by Tom Firestone by Baker McKenzie.
The Great Depression and the need for tax revenues to finance the New Deal ended the ban in 1933.
The economic fallout from the COVID crisis, according to some experts, could translate into a “New New Deal”, and Senator Ed Markey (D-MA) recently said that 2021, like 1933, would have an “FDR moment”. Just as the first “FDR moment” included the (re) legalization of alcohol, there are indications that the next could include the legalization of marijuana.
The COVID crisis has again highlighted the fundamental tensions in marijuana law and policy in the United States. Several states have declared marijuana activities “essential” and therefore exempt from mandatory shutdown orders. But at the same time, marijuana businesses are not eligible for relief from the CARES Act due to a small business administration policy that prohibits assistance to all marijuana businesses, since they operate in violation of federal law. This apparent inconsistency has sparked renewed interest in Congress for marijuana reform.
On April 17, a bipartisan group of 34 members of the Chamber of Deputies wrote to President Nancy Pelosi (D-CA) and minority leader Kevin McCarthy (R-CA), urging that state cannabis companies and their employees be covered. from the next raised bill COVID-19. On April 22, ten Democratic Senators sent a similar letter to majority leader Mitch McConnell (R-KY) and Democratic leader Charles Schumer (D-NY). On April 23, Earl Blumenauer (D-OR) introduced the Health and Safety of Small Emergency Cannabis Companies Act, which would allow marijuana companies to benefit from the CARES Act funding. The bill drew 16 bipartisan co-sponsors.
The debate also drew attention to the role of the sector in the United States economy. For example, the Chamber letter of April 17 stated that “[t]The state-owned legal cannabis industry contributes significantly to the US economy and workforce, employing over 240,000 workers in 33 states and four territories and generating $ 1.9 billion in state and local taxes in 2019. “ Given the economic potential, some governors are already seeking marijuana legalization and expected tax revenues to help their states recover.
New York Governor Andrew Cuomo, who advocated the legalization of recreational marijuana to supplement the New York state budget, is the most obvious example. Governor Albert Bryan of the US Virgin Islands has taken a similar stance, explaining this in light of the “economic disaster” [resulting from COVID] It is our hope that we can have a greater sense of need in implementing all the things that can help us regain solvency. “
Needless to say, anyone who wins in the White House in November will suffer tremendous pressure to supplement the federal budget and the revenue from marijuana taxes will be an obvious source. Although none of the presidential candidates have been a constant advocate for the legalization of marijuana, neither has been a consistent opponent.
In April last year, Senator Corey Gardner (R-CO) said that President Trump told him that he would support the state law, which would effectively provide state-owned companies with de facto immunity from prosecution. . President Trump’s attorney general William Barr said he did not believe that the justice department should legally pursue state activities. During the debate season, former Vice President Biden expressed his support for the decriminalization of the use or possession of marijuana, as well as the expulsion of convictions for use or possession. Furthermore, there is a good chance that Cuomo, Senator Cory Booker (D-NJ), Senator Kamala Harris (D-CA) and Senator Elizabeth Warren (D-MA), all strong advocates of legalization, can play key roles in a Biden Administration.
Of course, Senate Republicans (especially majority leader McConnell) have long been viewed as a serious obstacle to legalization. However, economic pressures and legalization efforts in their home states could force republican senators to support legalization. In addition, McConnell (who is currently in a re-election race) pushed the Farm Bill 2018 to help the local hemp industry. And here too the history lessons are instructive. As historian Daniel Okrent wrote, many Republicans who originally supported Prohibition supported its repeal, in the hope that it could increase revenue and reduce the tax burden on companies and businesses.
While we don’t have a crystal ball, we do have a story. And history teaches that crises often lead to significant legislative reforms, particularly in the area of vice regulation. The Great Depression led to the repeal of prohibition.
The AIDS crisis catalyzed the movement to legalize medical marijuana in California, causing proposal 215 in 1996. The severe economic decline in the early 1970s led Atlantic City to legalize gambling in 1976. Ironically , the COVID crisis could prove to be the final push that advocates of marijuana legalization have been seeking for so long.
Tom Firestone is co-chair of the company’s North American government enforcement practice and is a member of the company’s global compliance and investigation steering committee. Represents clients on anti-corruption and US Foreign Corrupt Practices Act (FCPA), internal investigations and transactional due diligence. He is also a member of the company’s Cannabis Review Committee and advised clients on cannabis compliance issues.