Regulation · 16 July 2021 · 7 min read

Senate Majority Leader Chuck Schumer Introduces a Bill to Federally Legalise Cannabis in the United States

The bill stands a slim chance of passing in its current form, with a majority of 60 votes in the Senate needed, meaning at least 10 Republicans and all Democratic senators signing on. However, advocates have welcomed the bill as an important step in the right direction.

The Cannabis Administration and Opportunity (CAO) Act introduced by senators Schumer, Wyden and Booker is extensive. At 163 pages, the bill contains a wide range of measures intended to set the stage for a federally legal adult-use cannabis industry in the US and to mend some of the harms caused by the disastrous war on drugs. The CAO Act has been the most highly anticipated bill regarding cannabis in the US this year, after being announced in February. We have summarised the main points of the bill below. Since the announcement, senators Schumer, Wyden and Booker have been campaigning on the issue of cannabis legalisation, especially as regards the need for restorative justice in the wake of the War on Drugs.

Senator Schumer said in a press release on Wednesday that ‘the War on Drugs has too often been a war on people, and particularly people of colour. Not only will this legislation remove cannabis from the federal list of controlled substances, but it will also help fix our criminal justice system, ensure restorative justice, protect public health, and implement responsible taxes and regulations’.

Senator Schumer speaks to the press on 13 July ahead of the release of the CAO Act. Source: Reuters.

While state-level legislation has been realised in 18 states, federal criminalisation has remained a major obstacle to the industry, for example, by acting as a deterrent for further legislative progress and by maintaining operational roadblocks. Three important positive effects of the CAO Act for cannabis-related businesses would be the ability of operators to transport cannabis across state lines, to export in bulk and also to access financial services such as banking and US stock exchange listings.

The bill is now entering a public comment period up until 1 September where the legislators are seeking advice on a range of issues such as whether a premarketing review is necessary for cannabis products, and how best to balance control of illicit operations with low barriers to market entry for small businesses.

After this comment period, the bill will eventually be introduced to the Senate and likely referred to the Senate Finance Committee, which is under the leadership of co-sponsor Senator Wyden. It is very likely that compromises will need to be made if the bill stands a chance upon arriving at the Senate floor, especially around aspects of the restorative justice measures. If the bill does not receive the support of the necessary 60 senators, it is possible that Senator Schumer could pass the bill using budget reconciliation whereby the bill is included in a set of must-pass measures, which would then require a simple majority of votes in the Senate to pass. This latter strategy faces its own set of challenges and is in no way guaranteed to succeed without considerable compromise on the bill’s contents.

The CAO Act does not have an endorsement from President Biden, with the White House Press Secretary telling reporters on Wednesday that ‘nothing has changed, and there’s no new endorsements of legislation to report today’. The US president has stated support for decriminalisation, expungement of prior criminal records and respecting states’ rights to control cannabis policy, but the legalisation of commercial adult-use cannabis may be a step too far for the president at this point.

The bill comes at a time when the US is quickly coming around to the idea of fully legalised cannabis. According to polls from Gallup and Pew, more than 60% of those in the US support the legalisation of cannabis for medical and adult-use cannabis. We calculate that 4 in 10 people in the US live in a state that has already legalised adult-use cannabis.

Source: Gallup, Prohibition Partners. Gallup asked “Do you think the use of marijuana should be made legal or not?”

Several other bills are currently being developed that would progress legalisation. In December 2020, the House passed the MORE Act, which would decriminalise adult-use cannabis and is reportedly the basis for much of the content of the CAO Act. The SAFE Banking Act passed the House for the second time in April this year and would allow for financial institutions such as banks and stock exchanges to provide services to cannabis-related businesses without federal legalization. Another bill to federally deschedule cannabis has recently been introduced by Republican lawmakers – the Common Sense Cannabis Reform for Veterans, Small Businesses, and Medical Professionals Act would legalise cannabis at the federal level but has no provisions for restorative justice.

These events are being closely monitored by governments in Europe, where some countries are taking their first steps towards adult-use legalisation. Switzerland and the Netherlands are now preparing to begin pilot schemes of legalised adult-use cannabis on a limited basis. Luxembourg passed legislation to legalise in 2018 but have yet to act on this. More recently, legislation has been proposed in Portugal, with the result being a 60-day period of negotiations and public comment, which is ongoing at the time of writing.

Here we provide a breakdown of the most important points from the CAO Act, sorted into several categories.

Decriminalisation

The bill recommends the removal of cannabis and THC from the Controlled Substances Act and from the Schedule of Controlled Substances.
It transfers responsibility for the control of cannabis from the DEA to a handful of other government bodies, namely to the FDA, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Alcohol and Tobacco Tax and Trade Bureau (TTB).
It allows all states to maintain their own control over cannabis products. States may maintain prohibition on cannabis but must allow for the transport of cannabis across its own territory from one state with legalised cannabis to another.
Several measures to ensure federal control of the cannabis industry will be implemented such as a federal register of operators and a federal track-and-trace system for adult-use cannabis. Any producers or wholesalers will need to be approved by the Treasury Department.

Regulations for adult-use cannabis and the CBD industry

The remote selling of cannabis will be regulated 1–2 years after the enactment of the bill.
Flavoured cannabis e-cigarettes will be banned.
A maximum of 10 ounces to be sold in any one transaction; a maximum of 10 pounds to be handled by anyone without an appropriate licence.
Sales of products to those under 21 would be banned.
Sales of cannabis products containing nicotine, caffeine or alcohol would be banned.
The grounds will be laid for a dietary CBD industry, where a threshold of CBD content is set for products to qualify as dietary supplements.

Taxation

Cannabis imported or produced in the US will be taxed at 10% of the removal price for the first two years after enactment, then 15% and 20% for the next two years, and then 25% for the final year. After that, cannabis is taxed with specific regulations based on the THC content of flowers or the THC equivalence of other cannabis products, with a view to products being taxed at 25% of the price of such products in the preceding year.
Substantial tax credits are offered to protect domestic producers from imports as well as any companies making less than US$20 million revenue per year

Justice

The Community Reinvestment Grant Program will fund non-profits that provide services to those affected by the War on Drugs such as job training, re-entry services, legal aid for civil and criminal cases, literacy programmes, youth recreation or mentoring programs, and health education programmes.
The Cannabis Opportunity Program and Equitable Licensing Grant Program will encourage, through grants and other means, the participation of disadvantaged communities in leadership roles in cannabis businesses and licensing activities.

Three grant programmes will be set up in order to address the harm done to communities by the War on Drugs, especially to communities of colour, which were disproportionately affected:
The bill ensures that loans from Small Business Development Centers are not withheld from cannabis businesses on the basis of their involvement in cannabis businesses.
The bill would expunge any arrests or convictions for non-violent federal crimes relating to cannabis.
No federal public benefits will be withheld on the basis of cannabis use nor will any immigrant be denied protections under their immigrant status due to the use of cannabis.

Research and prevention

The government will support and carry out research into the public health effects of legalised adult-use cannabis.
The government will support and carry out research and preventative campaigns around the topic of impaired driving due to cannabis use.

A full copy of the bill can be found here.

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