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Cannabis Legalization Up For Debate in Congress

It’s been more than 50 years since the Controlled Substances Act was signed into law, designating cannabis as a Schedule I illegal narcotic “with no currently accepted medical use and a high potential for abuse.”

In that time, millions of Americans were arrested and imprisoned for non-violent crimes related to
the criminalization of the plant, ruining lives and ripping families apart.

Now, congressional leaders are hoping to make amends.

In July 2021, Senate Majority Leader Chuck Schumer, along with Senators Cory Booker and Ron Wyden, introduced the Cannabis Administration & Opportunity Act (CAOA), which would remove marijuana from the Schedule I list, effectively legalizing it nationwide.

The bill allows states to set their own policies regarding cannabis, but federal regulations would also be implemented.

While the bill is indeed groundbreaking, and a symbol that legalization is closer than ever before, the CAOA faces an uphill battle.

Additionally, many industry professionals and advocates are concerned with certain components and wonder if passage would set operators up to fail.

“It’s an incredibly strong indicator of a paradigm shift with regards to attitudes toward cannabis,” said NORML and SSDP board member Evan Nison, founder of NisonCo PR.

“While the bill may not get the votes it needs to pass this time around, it’s a clear sign that legalization is imminent.”

But how exactly will the bill affect the industry and what do professionals in the space have to say? Cannabis & Tech Today breaks the CAOA debate down.

The Big Picture

The Cannabis Administration & Opportunity Act is the most comprehensive piece of cannabis reform legislation to date. In addition to the elimination of the federal prohibition on the plant and its derivatives, the 163-page bill touches on everything from interstate commerce to social equity.

Here Are Some Key Takeaways:

Federal Sales Tax Implementation – The CAOA stipulates a federal sales tax on the sale of cannabis products on top of state-imposed taxes. The initial tax would be 10% for companies meeting an annual sales threshold, gradually moving up to 25% within five years.

Expungement of Criminal Records – Under the CAOA, thousands of Americans would be eligible to have nonviolent cannabis-related convictions expunged. Federal penalties would also be eliminated.

Increased Research – Peer-reviewed studies into the cannabis plant and its effects have remained extremely limited due to criminalization. The CAOA directs funding toward research, specifically calling out brain health as one area to focus on.

Restorative Justice – The bill calls for the establishment of three unique grant programs designed to support communities most affected by the war on drugs. This includes funds for job training and other re-entry services for formerly incarcerated cannabis offenders.

280E Relief – One of the biggest challenges facing marijuana operators has been 280E, a section of the tax code that forbids plant-touching companies from deducting business expenses. The CAOA would rectify this, allowing cannabis companies to gain access to tax credits they currently do not qualify for.

Industry Response Mixed, With Many Calling for Changes to Initial Draft

By the public comment deadline of September 1, a large number of advocates, non-profits, and industry trade organizations weighed in on the bill. A wide array of comments and suggestions poured in, offering recommendations for revisions on everything from consumer rights to barriers to entry for new operators.

The National Cannabis Industry Association (NCIA), one of the largest trade groups in the space, submitted a nearly 30-page letter to bill sponsors after reviewing feedback from its members. 

“The CAOA is a good starting point for a conversation in the Senate about how to best end prohibition, repair the harms it has caused, and effectively regulate the substance at the federal level,” said Morgan Fox, NCIA’s media relations director.

“As a bill, it still needs a lot of work.”

Fox noted the organization’s members took issue with the proposed taxation model outlined in the CAOA, arguing the current structure is not viable.

“The tax components of the draft language would be worse than the status quo in most cases, undermining the viability and potential of the regulated cannabis market,” he explained.

“This tax structure would disproportionately hurt small businesses and would incentivize the unregulated market.”

Consumer advocacy groups pushed for more language protecting cannabis users, particularly medical patients. Americans For Safe Access called for legislators to address housing assistance barriers for medicinal users as well as increased education on medical cannabis for federal officials.

NORML also called for a focus on restorative justice while also maintaining the integrity of existing marketplaces and operators.

Sponsors of the bill will examine submitted comments and introduce a formal version to the Senate in the near future.

Outlook Hazy on CAOA, But Reform Is Nigh

Despite Senate Majority Leader Schumer’s enthusiasm regarding marijuana reform, it remains to be seen whether the Cannabis Administration & Opportunity Act will achieve the 60 votes necessary to pass.

This, compounded by President Joe Biden’s lukewarm attitude toward cannabis, may spell disaster for the bill — at least for now.

That’s not to say federal legalization isn’t coming. Industry professionals and analysts believe it’s not a matter of if but when.

“90% of Americans believe cannabis should be legal, and politicians tend to listen to their constituents,” Nison said. “This has become a mainstream issue and quite an important one at that.

“I’d bet on seeing federal reform within the next four or five years.”

This article originally appeared in the fall 2021 issue of Cannabis & Tech Today. Read the full issue here.

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