Yesterday afternoon President Biden made a historic announcement about marijuana policy, laying out three actions he plans to take to help address the historic wrongs of marijuana prohibition. First, the President pledged to issue pardons to anyone with a federal conviction for marijuana possession. Second, he called on governors to issue pardons for state level possession convictions. And finally, President Biden called on the Secretary of Health and Human Services and the Attorney General to begin a process of reviewing marijuana’s schedule under federal law, with the potential to move cannabis out of Schedule 1, currently the most restrictive under federal law.
First and foremost, we must acknowledge the historic nature of this announcement. For the first time ever, a sitting United States President has acknowledged the failure of cannabis criminalization and pledged to take bold action to address it. It is particularly notable that this came from Joe Biden, a politician who has traditionally been among the biggest drug warriors in the Democratic Party and largely seen as among the least supportive of marijuana reform among modern Democrats.
And he did so in no uncertain terms, stating “Sending people to prison for possessing marijuana has upended too many lives and incarcerated people for conduct that many states no longer prohibit. Criminal records for marijuana possession have also imposed needless barriers to employment, housing, and educational opportunities. And while white and Black and brown people use marijuana at similar rates, Black and brown people have been arrested, prosecuted, and convicted at disproportionate rates.”
Longtime cannabis reform advocates from organizations like the National Organization for the Reform of Marijuana Laws, the Marijuana Policy Project, and the Drug Policy Alliance, along with cannabis industry trade groups like the National Cannabis Industry Association have praised President Biden for this historic announcement. And rightly so, given their decades of activism and advocacy that helped create the current political climate that led longtime drug warrior Joe Biden to make the political calculation that a major marijuana reform announcement would be good politics less than one month from a major midterm election.
As historic as this announcement may be, it is worth examining what this means, and doesn’t mean, for the drug reform movement and the cannabis industry. For starters, while pardoning those with cannabis convictions is the right thing to do, it will only impact a relatively small number of people. This is because the federal government rarely enforces marijuana possession laws, instead generally only prosecuting large scale manufacturing and trafficking offenses. The overwhelming majority of cannabis possession convictions happen at the state level, where the President of the United States has no jurisdiction. The White House anticipates that around 6,500 people will receive pardons for federal possession convictions, a drop in the bucket in a country where over 500,000 people are arrested for cannabis possession every year.
This is why the second part of the President’s announcement is so important. While he does not have the authority to pardon anyone at the state level, his call on state governors to follow suit will likely have a major impact on the millions of Americans with state-level cannabis possession convictions. This is not to say that every governor will heed the call. It is hard to envision Governors Greg Abbott or Ron DeSantis being moved to commute tens of thousands of marijuana possession convictions in Texas and Florida. In fact, there is a risk that Republican governors, particularly those with their own presidential aspirations, will try to turn this into a partisan political issue by outwardly opposing the President.
But there are 22 states in the country with Democratic governors, most of whom are already more supportive of cannabis reform than President Biden. This announcement likely provides the political cover for these Democrats to heed the President’s call and begin the process of pardoning and expunging millions of cannabis convictions across the country. For those whose lives have been upended by a criminal conviction for something that the vast majority of Americans no longer believe should be a crime, and which is already legal at the state level for more than 70% of Americans, this would be a truly life changing action.
The impact on the cannabis industry, however, is likely to be far more muted. While cannabis stocks rallied on the news, with many rising as much as 30% in a matter of hours, this announcement does nothing to fix the issues currently plaguing the businesses shaping the industry. The President’s announcement made no mention of lack of access to banking or capital, a fix to the 280e provision of the IRS tax code that makes it nearly impossible for companies to turn a profit, or the myriad of issues preventing well intentioned social equity programs from being successfully implemented around the country.
What was most notably missing from the President’s proclamation was a call for Congress to take legislative action to fix these and other issues facing both the cannabis industry and cannabis consumers. The Administration is surely aware that congressional leaders are actively working on a comprehensive marijuana reform package that could include banking access, record expungement, veterans’ access to medical cannabis and Small Business Association loans to small and social equity businesses. The President had been silent on these efforts to date, and today’s announcement was a missed opportunity to send a direct message to Congress that he wants to see a broad ranging reform package reach his desk before the end of the Congressional session.
Yet even without a direct call to action, it is likely that Democratic congressional leaders will be emboldened to move forward with their reform package, armed now with the first real proof that marijuana reform is a priority for this Administration. Should such a package pass, it would be a tremendous shot in the arm for an industry that has largely been in a downward spiral for more than a year, due in large part to the lack of federal action on the issue of banking and capital markets access.
The sharp rally by cannabis stocks following this announcement shows that the President’s action instilled new confidence in cannabis investors that actual legislative reform is likely to become a reality this Congressional session. If they are correct, this would have positive, meaningful, and far-reaching impacts on the industry well beyond those of Presidential pardons for cannabis possession offenders.
Should the federal government move forward on rescheduling, as called for by the President, it could have a major impact on the industry, although not necessarily the kind many cannabis entrepreneurs would like. A move to Schedule 2 or 3 would not make cannabis federally legal, but would instead treat it like more restrictive pharmaceutical products, potentially handing over control of the cannabis industry to pharmaceutical companies. A far better solution would be to deschedule cannabis, removing it entirely from the Controlled Substances Act, something that would require an act of Congress.
The Drug Policy Alliance’s Kassandra Frederique summed up this issue by stating “We, however, hope that the Biden Administration will go further and fully deschedule marijuana from the Controlled Substances Act (CSA), rather than initiate a process that could lead to rescheduling. Keeping marijuana on the federal drug schedule will mean people will continue to face criminal charges for marijuana. It also means that research will continue to be inhibited and state-level markets will be at odds with federal law.”
Finally, while this action today may not have much of a direct impact on the cannabis industry, it could signal a willingness for the President to engage in more administrative actions in the future. Should Republicans take control of the House of Representatives next year, as is generally expected, it will become difficult for any bills, cannabis related or otherwise, to pass through Congress. As typically happens in these situations, presidential administrations typically look for ways to impact policy through the executive branch.
There are a myriad of executive actions and guidance memos that the administration could release on this issue in the years to come. Here are a few options:
· Issue a Cole Memo-style guidance from the Justice Department for federal prosecutors not to prioritize any cases involving state licensed cannabis businesses;
· Direct the Treasury Department to issue guidance asking the IRS to reinterpret 280e to not to apply to businesses licensed and in compliance with state law;
· Issue an executive proclamation that the federal government will not interfere with legal cannabis states that wish to engage in interstate commerce.
Prior to today’s announcement, it would have been difficult to envision the Biden Administration moving forward on any of these cannabis related executive or administrative actions. President Biden’s actions today could usher in a new wave of federal moves, both legislative and executive, that could have a fundamental and positive impact on both the lives of cannabis consumers and the financial health of the cannabis industry.