Locke Lord QuickStudy: The 2018 Midterms Continue A Positive Trend For The Marijuana Industry

Locke Lord LLP
November 13, 2018
Legalization of marijuana was a consistent and bipartisan winner in the past several elections and that trend continued in the 2018 midterms. Three more states—Utah, Michigan and Missouri—passed landmark legalization initiatives, with Utah and Missouri passing medical use laws, and Michigan passing a recreational use law. This comes as no surprise; a recent Gallup poll showed an astounding 66% of Americans support the legalization of marijuana. In fact, in the current contentious political and social climate, marijuana legalization is one of the few issues the majority of the country seems to agree on. This sentiment has translated into a thriving, rapidly evolving and legitimate industry. Yet despite its broad popular support, marijuana remains illegal at the federal level. The recent resignation of Attorney General Jeff Sessions, an ardent opponent of legalization, could tip the scale towards federal decriminalization in the near future. 
Marijuana and the law have had a varied history. ‎Since the enactment of the Controlled Substances Act in 1971,‎‎ marijuana has been categorized ‎as a Schedule I drug, alongside ‎heroin, cocaine, peyote, ecstasy, LSD, and others. Yet unlike those drugs, the federal government’s enforcement of its marijuana laws has varied considerably. From 2001 to 2010, federal officials vigorously enforced marijuana prohibition, touting 7 million marijuana-related arrests. In 2013, the ‎Department of Justice reversed course, announcing via the “Cole Memorandum” that the federal government would not enforce the federal ‎marijuana prohibition in states that had legalized the drug. A year later Congress passed the Rohrabacher-Farr ‎Amendment as part of an omnibus spending bill, prohibiting the ‎Department of Justice from expending funds in a way that would interfere with state medical ‎marijuana laws.‎ 2018 heralded a retrenchment, however, with Attorney General Jeff Sessions rescinding the Cole Memorandum and signaling a return to a more robust enforcement regime.
Therefore, the most exciting news for the marijuana industry this month might not be the three states that passed some form of legalization on November 7, 2018 (although that is plenty exciting), but the resignation of Attorney General Sessions the next day. While there is no guarantee that his successor will be more marijuana-friendly, pro-marijuana advocates have reason to be hopeful. Despite historical division along party lines—Democrats generally being pro-legalization and Republicans being generally opposed—legalization is no longer a partisan issue. For example, Utah’s Republican Senator Orrin Hatch, previously a staunch opponent of any form of legalization, recently stated that “[it’s] high time to address research ‎into medical marijuana.”‎ Similarly, former Speaker of the House John Boehner, having previously averred that he was “unalterably opposed” to marijuana, stated that his “thinking on cannabis evolved” as he joined the board of an ‎organization dedicated to promoting marijuana use and decriminalization.‎ ‎With marijuana legalization enjoying support from more Republicans, it is fair for pro-marijuana advocates to anticipate a more sympathetic reception from the next leader of the Department of Justice.

For the industry, the timing is just right. Despite the risks and impediments imposed at the federal level, the marijuana industry is booming. In 2017, it was one of the fastest growing industries in the United States, boasting 172,563 businesses, generating $4.6 billion in revenue, paying $1.2 billion in wages, and exhibiting an annual growth rate of 26.1%. That growth continues to accelerate with new markets regularly going “live.” Cannabis is now legal for medicinal purposes in more than 30 states, adult recreational use is legal in 10 states, including newly minted Michigan, and only Idaho, South Dakota, and Nebraska ‎still forbid all uses of marijuana. 

In short, the momentum toward legalization continued at the state level in this most recent election, and with it the marijuana industry added another level of legitimacy. The industry appears poised to offer significant business growth opportunities in the near future. The focus now shifts to the President’s appointment of the next attorney general and whether there will be a replacement to the Cole Memorandum.