Legal Alert

U.S. House Votes Again to Federally Decriminalize Cannabis, Regulate Legal Cannabis Businesses

by Shawn Summers
April 4, 2022

Summary

For the second time, a bipartisan majority of the U.S. House of Representatives on Friday, April 1, passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. If enacted, the MORE Act would decriminalize cannabis at the federal level, impose certain federal regulations and taxes on legal cannabis businesses, and provide for federal grants and other benefits for individuals previously harmed by cannabis prohibition. The House had previously passed the MORE Act in December 2020, a month before the end of the last Congress, and it died at the end of the session before the Senate acted on it. While the MORE Act is the most comprehensive cannabis reform proposal to receive the support of either house of Congress, the Biden administration has not publicly come out in support of the bill and its passage in the Senate this time seems doubtful.

The Upshot

  • The passage of the MORE Act by the House keeps up the pressure for cannabis reform at the federal level, as more states—most notably, New York and New Jersey—legalize adult-use cannabis and begin to set up recreational markets.
  • Federal decriminalization of cannabis would remove an enormous obstacle for entities, such as financial institutions, commercial landlords, and others, that would like to work with participants in the cannabis industry.
  • However, the MORE Act is unlikely to pass the Senate, especially in light of a competing decriminalization bill, the Cannabis Administration and Opportunity Act, expected to be introduced in the Senate later this month.

The Bottom Line

The passage of the MORE Act by the House maintains the momentum for cannabis reform at the federal level, but its low odds of passage in the Senate show that legalization is likely to remain a state-level phenomenon, at least for the near future.

A bipartisan majority of the House of Representatives voted on April 1, 2022, for the second time to decriminalize cannabis at the federal level, impose certain federal regulations and taxes on legal cannabis businesses, and provide for federal grants and other benefits for individuals previously harmed by cannabis prohibition.

The House bill, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2021 (H.R. 3617), passed 220–204, with three Republicans voting in favor and two Democrats voting against. A version of the bill originally was passed by the House in December 2020, a month before the end of the last Congress, but it died when the Senate failed to act on it before the end of the session. With only slight changes from its 2020 version, the MORE Act is the most comprehensive cannabis reform proposal to receive the support of either house of Congress.

Observers believe the bill stands little chance of receiving the 10 Republican votes it would likely need to pass the Senate. Moreover, although he agrees that “our current marijuana laws are not working,” President Biden is opposed to legalization of adult-use at the federal level. Hours after the MORE Act passed, White House Press Secretary Jen Psaki declined to commit the administration’s support to the Act, even while conveying the administration’s recognition of the general need for cannabis reform.

The April 1 vote took place amid an accelerating tide of state-level cannabis reform and legalization. In recent years, nearly every state has approved some form of state-legal cannabis, whether for medical use, recreational use or both. Eighteen states have fully legalized adult recreational cannabis use and have, or are in the process of, setting up adult-use recreational markets. Six of those legalization measures took effect in 2021 alone, including in New York, New Jersey, and Virginia.

However, all of these state laws remain in conflict with the federal government’s near-total prohibition of cannabis under the Controlled Substances Act (CSA). By removing cannabis from Schedule I of the CSA—the highest tier, reserved for the most dangerous drugs with no countervailing medical value—the MORE Act would resolve this conflict between state and federal law.

As in 2020, after “descheduling” cannabis at the federal level, the MORE Act would leave it up to each state to decide whether to allow cannabis use and how to regulate it, subject to some new federal requirements. For example, the Act levies a five percent federal sales tax on cannabis products, which would gradually rise to eight percent over several years. The Act would also require cannabis producers to receive a federal permit and abide by certain labeling and other requirements, as alcohol distillers do.

Finally, in an effort to “address the devastating injustices caused by the War on Drugs,” the MORE Act establishes a Community Reinvestment Grant Program, funded by the new cannabis sales tax, that would provide federal loans, grants, and other services to “individuals adversely impacted by the War on Drugs.” It would also prohibit the Small Business Administration from refusing to grant an eligible SBA loan or provide other services solely on the basis that the recipient is a legal cannabis business, and would expand eligibility for expungement of and resentencing for prior federal cannabis offenses.

Lawyers in our Cannabis Group closely watch changes in state and federal law and advise growers, dispensaries, technology companies, researchers, and investors on a variety of regulatory, licensing, corporate, financing, intellectual property, and other legal issues.

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