Let the States Decide – Federalism

A new bill would reconcile federal law with reality on the ground.

In the nine states where recreational marijuana is legal, industrial-scale growers distribute huge quantities of weed to product manufacturers, dispensaries are as common as banks in strip malls, and anyone over 21 can buy weed in all sorts of forms — edibles, CBD oils, cookies that contain ten milligrams of THC apiece, a good old-fashioned joint.

And everyone involved is breaking federal law. The possession, manufacture, and distribution of marijuana violates the Controlled Substances Act, which defines the drug as a Schedule I substance, the most severe level of classification. The prohibition doesn’t even allow an exception for medical use, which another 20 states have legalized.

With the Marijuana STATES Act, a bill that amends the Controlled Substances Act so that it applies only when state law applies as well, lawmakers are trying to change that.

Thus far, legal weed has flourished only because federal law hasn’t been enforced. The medical-marijuana business, still small, been protected for years by a rider to appropriations bills that bars federal money from funding their prosecution. Recreational-pot businesses, meanwhile, are protected mainly by the executive branch’s unwillingness to treat them as though they were Mexican cartels.

Under the Obama administration, Department of Justice policy was defined by the “Cole Memo,” which directed federal prosecutors to deprioritize marijuana in states where it was legal. That represented an attempt to change the law by executive fiat, and the Trump DOJ, led by unreconstructed drug warrior Jeff Sessions, rescinded the memo on those grounds. But while Sessions made noise early on about ramping up enforcement, legal-weed states have yet to see a crackdown. Going after the weed industry would require federal authorities to raid huge farms, confiscate enormous amounts of money, and put dispensaries out of business, and would set off a political firestorm. So an uneasy stasis persists.

Enter the STATES Act. A bipartisan group of senators, led by Cory Gardner (R., Colo.) and Elizabeth Warren (D., Mass.), introduced the bill last week. It would amend the Controlled Substances Act to conform to the policies of individual states: Phat Panda Farms, based in Spokane, Wash., would be vulnerable to federal prosecution if it tried to open up a branch in Jackson, Miss., but otherwise would be phree to pharm away. Marijuana is a question to which the citizens of Mississippi and Washington obviously have different answers, making it a natural candidate for federalism.

The bill would also allow pot businesses to take deductions and make it easier for banks to serve them by clarifying money-laundering statutes — and aside from federalism, the incentives are clear for the bill’s proponents. Consumers want to smoke; producers want to profit; plenty of capital sits on the sidelines waiting for a change in federal policy. The current quilt of laws and the problems inherent to leaving lawmaking to the executive branch have led to uncertainty, which hinders the development of the weed business. Were it to pass, all interested parties would know what the rules are. Otherwise, companies risk falling afoul of money-laundering statutes if they put their revenue in the banks, so many sit in cash. They also can’t take business deductions on their federal taxes, so they wind up missing out on profits. The STATES Act addresses both of these problems, and could spur a Hemp Valley explosion of startups in states — such as Massachusetts and Colorado — that have legalized it.

"We should not forget that the drug imposes economic and human costs. Its proliferation will invite new regulatory and social questions

Fearing opposition from the usual tough-on-crime suspects, advocates of the STATES Act are clear: This is not a legalization bill. Buying weed in Colorado and returning home to Nebraska would remain both a state and federal crime under the STATES Act, as would selling weed as a black-market drug dealer who also carries fentanyl in his inventory. People who run afoul of state laws would be subject to federal prosecution, potentially allowing the federal government to reinforce the various legal regimes of each state. Gardner points to another virtue of increased transparency in the business sector: “Conflicting federal and state marijuana laws make it difficult for legitimate businesses to use the basic financial services they need access to, which creates a public safety risk,” the senator told National Review. “Businesses are being forced to carry around bags of money to pay for their employees and rent because of banks not being able to accept their money. . . . Getting this industry into the banking system will help increase transparency and allow law enforcement to ensure both that the profits are going to investors rather than cartels.”

As more states legalize marijuana, the need for a reconciliation between the federal prohibition and the will of the people will come into sharper relief. But we should not forget that the drug imposes economic and human costs. Its proliferation will invite new regulatory and social questions: What is the proper taxation regime for marijuana? Set the wrong one — per-gram, for instance — and we risk "incentivizing" businesses to develop ever-more potent strains, amplifying the costs to heavy users. How much should society stigmatize marijuana? A newly libertarian legal regime need not come with a libertine social ethic that trivializes the abusive potential of weed.

All of which means the STATES Act, even if it were to pass, should not be considered the end of marijuana policy making in the U.S. But if it is just a start, it is the right start. The federal government should bequeath these questions to the laboratories, and let us experiment with different regulatory strains.

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