(This developing story was updated at 5:20 pm ET July 21.)
Legislation to remove the decades-old federal ban on marijuana was at long last introduced Thursday by Senate Majority Leader Chuck Schumer, and cannabis industry leaders were gleeful over the milestone, even though it’s a long shot that the legalization bill will become law.
Most marijuana lobbyists give Schumer’s Cannabis Administration and Opportunity Act (CAOA) almost zero chance of getting through the Senate, since it would need 60 votes to pass.
But several said it could lend momentum to more incremental reform bills – most notably the SAFE Banking Act, which would allow banks to serve cannabis businesses without fear of federal reprisal.
“It really does increase the chances of something happening,” said Randal Meyer, the executive director of the Global Alliance for Cannabis Commerce (GACC), who said the CAOA might have “an uncorking effect” for marijuana legislation.
Schumer and colleagues including U.S. Sens. Cory Booker of New Jersey and Ron Wyden of Oregon have been working on the 296-page measure mostly behind closed doors since early 2021.
A draft of the bill was circulated last year.
“The question today is no longer whether cannabis should be legal – many states have already made that decision on their own initiative. The question is whether cannabis should be subject to the same high regulatory standards that apply to alcohol and tobacco,” Schumer, Booker and Wyden said in a joint statement released Thursday.
According to a synopsis from Schumer’s office, the new bill would:
- Remove marijuana from the list of federally controlled substances.
- Allow states to continue taking the lead on regulating the industry but also maintain prohibition in states that have not legalized.
- Establish a “regulatory regime similar to alcohol and tobacco” from the federal government.
A variety of industry trade groups offered feedback last fall on changes they’d like to see in the measure – including lowering the proposed national marijuana tax rate, which was partially implemented in the newer version.
And the newly introduced bill does have some notable revisions versus the draft document.
For instance, the bill still includes a 10% national tax on all marijuana products for the first two years if the bill becomes law, and that tax would gradually ramp up to 25%, a provision staunchly opposed by marijuana trade groups.
But in the newer version, that tax rate will only apply to “larger cannabis businesses,” while the excise tax for “small and mid-sized producers” would be only half the rate, starting at 5% and ramping up to 12.5% over five years, according to a synopsis of the bill from Schumer’s office.
Impact on cannabis stocks
Pablo Zuanic, an investment analyst at New York-based Cantor Fitzgerald, thinks the revised bill is “bullish for cannabis stocks,” especially considering values have been depressed, “the recent rally notwithstanding.”
“If Sen. Schumer’s cannabis reform bill (as filed this morning) were to be passed by Congress, it would be a watershed event for U.S. cannabis stocks,” Zuanic wrote in a research note Thursday morning.
“But we are doubtful it will have 60 votes in the Senate, so we will closely monitor his comments and those of Republicans in the coming days,” including the willingness of the bill sponsors to compromise, Zuanic wrote, echoing a long-held analysis from Congressional observers.
Zuanic added that he sees the bill as more than just midterm “election posturing” and instead a serious effort to develop what could be historic legislation.
Investors initially seemed indifferent to Thursday’s development, in sharp contrast to soaring prices when Schumer in early 2021 announced his plan to introduce a sweeping marijuana reform bill.
An exchange-traded fund that tracks U.S. multistate operators – AdvisorShares Pure US Cannabis ETF – declined slightly Thursday morning, before finishing strong and closing at $12.65 a share, up 3.6% for the day.
The cannabis ETF, which trades on the New York Stock Exchange Arca as MSOS, has plummeted from $26 a share at the beginning of the year.
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Will anything happen this year?
The introduction of Schumer’s bill could spur more political wrangling behind the scenes to get some type of cannabis reform passed by the end of the year, several industry experts said, even if the majority leader’s bill itself winds up being tabled.
Meyer, of the Global Alliance for Cannabis Commerce, noted that a large number of bills approved by Congress in the past decade have been accomplished in the month-and-a-half lame duck session that follows the midterm elections in November but which precedes the next Congress, which convenes in January.
That window often leads to a lot of compromise deals, Meyer said, and the SAFE Banking Act could be one such deal, riding the political momentum that Schumer just created with his bill.
“It’s entirely possible. It depends on what happens in the next couple weeks,” Meyer said.
“I wouldn’t be surprised if we see something little float through where there’s almost no objection. Maybe a medical marijuana research bill. And then if that occurs, there’s a real chance you could get a SAFE Banking compromise package.”
Amber Littlejohn, the executive director of the Minority Cannabis Business Association, also said there are signals within the CAOA text that Democratic senators like Cory Booker – who have objected to SAFE Banking being passed before marijuana-related criminal justice reforms are enacted – have realized how important access to capital is for small and minority marijuana companies.
That, she said, gives her hope that a compromise on SAFE Banking could be reached before the end of the year.
“I’m going to believe in SAFE Banking until the day this session ends,” Littlejohn said. “That affirmation of those challenges really does give me hope again that the Senate understands this is an issue, and one we need to fix, and that we do have a vehicle to fix it this year.”
David Mangone, a spokesman for the National Cannabis Roundtable, agreed with his two counterparts on the CAOA introduction upping the odds for SAFE Banking.
He said the Schumer introduction sets the stage for something – almost anything cannabis-related – to get through Congress.
And he thinks SAFE Banking is near the top of the list of potential victories.
Senate votes key
“It still comes down to the reality of counting votes in the Senate. And right now, when you look at co-sponsorship, SAFE Banking is one of those bills where it’s very conceivable that you could overcome a Republican filibuster (in the Senate). There are nine (GOP) senators on the standalone bill,” Mangone observed.
And, he noted, Schumer and his team didn’t just pay lip service to the CAOA with soliciting feedback, which he said is evident just from how it was amended between last year and this week.
“Just from page count alone, it does show that they sincerely took a lot of feedback, and incorporated it… (the bill) jumped from about 150 pages to almost 300,” Mangone said.
“To me, that shows they are serious about getting some form of reform done, because if they weren’t, we would have seen the exact same bill introduced. Not many changes, just a new title slapped on it.”
Steve Hawkins, the CEO of the U.S. Cannabis Council, said he wouldn’t be surprised to see a package of marijuana policy issues approved that combines marijuana research, federal criminal record expungement and SAFE Banking.
“We very well may see a package of all three pass Congress later in the year,” Hawkins said.
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