Cannabis lobbyists believe incremental steps are the most likely path to federal reform

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Image depicting Cannabis Administration and Opportunity Act

While not impossible, comprehensive marijuana reform that includes federal legalization of the plant in the form of one bill would be a politically heavy lift in today’s divisive Congress.

So it’s important to focus on the most politically palatable and plausible ways to make progress, said Saphira Galoob, principal and CEO of The Liaison Group, a cannabis lobbying firm in Washington DC.

“I think legalization is more of a process than a moment,” Galoob said. “It’s not that I’m against comprehensive reform. I just don’t think it’s going to happen in Washington in one fell swoop—and I don’t believe we will only have one bite at the apple, where every issue surrounding legalization gets resolved at once.”

She advocates creating a pathway to legalization through a “sequencing,” or more incremental, approach that invokes authority within both the Biden administration and Congress.

For Galoob and other veteran lobbyists, several incremental measures offer the best opportunity for passage this year:

  • Cannabis banking reform such as the SAFE Banking Act would enable financial institutions to serve state-legal marijuana businesses without fear of federal reprisal. The legislation could be attached to a must-pass spending measure or other authorizing bill, such as the America COMPETES Act/U.S. Innovation and Competition Act.
  • The Medical Marijuana Research Act is a bipartisan effort to expedite research into cannabis.
  • The HOPE Act would direct funds to states for cannabis conviction-expungement efforts. Unlikely allies in the U.S. House—Ohio Republican David Joyce and New York Democrat Alexandria Ocasio-Cortez—introduced the measure.
  • A bill such as the Veterans Equal Access Act of 2021 would allow Veterans Administration doctors to provide medical marijuana recommendations to former military service members.

Lobbyists agreed these incremental measures are more likely to pass than a wide-ranging federal legalization effort.

“What’s at stake if we don’t take the right pathway, if we are unrealistic with our political and advocacy strategy and get nothing?” Galoob asked.

The result could be that individuals continue to languish in prison, social equity programs will not have the financial institutions in place to support their chance to succeed, and there will be further delays in reforms needed to help marijuana businesses access capital, banking services and equal treatment in terms of taxation, she said.

Taking the wrong pathway also will delay federal investments in communities and individuals hurt by the war on drugs, she said.

The bucket approach

Galoob sees cannabis reform efforts as sitting in distinct buckets.

One bucket contains the various measures that would legalize marijuana and, over time, create a national marketplace.

Many comprehensive measures already are on the table, including the social justice-focused MORE Act, which the U.S. House of Representatives has passed before.

At press time, Senate Majority Leader Chuck Schumer and fellow Senate Democrats Cory Booker of New Jersey and Ron Wyden of Oregon were continuing to work on a sweeping, comprehensive measure called the Cannabis Administration and Opportunity Act (CAOA). The bill is expected to be unveiled in April.

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The second bucket contains reforms needed by state-legal cannabis businesses because marijuana is federally illegal, Galoob said.

That includes the SAFE Banking Act and eliminating the application of Section 280E, the provision of the IRS tax code that prevents cannabis companies from taking standard business deductions.

“There are politics, policies and personalities in each of those buckets,” Galoob said. “Each of those live on very distinct political and legislative thoroughfares and pathways.”

The questions one needs to ask, Galoob said, are:

What is the political landscape that we are faced with now, and how do we drive the opportunity through that landscape?

What is the terrain between now and November, and how should we be marching given the players and the politics and what else Congress is dealing with?

Cannabis banking

The SAFE Banking Act is the measure that would help cash-dependent marijuana businesses the most.

Galoob said she believes that passing SAFE Banking is a realistic goal for this year and would help create momentum for further reform by “letting the economics of the industry influence public policy.”

SAFE Banking was stripped out of a defense budget bill last year but was recently revived and attached to a federal technology and innovation spending bill that was passed by the House on Feb. 4. But it’s unclear whether SAFE Banking will pass the full Congress.

One hitch: Schumer and Booker have made it clear they first want their comprehensive marijuana bill to be considered in the Senate, even though it’s believed to be extremely unlikely the two could muster the 60 votes needed for passage.

That led some industry insiders to conclude the senators were responsible for stripping SAFE Banking out of the recent defense budget bill.

In fact, Booker said last year that any marijuana legislation needed to include provisions to correct America’s failed war on drugs, although he later told Yahoo Finance that he supported SAFE Banking and saw its potential to be the “sweetener” to get moderates on board with equitable justice reform.

SAFE Banking a ‘viable’ stand-alone

Steve Hawkins, president and CEO of the U.S. Cannabis Council, sees similar reform pathways as Galoob.

Hawkins said what has happened to SAFE Banking so far in the 2021-22 congressional session is “part of the dance” and not uncommon when congressional leaders have bills they want to get first consideration.

“There are various legislative agendas,” Hawkins said. “But I’m confident that when the smoke clears, we’ll get a chance to get (SAFE Banking) to the Senate floor.”

Hawkins noted that SAFE Banking has 40 Senate co-sponsors, including nine Republicans.

“I think it’s definitely viable as a stand-alone” measure, Hawkins said, if it doesn’t pass as an attachment to another bill.

U.S. House Rep. Ed Perlmutter, a Colorado Democrat who announced he will not run for reelection, has been the biggest champion of SAFE Banking over the years and has pledged to get it across the finish line before he leaves Congress.

The HOPE Act

Hawkins indicated the HOPE Act might offer the equitable justice provisions that Schumer, Booker and other progressives want but which currently aren’t included in the SAFE Banking bill.

The fact that U.S. Reps. Ocasio-Cortez and Joyce teamed up to introduce the measure in the House is seen as indicative of the broad support the bill could get.

In addition to giving money to states to help them administer expungements of cannabis offenses, HOPE would require states to report about the impacts of marijuana prohibition on communities and individuals.

“It’s a pretty powerful tool in advancing criminal justice,” Hawkins said of the legislation.

A long time coming

For marijuana businesses, frustration is growing over the lack of progress on Capitol Hill.

Rachel Gillette, head of the new cannabis industry group at the Denver-based law firm Holland & Hart, said she was a “little offended by the kind of horse trading” that resulted in the SAFE Banking measure coming out of the defense spending bill.

“I’m really disappointed because I think (SAFE Banking) is such a necessary concept for cannabis businesses to exist in the modern world.”

Gillette said cash control is one of the biggest issues her clients deal with, and it seems as if everyone would be better served—the federal government included—if state-legal marijuana businesses could access traditional financial services.

The current situation “creates this tremendous safety issue for a multibillion-dollar industry,” she said.

Cannabis businesses fortunate enough to get bank accounts pay exorbitant fees as high as $15,000 to move money between the accounts, she said.

“I don’t think people recognize how expensive (cannabis) banking is,” she said.

Gillette added that she just wants some progress in federal marijuana reform to be made in Congress.

“At this point, I think I’ll take anything,” she said.