Alongside a new presidential administration and a shift in power in the Senate, legislative changes are being discussed that could occur over the next several years. Everything from pandemic relief and coronavirus aid to tax and immigration changes are being considered. Another area with potential for substantial reform is the cannabis sector. Federal cannabis policy reform is likely to be considered and a federal legalization bill may now have a better chance than ever to pass both the House and Senate. Here is our cannabis outlook for 2021.
Cannabis Outlook 2021: Federal Level
Although many states have passed medical or recreational-use cannabis laws, at the federal level, cannabis remains a Schedule I controlled substance, as set forth in the Controlled Substances Act of 1970. Under the previous presidential administration and Republican-controlled Senate, two substantial cannabis bills that had been approved by the House of Representatives did not survive Senate scrutiny. Those bills included the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, which would have repealed the federal criminalization of marijuana, and the Secure and Fair Enforcement (SAFE) Banking Act, which would have eliminated penalties that could be assessed on financial institutions because they provided services to cannabis businesses.
Now that control has shifted in the Senate, and Democrats retain a slight advantage in the House, we are likely to see similar bills introduced over the next year or two. These bills have a much higher likelihood of passing Senate muster, due in part to several high-profile Democratic senators publicly stating their support for the advancement of marijuana legislation, including Senate Majority Leader Chuck Schumer. Despite this support, passage of such a bill will not be an easy task, given the slim margin of error within the Senate. In addition, although President Biden and his administration have communicated several legislative priorities for his first year in office, cannabis legislation has not been among them.
Cannabis at the State Level
In addition to the national changes in Senate and White House control, the November elections brought several cannabis-related changes at the state level. South Dakota made history by becoming the first state to legalize both medical and recreational cannabis use on the same ballot. Montana, Arizona and New Jersey also approved recreational cannabis bills. In addition, Mississippi voters approved the legalization of medical cannabis, bringing the total number of states where medical cannabis is allowed to 38 (15 states allow both medical and recreational).
Looking forward to 2021, several states have the potential to pass recreational-use laws, including New York, Pennsylvania, Maryland, Connecticut and New Mexico, while Kansas, Kentucky, South Carolina and Alabama are poised to legalize medical-use cannabis.
Ohio and Michigan: A Closer Look
In Ohio, although only medical-use cannabis has been approved, the market was expected to achieve between $200-250 million in 2020 sales, according to cannabis industry publisher Marijuana Business Daily. Several new municipalities voted in 2020 to remove or reduce penalties for low-level marijuana possession offenses, bringing the total number of Ohio municipalities to do so to 18. These municipalities include most of the major metropolitan areas in the state: Cincinnati, Columbus, Cleveland, Toledo and Dayton among them. Some of these municipalities have stopped penalizing marijuana possession if it is less than a certain amount (e.g., 100 or 200 grams), or have greatly reduced the penalty for possession. For example, in Columbus, the fine for possession of 100 grams or less is only $10 ($25 for 100-200 grams).
In Michigan, both medical and recreational-use cannabis are allowed, but Michigan municipalities have the authority to opt out of recreational sales. Although the majority of towns and municipalities have opted out, several communities voted in 2020 to expand the licensing of cannabis-related business within their city limits. Despite the high number of municipalities opting out of cannabis sales, Michigan’s recreational and medical cannabis sales have skyrocketed, producing nearly $1 billion in sales revenue for the 2020 year, according to cannabis industry data research group Headset. This surge in sales has allowed Michigan to surpass Nevada in becoming the fifth-largest cannabis market in the United States, behind California, Colorado, Washington and Oregon. In 2020, Michigan lawmakers also enacted legislation facilitating the expungement of low-level marijuana records.
Cannabis Outlook for 2021: Conclusion
Given the increase in state-level allowance of medical and recreational-use cannabis, in addition to increasing momentum for legislative reform at the federal level, 2021 is poised to be a big year for the cannabis industry. As changes occur that may affect your business, we will be available and ready to assist. Please contact your Clark Schaefer Hackett advisor for more information.