Federal Cannabis Reform: Inevitable but Inevitably Piecemeal by E.K

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Federal Cannabis Reform: Inevitable But Inevitably Piecemeal By E.K. McWilliams and Nika Arzoumanian (August 6, 2021, 5:34 PM EDT)

U.S. Senate Majority Leader Chuck Schumer, D-N.Y., recently unveiled the Cannabis Administration and Opportunity Act, or CAOA, a long-anticipated and comprehensive federal cannabis legalization bill.

Based on the momentum behind cannabis reform, many believe that transformative reform — via the CAOA or another sweeping bill — is just around the corner.

In fact, many Americans wonder why Congress has taken so long to enact large- scale cannabis reform given that 68% of the electorate supports legalization, and E.K. McWilliams most states have legalized marijuana for recreational or medical use.[1]

In the November 2020 election alone, voters legalized medical cannabis in Mississippi and South Dakota and adult-use cannabis in Arizona, Montana, New Jersey and South Dakota.

However, it is important to look beyond opinion polls and state legalization measures when considering the likely timing and shape of federal marijuana reform.

Indeed, even though 83% of Democrats support cannabis legalization for adult use, Nika Arzoumanian two-thirds of delegates to the July 2020 Democratic National Committee — including members of Congress, governors and other party leaders — voted against including cannabis legalization in the party platform.

Likewise, even though about half of Republicans support cannabis legalization for adult use, nearly all Republican senators — including those from states that recently legalized adult-use cannabis — oppose federal legalization.[2]

Why the discrepancy between public support for marijuana and the odds that federal elected officials will support transformative cannabis reform?

Part of the answer is a concept in political theory called path dependency. The path-dependency theory emphasizes how early policy choices shape later political dynamics. Simply put, when the government makes certain policy choices, institutions are developed to execute those policies, and affected parties

including constituents, lawmakers and interest groups become stakeholders invested in preserving the status quo.

Thus, when the government passes laws and regulations, particularly on a complex and controversial issue like cannabis, it is difficult to change course swiftly and dramatically because there are people and institutions who have a horse in the race.[3]

Path dependency explains why public support for federal cannabis legalization likely will not lead to the immediate passage of a transformative cannabis reform bill, just as support for a public option did not result in radical health care reform under then-President Barack Obama.

Instead, and despite momentum at the state level, Congress will likely pass incremental reforms such as a bipartisan bill to protect banks that service state-legal marijuana businesses from being penalized by federal regulators.

Those probable, incremental measures will result from a push and pull between individuals and institutions that developed as a result of the federal government's prohibition on marijuana and stakeholders that have more recently cropped up as a result of state legalization.

Collectively and over time, piecemeal cannabis reform measures will radically shift the federal government's approach to regulating marijuana and will lead to a new era in American cannabis policy.

History of Cannabis Policy in the U.S.: Stakeholder Groups and Public Opinion

The history of federal cannabis prohibition is a nearly perfect case study for path dependency. In the U.S., medicinal cannabis was used regularly without controversy until the early 1900s, when the government began using cannabis as an excuse to detain and deport Mexican immigrants.[4]

In the 1930s, white supremacist propaganda fueled rumors that Black men who used cannabis were more likely to be sexually aggressive toward white women, leading to the effective federal ban of cannabis via the Marijuana Tax Act of 1937.

Then, former President Richard Nixon passed the Controlled Substances Act in 1970, establishing schedules for narcotics based on their addictiveness and accepted medical use. Cannabis was placed in the most restrictive category, Schedule I, even though an independent scientific report determined that cannabis was not dangerous.[5]

In the ensuing years, especially during then-President Ronald Reagan's war on drugs, the federal government disproportionately prosecuted Black people for small-volume possession, and courts often imposed draconian sentences.

After cannabis was placed on Schedule I, marijuana's illegality became a roadblock to changing minds on how the drug should be regulated, and institutional stakeholders became invested in maintaining cannabis prohibition. For example, the U.S. Drug Enforcement Administration was established as a result of cannabis prohibition. Prohibition provides the DEA plenty to do to fulfill its mission of keeping illicit drugs off the streets, and, in 2020 alone, taxpayers spent $3.1 billion to fund the agency.[6]

Similarly, local law enforcement has a financial incentive to oppose cannabis reform, as police can seize and keep cannabis proceeds under forfeiture laws. Likewise, public health agencies like the National

Institute on Drug Abuse have a bureaucratic incentive to maintain an anti-cannabis stance. NIDA is "constitutionally committed to America's drug war," and thus its existence is partly justified by cannabis prohibition.[7]

Cannabis's Schedule I status has also impeded marijuana research. Until recently, the University of Mississippi, with NIDA, was the only operator that could supply cannabis for research, a strange role for an organization committed to limiting drug use. In light of its mandate, NIDA makes sizable contributions to drug research on harm minimization, but not on understanding how marijuana works and the short- and long-term effects of cannabis usage.[8]

In addition, pro-cannabis advocates have been left without scientific studies to rebut ongoing messages by law enforcement and health agencies about the mysterious evils of cannabis. In a vacuum of scientific research, many Americans were left with the impression that voters should continue to "just say no" to loosening restrictions on cannabis for the good of society.

According to a 2015 Pew Research poll, the most frequently mentioned reason people opposed cannabis legalization is that cannabis "generally hurts society and is bad for individuals."[9] Public opinion began to shift over the last several years as states legalized marijuana and as advocates reframed the debate as a matter of social justice rather than public health.

Congressional Committees Shape Legislation Through Concessions to Stakeholder Groups: The Health Care Reform Analogy

Federal marijuana legislation, like any major policy reform, will be shaped both by the interests of myriad stakeholders and the obstacles posed by the congressional committee system.

Electorally sensitive legislators calibrate their priorities in part according to interest groups who contribute funds and have the capacity to organize voters and bankroll mass media issue campaigns. Thus, as a matter of political reality, legislators at the committee level will likely demand concessions in favor of various interest groups in exchange for their support of federal cannabis legislation.

This sausage-making will likely result in the accomplishment of federal cannabis reform through incremental steps, similar to how congressional Democrats pushed the Affordable Care Act through congressional committees by making concessions to many stakeholders.

While not a perfect analogue, the history of the ACA illuminates how public support for a major reform often winds up as incremental legislation. To pass meaningful health care reform, Obama knew that his plan would need to survive the congressional committee system. The odds are poor for any bill: 90% of bills die in committee because lawmakers, influenced by various stakeholders, cannot reach an agreement.[10]

Obama chose to build on Medicare and Medicaid and preserve private insurance rather than put forth the widely supported federal, single-payer insurance plan to minimize opposition from stakeholder groups and gain congressional approval.

The health insurance industry super lobby, America's Health Insurance Plans, accepted stricter regulations, including price controls and guaranteed-issue health insurance without preexisting condition exclusions, if these regulations were accompanied by mandates that would bring young, healthy people into the system.[11]

The pharmaceutical lobby made a deal to contribute $80 billion toward the cost of ACA in exchange for favorable concessions.[12] In addition, trade unions vigorously opposed a new excise tax that was imposed on high-cost, so-called Cadillac employer-based plans.

Although the final law included the excise tax, the unions wielded their electoral power with legislators reliant on union support to weaken the provision and delay implementation.[13] Obama also won the support of the American Association of Retired Persons by including a plethora of benefits for seniors in the ACA, a constituency initially opposed to reform.[14]

The ACA survived committee because Obama and his coalition were able to appease disparate interests and the representatives who rely on those interests for reelection. This history explains why the ACA was passed in lieu of the public option, just as incremental cannabis reform will likely pass in lieu of transformative legislation.

The Path Forward: The March Toward Cannabis Reform

The CAOA's authors have presented the draft bill as the start of a long discussion with legislators, who are wary of legalization, and industry stakeholders with competing priorities. They are soliciting feedback from colleagues, regulators and reform advocates until Sept. 1 on a variety of issues raised in the draft.

Through this process and beyond, we can expect to see the push and pull between interests that developed as a result of federal cannabis prohibition and stakeholders fighting for legalization.

In terms of opposition to transformational federal reform, pharmacuetical companies are concerned that patients will choose readily available medical cannabis over more traditional prescription drugs to alleviate their symptoms.[15]

Police unions — whose endorsements play a major role in get-out-the-vote efforts for many legislators — also donate substantially to anti-legalization efforts, citing concerns over increased traffic accidents and other safety risks.[16] Law enforcement agencies may lose not only federal funding from the war on drugs but also opportunities to seize and keep cannabis proceeds.[17]

Likewise, because private prisons profit from filling beds, the continued incarceration of nonviolent drug users contributes to their bottom lines.[18]

Some alcohol companies fear accessible cannabis will reduce their share of the leisure activity market.[19]

Legislators relying on religious support must contend with moral concerns over drug use, too. These interests invested in preserving the status quo will ultimately be a moderating force when it comes to federal cannabis legalization because of their outsized influence on legislators who rely on their money, endorsements and organizing power.

That said, the diverse set of interests in favor of cannabis legalization make federal cannabis reform inevitable, though not necessarily in one fell swoop, in light of the countervailing stakeholders discussed above. As states have rapidly legalized marijuana over the last several years, powerful stakeholders that are invested in maintaining the new normal of legal cannabis have emerged.

Individual stakeholders are relying on cannabis to remain legal in the states and seeking to create momentum behind federal cannabis reform. Today, more than 1 of every 3 Americans live in a state where adult use cannabis is legal.[20] Nearly 300,000 full-time workers — employed by cannabis companies or ancillary business — are dependent on the legal cannabis industry.[21]

Similarly, institutional stakeholders are a driving force behind cannabis legalization. Legal cannabis is a $24.6 billion industry, led by highly profitable, multistate, vertical cannabis companies that substantial taxes and make sizable campaign contributions.[22] State-licensed cannabis businesses, as well as ancillary businesses that serve the cannabis industry, are supporting politicians who will allow cannabis enterprises access to banking services and insurance.

Many of these companies employ lobbyists to advocate for cannabis legalization, as does the well- funded National Cannabis Industry Association. The efforts of lobbyists are boosted by advocacy groups such as the Marijuana Policy Project and the National Organization for the Reform of Marijuana Laws.

Yet another powerful factor has set Congress on a path toward cannabis legalization: States have come to benefit from and rely on substantial tax revenue generated from legal cannabis sales. Washington state cannabis users paid $454 million in excise taxes on legal cannabis products in 2020, and California cannabis users paid $500 million in excise taxes on legal cannabis products in 2020. [23]

Analysts expect substantial increases in legal cannabis revenue in the coming years, both in states where cannabis is already legal and in states that are poised to implement new regimes.[24] States are now dependent on cannabis revenue, and that dependency — along with all the stakeholders that have emerged as a result of state legalization — means that the momentum behind cannabis reform is likely unstoppable.

Schumer made a valiant attempt to address myriad concerns in the CAOA. For example, in addition to proposing federal decriminalization, the CAOA caters to both states' rights-supporting Republicans and progressive Democrats by allowing states to decide whether to legalize cannabis and expunging nonviolent, federal cannabis-related criminal records.

In a nod to social justice advocates, state and local governments must establish an automatic expungement program for past cannabis offenses to be eligible for any grant funding created by the bill. To assuage public health experts' concerns, the bill establishes funding for federal research on a variety of cannabis-related issues, including drugged driving. [25]

Despite the attempt to appease many stakeholders, even the drafters of the CAOA concede that the CAOA is unlikely to pass in the near future.[26] Disagreement among Democratic lawmakers as to cannabis reform, combined with lack of support from Republican officials, will likely lead federal lawmakers to pass incremental cannabis reform legislation, such as the Secure and Fair Enforcement Act, or SAFE Banking Act, before or instead of a radical reform measure like the CAOA.

As discussed above, because a committee must reach a consensus in order for a bill to make it out alive, the power of a single disparate voice in any committee is amplified. For example, Sen. Jeanne Shaheen, D-N.H, who has already voiced opposition to the CAOA, serves on the Senate Small Business Committee. The committee's other members will need to compromise enough to reach consensus with Shaheen in order for the CAOA to survive their committee.

Conversely, Sen. Cory Booker, D-N.J., who has voiced strong opposition to an incremental approach, serves on the Senate Judiciary Committee. Because many lawmakers — Democratic and Republican — disagree with Booker's transformative approach, he will probably need to choose between compromise and falling prey to the committee system's many veto points.

Even assuming congressional Democrats united behind a transformative reform bill like the CAOA, Republicans — including through a filibuster — could derail progress completely. Given the divisions between Democrats, at the present time the CAOA drafters will need to find at least 10 Republican votes to pass the legislation through the Senate.

In turn, most Republican members of Congress oppose cannabis legalization and believe cannabis legalization is a states' rights issue that should be decided on the local level.[27] While piecemeal legislation that expands opportunities for medical cannabis research or removes financial restrictions on cannabis businesses has bipartisan support, full-scale federal legalization is not a part of the congressional Republican agenda.

Conclusion

The likely trajectory of marijuana reform in the U.S. will be shaped by stakeholders both for and against ending the federal prohibition on cannabis. While institutions that are invested in cannabis remaining illegal under federal law will have sway, state-level legalization has resulted in powerful stakeholders who are invested in the new normal of legalized marijuana, including individual workers, multistate cannabis operators and states.

These interest groups, combined with public support for marijuana legalization — which has only deepened during the pandemic — have created unstoppable momentum behind federal reform. But while cannabis reform may be inevitable, that does not mean it will happen immediately as part of a transformative bill like the CAOA.

Instead, as a matter of political reality, congressional Democrats will account for the push and pull of disparate interests in shaping cannabis reform legislation, and they will make concessions to various stakeholders to pass legislation out of congressional committees and to gain the support of reluctant members of their own party as well as Republicans.

E.K. McWilliams and Nika M. Arzoumanian are associates at Jenner & Block LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Jeremy Berke, Shayanne Gal, and Yeji Jesse Lee, "States Where Marijuana Is Legal: Map," Business Insider (Apr. 14, 2021), https://www.businessinsider.com/legal-marijuana-states-2018- 1#:~:text=Since%202012%2C%2016%20states%20and,marijuana%2C%20whether%20medically%20or% 20recreationally.

[2] Natalie Fertig, "Republicans Are Watching Their States Back Weed – And They're Not Sold," Politico (June 27, 2021) https://www.politico.com/news/2021/06/27/republicans-weed-496390.

[3] Paul Pierson, Increasing Returns, Path Dependence, and the Study of Politics, 94 The American Political Science Review 251 (June 2000).

[4] Malik Burnett and Amanda Reiman, "How Did Marijuana Become Illegal in the First Place?" Drug Policy Alliance (Oct. 8, 2014), https://drugpolicy.org/blog/how-did-marijuana-become-illegal-first-place.

[5] "Marihuana: A Signal of Misunderstanding," Schaffer Library of Drug Policy (Mar. 22, 1972), https://www.druglibrary.org/schaffer/Library/studies/nc/ncrec1.htm.

[6] "It's Time to Dismantle the DEA," Drug Policy Alliance, https://drugpolicy.org/DEA.

[7] Philip Wallach & Jonathan Rauch, "Bootleggers, Baptists, Bureaucrats, and Bongs: How Special Interests Will Shape Marijuana Legalization," Center for Effective Public Management at Brookings (June 2016), https://www.brookings.edu/wp-content/uploads/2016/07/bootleggers.pdf.

[8] Philip Wallach & Jonathan Rauch, "Bootleggers, Baptists, Bureaucrats, and Bongs: How Special Interests Will Shape Marijuana Legalization," Center for Effective Public Management at Brookings (June 2016), https://www.brookings.edu/wp-content/uploads/2016/07/bootleggers.pdf.

[9] "In Debate Over Legalizing Marijuana, Disagreement Over Drug's Dangers," Pew Research Center U.S. Politics & Policy (Apr. 14, 2015), https://www.pewresearch.org/politics/2015/04/14/in-debate-over- legalizing-marijuana-disagreement-over-drugs-dangers/.

[10] Id.

[11] Reed Abelson, "In Health Care Overhaul, Boons for Hospitals and Drug Makers," N.Y. Times, (March 21, 2010).

[12] "Big Pharma's ObamaCare Reward," WSJ (Feb. 5, 2015), https://www.wsj.com/articles/big- pharmas-obamacare-reward-1423180690.

[13] Betsy McCaughey, "ObamaCare's Phony Deficit Reduction," WSJ (Aug. 7, 2012), https://www.wsj.com/articles/SB10000872396390444860104577558723207171952.

[14] Id.

[15] Christopher Ingraham, "One Striking Chart Shows Why Pharma Companies Are Fighting Legal Marijuana," The Washington Post (July 13, 2016), https://www.washingtonpost.com/news/wonk/wp/2016/07/13/one-striking-chart-shows-why- pharma-companies-are-fighting-legal-marijuana/.

[16] Robert McCoppin, "Police Oppose Marijuana Legalization in Illinois, but Want a Bigger Cut of the Proceeds if Law Passes," Chicago Tribune (May 8, 2019), https://www.chicagotribune.com/news/breaking/ct-met-police-oppose-marijuana-legalization- in-illinois-20190508- story.html#:~:text=The%20primary%20concern%20police%20have,participants%20tested%20positive% 20for%20cannabis.

[17] Pamela Engel, "America's Drug Companies Are Bankrolling the Crusade against Legal Weed," Insider

(Jul. 11, 2014), https://www.businessinsider.com/police-unions-and-pharmaceutical-companies-fund- anti-marijuana-fight-2014-7.

[18] "Private Prisons and Pharmaceutical Industry Fight against Marijuana Legalization," Project Censored (Apr. 5, 2017), https://www.projectcensored.org/private-prisons-pharmaceutical-industry- fight-marijuana-legalization/.

[19] Mark Travers, "Research Suggests Marijuana Is Competition For Alcohol, Not Tobacco," Forbes (Oct. 8, 2019) https://www.forbes.com/sites/traversmark/2019/10/08/marijuana-legalization-poses-a- massive-threat-to-this-industry/?sh=2f0cb4645c3d.

[20] Natalie Fertig and Mona Zhang, "1 in 3 Americans Now Lives in a State Where Recreational Marijuana Is Legal," Politico (Nov. 4, 2020), https://www.politico.com/news/2020/11/04/1-in-3- americans-lives-where-recreational-marijuana-legal-434004.

[21] Kevin Murphy, "Cannabis Is Becoming A Huge Job Creator," Forbes (May 20, 2019), https://www.forbes.com/sites/kevinmurphy/2019/05/20/cannabis-is-becoming-a-huge-job- creator/?sh=669f9f3149bf.

[22] "Legal Marijuana Market Size, Share & Trends Analysis Report By Marijuana Type (Medical, Adult Use), By Product Type (Flower, Oil), By Medical Application (Chronic Pain, Mental Disorders), And Segment Forecasts, 2021 – 2028," Grand View Research (Mar. 2021), https://www.grandviewresearch.com/industry-analysis/legal-marijuana-market.

[23] Jonnette Oakes, "States Reap Windfall as Pot Sales Soar," The Hill (Mar. 12, 2021), https://thehill.com/homenews/state-watch/542944-states-reap-windfall-as-pot-sales-soar.

[24] Id.

[25] Natalie Fertig, "Schumer Launches Long-Shot Bid for Legal Weed," Politico (July 14, 2021), https://www-politico- com.cdn.ampproject.org/c/s/www.politico.com/amp/news/2021/07/14/schumer-launches-long-shot- bid-for-legal-weed-499584.

[26] Sam Reisman, "Top Senate Dems Admit Pot Legalization Push a Long Shot," Law360 (July 14, 2021), https://www.law360.com/cannabis/articles/1402960/top-senate-dems-admit-pot-legalization- push-a-long-shot?nl_pk=d97a9b89-f2dd-452c-8991- b3c9d6a885f4&utm_source=newsletter&utm_medium=email&utm_campaign=cannabis.

[27] Sam Reisman, "Pot Banking Bill Gets New Introduction in Senate," Law360 (Mar. 23, 2021), https://www.law360.com/articles/1367889/pot-banking-bill-gets-new-introduction-in-senate.