Legalization – The Devil is in the Details

Two marijuana bills are circulating on Capital Hill, here's what you need to know.

There are drastic fundamental differences in the two bills that are circulating on Capitol Hill. The first is the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act as proposed bilaterally by U.S. Senators Elizabeth Warren (D-Mass.) and Cory Gardner of (R-Colo.). The second is the Marijuana Freedom and Opportunity (MFO) Act, which was proposed by Senate Democratic Leader Chuck Schumer (D-NY), and is co-sponsored by Senators Bernie Sanders (I-VT), Tim Kaine (D-VA), and Tammy Duckworth (D-IL).

The MFO Act’s stated purpose is “To decriminalize marijuana, and for other purposes.” Other provisions are as follows:

  • Removes cannabis from the list of scheduled substances under the Controlled Substances Act, effectively decriminalizing it at the federal level.
  • Creates the Marijuana Opportunity Trust Fund (“Fund”). The Secretary of Treasury would transfer the greater of ten percent of all tax revenue generated by the cannabis industry or $10 million to the Fund. The amount transferred into the Fund would then be made available to small cannabis businesses owned by women and minority entrepreneurs.
  • Authorizes up to $250 million over five years to highway safety research in order to analyze and assess driving under the influence of marijuana, as well as to develop technology to measure impairment.
  • Authorizes $500 million over five years for critical public health research to better understand the effects of THC on the brain and the efficacy of medicinal marijuana for specific ailments.
  • Requires the Alcohol and Tobacco Tax and Trade Bureau to develop “restrictions on the advertising and promotion of products related to marijuana.”
  • Authorizes up to $100 million for state and local governments to create expungement or sealing programs for those with prior marijuana convictions.

The STATES Act would leave marijuana as a Schedule I substance, but remove it for those states or tribes where the state legislators or tribal governments have legalized it. Other provisions include:

  • Removes industrial hemp from the list of controlled substances as defined in the 2014 Farm Bill.
  • Prohibits anyone under the age of 18 from working in the marijuana field.
  • Excludes state legal transactions from money laundering, and removal from forfeiture due to illegal activity (however, it is interesting to note that it doesn’t explicitly provide for relief from IRS rule 280e).

While both bills provide welcome relief, it seems as though the STATES Act is clearly more conservative when it comes to federal legalization, and leaves much more room for interpretation and the possibility of litigation. The MFO Act completely legalizes cannabis federally, thereby leaving states where it is still outlawed to “police it” as they see fit. At this point, the question remains whether there is the political will in order to pass either.

Peter Stavropoulos is counsel to Hoban Law Group in New York. He advises clients regarding matters that include litigation (civil and criminal), commercial transactions, corporate governance, and real estate. He has clients in the cannabis and hemp industries where he advises on matters that include legal, financial, corporate governance and strategy. He can be contacted at stavro@hoban.law.

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