Interstate Commerce And Pot Don’t Mix, But That May Change

The main obstacle to a thriving legal cannabis business is the fact that the business is actually not legal at all under federal law.

To the federal government, Cannabis is still a Schedule 1 “narcotic,” placing it in the same legal category as heroin, even though it’s not a narcotic and it is legal in 11 states.

The biggest perversity to arise from this is that a lot of people, disproportionately Black, are sitting in prison for selling weed—precisely the same thing that a lot of CEOs, disproportionately white, are getting rich from. Other perversities abound, including that the legal pot businesses can’t get access to banking. University researchers often can’t work directly with pot plants for fear of losing federal funds and federal taxation remains a bewildering mess.

But among all of the problems, perhaps the most harmful to the industry’s growth is that interstate commerce is banned.

If one makes cannabis gummies in Colorado, they can’t export them to California. Instead, the gummy-maker must strike an agreement with a manufacturer across state lines to produce the pot-laced treats.

As with banking, there are efforts under way, including in Congress, to make it possible for companies in legal states to ship cannabis products to other legal states without worrying about executives or truck drivers getting busted for trafficking.

Just as the proposed SAFE Banking Act would provide a stopgap solution ahead of federal legalization, such a law would provide cover until cannabis is treated like any other legal product. The question is what exactly the law will be.

Last year, two Oregon Democrats, Rep. Earl Blumenauer and Sen. Ron Wyden, introduced the State Cannabis Commerce Act, which would allow imports and exports among legal states. But it hasn’t picked up much support so far.

Now a group called the Alliance For Sensible Markets has come up with another approach: get two or more states to agree to trade cannabis, and take that agreement to Congress for approval. If green-lit, those contracts would “spur an immediate explosion of new investment, expansion, and business formation, creating tens of thousands of jobs and generating billions in economic activity in local communities,” the group claims.

If all the legal states joined in such an agreement, growers in California and Oregon, for example, would be able to sell a lot more weed. Shops on the East Coast, where outdoor pot growing is a challenge, would get access to huge supply chains, stabilizing prices and spurring demand.

Oregon, ahead of the curve, last year passed a bill that would allow imports and exports, but it won’t mean much until at least one other state signs on.

In California there hasn’t been much movement so far because of “factions” in the state that have “larger agendas,” said Sean Donahoe, founder and CEO of the Oakland-based Sungrown Developments, an industry consultancy. Donahoe sits on the board of the National Cannabis Industry Association, which has lobbied for interstate commerce.

As the California pot industry deals with the consolidation of the three agencies that govern cannabis, and works to lower taxes and relax regulations, interstate commerce was already on the back burner, Donahoe said. Then Covid-19 put pretty much everything on hold, he added.

The idea has also been a hard sell.

Even when the Obama administration’s Justice Department issued a memo (later rescinded) telling federal law enforcement to lay off the legal industry, it specifically excluded interstate transportation of weed from that protection, warning the industry not to even think about trying it.

But that doesn’t mean proponents have given up. “If we don’t get this sh*t together in California, states like New Mexico and Montana will take advantage,” Donahoe said. The state government, he added, “doesn’t understand the scope of where the cannabis business is headed.”

That is: toward becoming a major, global industry.

First, though, it would have to go national.

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