Locke Lord QuickStudy: Seeing Through the Haze Part III: What will federal legalization of marijuana look like?

Locke Lord LLP
April 25, 2019

This is the last article in our three-part series examining various proposals for the federal ‎legalization of marijuana and the possible socioeconomic impact those proposals could have on ‎the burgeoning marijuana industry. Part I of our series ‎ looked at the Strengthening the Tenth ‎Amendment Through Entrusting States (STATES) Act, which would formalize state-level ‎control over the industry. Part II ‎ looked at the so-called “420 Bills,” which would result in ‎far more substantial federal regulation of the industry. This article examines the Compassionate ‎Access, Research Expansion and Respect States (CARERS) Act and the Marijuana Justice Act, ‎which are narrowly tailored to address the issues of legalizing medical marijuana and promoting ‎marijuana-related criminal justice reform among the states, respectively.‎


Representatives Steven Cohen (D-TN) and Don Young (R-AK) introduced the CARERS Act ‎early in the current session of Congress. Lawmakers introduced similar bills in both the House ‎and Senate last session with bipartisan support, but those laws had not significantly advanced.‎

What the CARERS Act would do

The CARERS Act has five components. First, it would amend section 708 of the Controlled ‎Substances Act (CSA) to state that:‎

Notwithstanding any other provision of law, the provisions of this title relating to ‎marihuana shall not apply to any person acting in compliance with State law, as ‎determined by the State, relating to the production, possession, distribution, ‎dispensation, administration, laboratory testing, recommending use, or delivery of ‎medical marihuana.‎

Second, it would exclude cannabidiol (CBD) from the definition of marijuana in section 102 of ‎the CSA. CBD is derived from marijuana and hemp but contains no greater than .3 percent delta-‎‎9-tetrahydrocannabinol (THC), the psychoactive component of cannabis. Third, it would respect ‎state laws regarding CBD concentration. Fourth, it would increase the number of licenses ‎available to manufacture and distribute marijuana and marijuana-derivatives for scientific ‎research. Fifth, it would allow healthcare providers employed by the Department of Veterans ‎Affairs to provide recommendations for medical marijuana use to patients in states with medical ‎marijuana programs.‎

What the CARERS Act would not do

The CARERS Act is incremental legislation and leaves several issues for later resolution. Like the ‎STATES Act, it eliminates the conflict between state and federal law with respect to medical ‎marijuana. But unlike the STATES Act, it stops there. Even upon passage of the CARERS Act, ‎recreational marijuana would remain illegal under federal law even if permitted by state law. ‎

The CARERS Act also does not attempt to broadly regulate marijuana at the federal level like ‎the 420 Bills. It would not impose a federal excise tax; it does not create a federal licensing or ‎permitting scheme; it does not impose advertising and marketing guidelines; it would not ‎expressly allow marijuana-related businesses (MRBs) to access the financial markets; it would not ‎expunge criminal records relating to marijuana or otherwise reform the justice system; and it ‎would not exempt MRBs from federal law that prevents MRBs from taking a critical business ‎expense deduction on their taxes (IRC §280E).‎

Will the CARERS Act pass?‎

We do not expect the CARERS Act to pass in the current environment. The CARERS Act has ‎bipartisan support, but it is focused on protecting only medical marijuana from federal ‎interference. With 10 states and Washington D.C. legalizing recreational marijuana already, and a ‎significant number of additional states considering it, we believe lawmakers inclined to support ‎state’s rights will be inclined to address the issue with respect to both medical and recreational ‎marijuana. That is likely why the STATES Act has received far more attention in recent months ‎than the CARERS Act.‎

That said, the CARERS Act could be a potential fallback option if the STATES Act or other ‎more aggressive legalization plans fail to gain traction. We could foresee a situation where the ‎STATES Act fails to garner the requisite support, and pro-legalization lawmakers agree to accept ‎a more limited measure like the CARERS Act. ‎

If passed, how would the CARERS Act affect the marijuana industry?‎

The CARERS Act would be a positive if small step forward for the marijuana industry. ‎Certainly, MRBs would appreciate the protections for medical marijuana and CBD, and would ‎be more secure in their operations. ‎

Many of the problems that plague the industry would remain, however. While financial ‎institutions would probably feel more secure doing business with MRBs, new issues would arise ‎from the legality of medical marijuana and the illegality of recreational marijuana at the federal ‎level. And the continued illegality of recreational marijuana at the federal level could also be ‎perceived as a mandate to prosecute by the federal government, creating additional tension with ‎those states that have allowed recreational use. These issues would likely keep large financial ‎institutions on the sidelines. There would also still be vexing questions regarding criminal justice ‎reform. Those outstanding issues mean that even if the CARERS Act would pass, it would likely ‎only be a bridge as legislators continued to work on more comprehensive, or at least ‎complementary, legislation. ‎

The Marijuana Justice Act

Senator Corey Booker recently reintroduced the Marijuana Justice Act in the Senate. The bill has ‎six cosponsors (all Democrats). Similar bills were introduced last session in both the House and ‎Senate.‎

What the Marijuana Justice Act would do

The Marijuana Justice Act has the broadest criminal justice reform provisions of the various ‎proposed legalization vehicles. It would amend the CSA to deschedule marijuana entirely. It also ‎mandates that states that have not legalized marijuana and have a racially “disproportionate arrest ‎rate” or racially “disproportionate incarceration rate” for marijuana offenses will not be eligible to ‎receive any federal funds for the construction or staffing of prisons or jails and shall be subject to ‎up to a 10% reduction in funds allocated under the Omnibus Crime Control and Safe Streets Act ‎of 1968. Additionally, federal courts will be required to expunge federal convictions for ‎marijuana use or possession (something 73% of registered voters support according to national ‎polling data compiled by the Center for American Progress), and individuals in prison for such ‎crimes will be entitled to a resentencing hearing. Finally, the Marijuana Justice Act will create a ‎‎“Community Reinvestment Fund” to “reinvest in communities most affected by the war on ‎drugs.”‎

What the Marijuana Justice Act would not do

The Marijuana Justice Act is specifically focused on criminal justice reform. Accordingly, it ‎would not result in a broad takeover of marijuana regulation by the federal government. ‎Although not explicitly reserving the right to regulate marijuana to the states (like the STATES ‎and CARERS Acts), the Marijuana Justice Act would also retain the state-centric licensing and ‎regulatory status quo. ‎

Will the Marijuana Justice Act pass?‎

We do not believe the Marijuana Justice Act will pass in full. Specifically, we do not believe ‎there is the necessary bipartisan support for the provision of the Act that would punish states that ‎have not legalized marijuana for racial disparities in arrests and incarceration. Such a provision ‎appears to have too many political implications to gain traction in the current political ‎environment.‎

We have long believed, however, that federal legislation will need to contain some form of ‎criminal justice reform in order to pass. The Marijuana Justice Act would expunge prior federal ‎marijuana records, and order resentencing for those imprisoned for federal marijuana crimes. We ‎believe that such an approach may prove acceptable to those demanding criminal justice reform ‎‎(like Senator Booker), while not being a deal-breaker for other pro-legalization legislators.‎

If passed, how would the Marijuana Justice Act affect the marijuana industry?‎

If the Marijuana Justice Act were to pass, marijuana would be descheduled under the CSA and ‎legal at the federal level, but would still be subject to the state-centric licensing and regulatory ‎scheme currently in place. In other words, the federal government would not be able to interfere ‎with MRBs, but states would still have the power to regulate marijuana as they see fit, which is ‎similar to what would happen in practice upon passage of the STATES Act.‎

The big impact of the Marijuana Justice Act would be in the criminal justice arena. If passed as ‎written, the Marijuana Justice Act would not only reform the federal approach to marijuana, it ‎would place immense pressure on the states to reform their own approaches to marijuana or face ‎funding cuts. That pressure imposed on the states makes the Marijuana Justice Act different from ‎the other legislation percolating in Washington that seek to address criminal justice reform.‎

Where will things go from here?‎

Public support for the legalization of marijuana is at an all-time high, and politicians on both sides ‎of the aisle are taking notice. Federal legalization of marijuana seems to be a matter of when, not ‎if. The bill with the most bipartisan support now, and the one we see as having the clearest path ‎to becoming law, is the STATES Act, but we expect that there will need to be some criminal ‎justice element added before passage, and such an addition has the potential to change the ‎political dynamic.‎

In any event, these are exciting times for proponents of legalizing marijuana and the marijuana ‎industry because whether it is the STATES Act or some other bill, federal legalization will have a ‎profound and immediate impact on the marijuana industry. We will continue to track ‎developments in Washington and provide appropriate updates. To ensure you stay up-to-date on ‎all recent developments, you can subscribe ‎to Locke Lord’s Cannabis Blog. ‎