including the American Bankers Association.

In fact, on April 11, 2022, the Credit Union National Association (CUNA) sent a letter of support to House leaders Nancy Pelosi and Kevin McCarthy, asking that the bill remain attached to the America COMPETES Act. In this letter, the CUNA highlighted the dangers facing the cannabis industry, stating: “A 2015 analysis found that, in the absence of being banked, one in every two cannabis dispensaries were robbed or burglarized—with the average thief walking away with anywhere from $20,000 to $50,000 in a single theft.” Despite this widespread support, the SAFE Act was stripped from the America COMPETES Act.

Presently, New York and New Jersey cannabis licensees and applicants have joined this fight and are advocating for the Senate to pass the SAFE Act. They are joined by members of the NAACP’s Board of Directors, among many other advocacy groups. In late October, the NAACP’s Board of Directors approved a resolution calling upon Congress to pass the SAFE Act, enacting legislation that explicitly allows banks to provide financial services to state-licensed cannabis businesses. Also currently lobbying for this bill is the National Association of Federally Insured Credit Unions (NAFCU), who are currently advocating for the SAFE Act to be included in the fiscal year 2023 National Defense Authorization Act (NDAA). It must be noted that these examples are by no means exhaustive of the groups and organizations advocating for the passage of the SAFE Act. It has also been endorsed by a number of state attorneys general and governors, who argue that it would help to address the public safety and financial risks associated with the current system, which forces cannabis businesses to operate on a largely cash-only basis.

Despite this support, Congress’ lame duck session came and went, and the SAFE Banking Act still failed to get through the Senate. Now at the outset of 2023, the cannabis sector remains in a state of limbo and disarray.

As stated above, the SAFE Act has been debated in Congress since 2019, but to date, Congress has failed to pass this commonsense bill. While the complete federal legalization of cannabis may still seem like a pipe dream for advocates who have been observing Congress over the years, those in the cannabis industry are a perpetually optimistic and determined bunch. Hope remains that the groundswell of support from various business leaders, politicians, and advocacy groups will create enough inertia to finally get the SAFE Act passed in 2023. If banking is finally made available to cannabis businesses operating within legalized states, the pipe dream of complete federal legalization of cannabis may finally, for the first time, appear to be an achievable reality.