Legal cannabis is one of the fastest-growing industries in the US. Sales hit $25 billion in 2021 and are projected to reach $100 billion by 2030. Nineteen states have legalized cannabis for adult use, and another 19 have medical marijuana programs. However, since cannabis is still illegal under federal law, companies can't do business with each other across state borders because interstate commerce falls under federal jurisdiction.
Could federal cannabis legalization make things worse?
The policy gap between state and federal law has created a patchwork of marijuana markets, with laws and regulations differing from state to state. It's massively confusing. As various pieces of legislation like the MORE Act, the States Reform Act, and the SAFE Banking Act work their way through Congress, we're all wondering: will cannabis be easier to access, more affordable, and more equitable for everyone when it's legal under federal law? Not necessarily, some experts say.
While states are making progress by creating opportunities for craft cultivators and small businesses and implementing social equity policies, massive national corporations are waiting on the sidelines to take advantage of federal legalization. And as many cannabis advocates press forward in their quest to end federal prohibition, saying it will create jobs, reduce harm, redirect law enforcement resources, generate tax revenue and promote consumer safety, some industry watchdogs caution that federal legalization could make things worse if, or when, those corporations are given the green light to enter the market.
Shaleen Title, CEO of the cannabis policy think tank Parabola Center, recently published a paper titled Bigger is Not Better: Preventing Monopolies in the National Cannabis Market. In the paper’s opening statement, Title writes, “It is a crucial and vulnerable moment for the future of the cannabis market. While states are making historic progress creating paths for small businesses and disenfranchised groups, larger companies are expanding, consolidating, and lobbying for licensing rules to create or maintain oligopolies. Federal legalization will only accelerate the power grab already happening with new, larger conglomerates openly expressing interest.”
Small businesses vs. cannabis corporations
The policy gap between state and federal law has created a jumbled assortment of marijuana markets, with laws and regulations differing from state to state. This has given rise to a chaotic, unpredictable environment for cannabis businesses, which have “the arduous task of securing capital and banking for a product still federally illegal,” Title writes. State-legal legal cannabis markets are challenging for marginalized people to access — today, fewer than 4 percent of cannabis business owners are Black, according to findings presented in the MORE Act.
Things don’t necessarily get easier for cannabis entrepreneurs and social equity applicants when states pass recreational legalization laws because existing medical marijuana businesses often lobby regulatory agencies for a ‘grace period’ to get a head start on sales. This move can effectively shut out newcomers trying to enter the industry.
Federal legalization could also undermine small cannabis businesses if larger, well-resourced companies are able to quickly develop and release novel products at the national level. Title sounds the alarm about Big Tobacco in particular. “Cannabis could be combined with other substances to create products that are more addictive or dangerous,” she writes.
Slow down federal cannabis reform?
Now that we have a decade of state-legal cannabis reform to look back on, starting with the recreational marijuana laws passed in Colorado and Washington in 2012, cannabis regulators and activists are sounding the alarm about ending prohibition at the federal level. Many states are still trying to iron out confusing, inequitable policies that are crushing small businesses. DC’s marijuana market is subject to an ongoing battle between the electorate, which resoundingly approved legal weed under I-71, and Congress. Putting the federal government in charge when its only expertise has been in arresting and prosecuting marijuana users could potentially lead to even worse problems for the cannabis industry.
There’s been an ironic twist in perspective due to the track record of state-level reforms combined with new concerns about the future of cannabis companies, Title writes: “Many who previously opposed legalization, now seeing the success of state legalization efforts, are starting to warm to the notion of ending prohibition at the federal level; many small cannabis businesses and longtime reform advocates have become the loudest voices in support of going slow and exercising caution in federal reforms.”
Title’s paper is a fascinating read. We recommend you check out the entire document. And keep an eye out for Gentleman Toker’s coverage of state and federal legalization initiatives!