STATES Act reintroduced in Congress to harmonize federal, state cannabis law

The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act was introduced in the last Congress to, in effect, amend the Controlled Substances Act and defer to the various states regarding the legalization and regulation of cannabis and to limit federal agents from raiding state licensed businesses. The STATES Act also sought to simplify the ability of banks to conduct transactions with cannabis-related companies by mitigating concerns related to receiving “illegal” proceeds. The bill provided that transactions which comply with the law would not constitute trafficking and thereby result in proceeds of an unlawful transaction.

On April 4, 2019, the STATES Act (S. 1028, H.R. 2093) was reintroduced in the U.S. Senate by Senators Corey Gardner (R-CO) and Elizabeth Warren (D-MA) and in the House by Representatives Earl Blumenauer (D-OR-03) and David Joyce (R-OH-14). The bill largely mirrors the STATES Act introduced in the last Congress with two exceptions:

1. The provisions legalizing hemp have been eliminated as those provisions are no longer necessary due to the 2018 Farm Bill; and
2. The STATES Act includes a provision requiring the U.S. Government Accountability Office to provide a report on traffic safety issues, including the collection of data regarding traffic crashes and injuries in states which have legalized marijuana and possible evaluation of the relationship of marijuana impairment with such incidents.

The next step for the STATES Act is for the Senate and House Judiciary Committees to hold hearings on the bill, which House Judiciary Committee Chairman Jerry Nadler (D-NY-10) is expected to convene in the coming weeks. Senate Judiciary Committee Chairman Lindsey Graham (R-SC) has no current plans to hold a hearing on S. 2093.

The STATES Act is likely to encounter opposition from conservatives who view the bill as a step towards legalization – though the bill does not legalize cannabis nor make any normative statements about cannabis use. There are also significant concerns being raised by progressives who claim that the bill does not go far enough, and are calling for the STATES Act to include the expungement of federal cannabis crimes or other social justice provisions that can be addressed within the jurisdiction of the Judiciary Committees. The Minority Cannabis Business Association opposes the STATES Act because it does not include elements that address minority access or social justice issues related to cannabis.

A desire by liberal Democrats to address historic inequities borne from marijuana prohibitions nearly stalled the SAFE Banking Act, which nevertheless was favorably reported by the House Financial Services Committee with resounding support on March 28, 2019. Progressives who initially fought for a broader, more criminal-justice oriented bill eventually supported the SAFE Banking Act because it included federal banking regulators to annually report to Congress data on minority-owned and women-owned cannabis-related businesses. Whether or not a similar compromise can be struck with the STATES Act remains to be seen, but activists and congressional staff are in conversations on how to best proceed in a manner that retains Republican support while beginning to legislate reforms that will effectively address past inequities.

At a glance, it seems as though the STATES Act should have a clear path forward: 46 states have already permitted or decriminalized marijuana on some level, and the majority of Americans support legalization. However, challenges remain. Proponents of the STATES Act see it as an important step in eliminating the current conflict between federal law and state laws concerning the legalizations of cannabis, while marijuana advocates are framing the bill as the first step in ending federal prohibition of cannabis. Many conservatives opposed to loosening any federal drug laws oppose the STATES Act because they see it as a “slippery slope” leading directly to legalization. It will take a concerted political effort and a strong coalition of stakeholders to turn the STATES Act into law.

Kevin Young is a member of the firm’s corporate and securities practice and our cannabis group. Jack Jacobson is a member of our lobbying & policy group and cannabis group.