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Federal Reserve Bank Highlights Economic Potential And Health Impacts Of Marijuana Legalization

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A Federal Reserve Bank district recently published a short analysis outlining the potential benefits and consequences of state-level marijuana legalization, noting the economic impact of the policy change as well as the possibility that people will use cannabis as a substitute for alcohol.

It’s a complicated issue for policymakers, an official with the St. Louis division of the central bank wrote, especially as it concerns taxation. Setting tax rates too high could reduce demand for legal marijuana products and send consumers to the unregulated market, but setting them too low could offset revenue to states, Charles S. Gascon, a regional economist and senior coordinator for the Fed, wrote.

“While public discourse surrounding the legalization of marijuana often revolves around perceptions toward recreational drug use, an economic argument supporting (or opposing) legalization can be made regardless of one’s moral standing on use,” the analysis, which focused on various state medical and recreational programs in the midwestern region, states.

For medical cannabis, the bank said such markets raise “the question of potential medical benefits and costs.”

“One could view any drug from the same lens by asking, do the potential benefits from appropriate use of the drug outweigh the costs or risk of abuse?” But unlike traditional pharmaceuticals, medical marijuana products are subject to sales and excise taxes, making them more like tobacco and alcohol than traditional medicines for economic purposes.

The Fed post also asserts that “recreational use of any drug may create social costs, such as long-term health problems, injuries, accidents, unemployment, vagrancy and crime” and that as result of these social costs, “the free-market price is likely too low and therefore consumption is too high.”

“Policymakers can attempt to solve this problem in two ways: first is criminal enforcement, which increases the cost of supplying drugs, reducing supply in the market and subsequently pushing up prices,” it continues. “Second is taxation on purchases, which reduces the quantity demanded in the market by increasing the price. In theory, both policies could achieve the same outcome of reducing drug use to a socially optimal level.”

“Policymakers face the difficult task of taking this theory to practice. Enforcement requires determining the most efficient techniques and the severity of penalization. Policymakers must also account for the adverse consequences of incarceration. On the other hand, taxation requires determining the optimal tax rate, which may vary for different types of consumers. Again, there may be a cost of enforcing this tax on those who seek to avoid payment. For both policies, the main challenge is determining the social cost of drug use, which ultimately determines the degree of necessary enforcement or taxation.”

The financial institution concluded by noting complications created by the federal-state marijuana policy conflict, including the lack of access to banking services for cannabis businesses.

One of the more interesting points the bank made is that consumers “are likely to spend a greater share of their income on marijuana and less on other taxable goods, such as alcohol” when cannabis is legal.

The Federal Reserve Bank of St. Louis seems to have taken special interest in cannabis policy. In February, it posted a notice clarifying that financial institutions no longer have to automatically treat hemp businesses as suspicious under reporting rules.

Last year, the Federal Reserve Bank Of Kansas City analyzed Colorado’s marijuana market and ultimately determined that the cannabis industry is primed to continue to grow as public support for legalization increases, although perhaps not quite at the rate seen in the early years of the policy change’s implementation.

In April 2019, three Federal Reserve Bank presidents united in a call for clarity on rules for providing financial services to the marijuana industry.

Colorado Marijuana Social Equity Businesses Would Be Defined Under New Bill

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Kyle Jaeger is Marijuana Moment's Sacramento-based senior editor. His work has also appeared in High Times, VICE and attn.

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California Senator Seeks Federal Clarification On Medical Marijuana Use In Hospitals

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A California senator is asking the head of the U.S. Department of Health and Human Services (HHS) to provide clarification on whether hospitals and other healthcare facilities in legal marijuana states can allow terminally ill patients to use medical cannabis without jeopardizing federal funding.

State Sen. Ben Hueso (D) on Thursday sent a letter to HHS Secretary Xavier Becerra and Centers for Medicare and Medicaid Services (CMS) Administrator Chiquita Brooks-LaSure inquiring about the policy. Confusion about possible implications for permitting marijuana consumption in health facilities led pro-legalization Gov. Gavin Newsom (D) to veto a bill meant to address the issue in 2019.

Hueso refiled a nearly identical version of the legislation for this session, and it’s already passed the full Senate and one Assembly committee. It’s now awaiting action on the Assembly floor before potentially being sent to Newsom’s desk.

“Ryan’s Law would require that hospitals and certain types of healthcare facilities in the State of California allow a terminally-ill patient to use medical cannabis for treatment and/or pain relief,” the senator wrote in the letter to the federal officials, with whom he is asking to meet to discuss the issue. “Currently, whether or not medical cannabis is permitted is left up to hospital policy, and this creates issues for patients and their families who seek alternative, more natural medication options in their final days.”

Hospitals that receive CMS accreditation are generally expected to comply with local, state and federal laws in order to qualify for certain reimbursements. And so because marijuana remains federally illegal, “many healthcare facilities have adopted policies prohibiting cannabis on their grounds out of a perceived risk of losing federal funding if they were to allow it.”

But Hueso said that his office received a letter from CMS several months ago stating that there are no specific federal regulations in place that specifically address this issue and that it isn’t aware of any cases where funding has been pulled because a hospital allows patients to use medical cannabis.


Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

Additionally, because the Justice Department has been barred under annually renewed spending legislation from using its funds to interfere in the implementation of state-level medical marijuana programs, the senator said, “we believe the risk of federal intervention is little to none.”

“This confirmation from CMS been quite a breakthrough and we are optimistic it will alleviate the Governor’s concerns,” the letter continues. “However, I want to underscore that, prior to receiving this response, even the Governor of California was under the impression that CMS rules prohibited hospitals and healthcare facilities from allowing medical cannabis use.”

“Undoubtedly other states are struggling with this issue, too,” it says. “As more states decriminalize cannabis and even create recreational markets, we must not forget to also update the books for the most important consumers of all—patients.”

“While ideally the federal government will remove cannabis from its Schedule I designation, I appreciate that this is a lengthy and complex process. In the interim, it would be extremely helpful if you could provide clarification that assures Medicare/Medicaid providers that they will not lose reimbursements for allowing medical cannabis use on their premises. This clarification would go a long way to help hospital staff, security, above all, patients.”

Becerra, while previously serving as California attorney general and as a member of Congress, demonstrated a track record of supporting marijuana law reform.

Meanwhile, there are efforts in both chambers of Congress to end federal marijuana prohibition.

Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) are currently soliciting feedback on draft legalization legislation they introduced this month.

Meanwhile, a separate House bill to federally legalize marijuana and promote social equity in the industry was reintroduced in May.

The legislation, sponsored by Judiciary Committee Chairman Jerrold Nadler (D-NY), was filed with a number of changes compared to the version that was approved by the chamber last year.

Read the letter from the California senator to Becerra below: 

Marijuana hospital letter t… by Marijuana Moment

Rhode Island House Speaker Says ‘No Consensus’ On Marijuana Legalization, But It’s ‘Workable’

Photo courtesy of Mike Latimer.

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Rhode Island House Speaker Says ‘No Consensus’ On Marijuana Legalization, But It’s ‘Workable’

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A top Rhode Island lawmaker says that while there’s not yet a consensus among legislators and the governor on a bill to legalize marijuana, it’s still a “workable” issue and would be prioritized if a special session is convened this fall.

House Speaker Joe Shekarchi (D) told The Public’s Radio that it’s “possible” that a special session will be held later in the year after lawmakers failed to reach a deal on competing reform proposals.

“It really depends if we can come to some kind of resolution of consensus on a couple of major bills,” he said, referring to cannabis and a handful of other issues. “If we can, we certainly would come back.” But if not, members will continue to discuss the proposals and prepare to take them up at the start of the next session in January.

“Unfairly, sometimes I have or the House gets blamed for stopping the legalization of recreational use of marijuana, when in reality there is no consensus,” he said. “If we can come to some closeness, in the several different proposals, then we’ll move some kind of legislation. But if not, it just needs more work—and it’s very workable, so it’s very much something that can happen, we just have to put the effort in and make it happen.”

Listen to the speaker discuss the marijuana legalization plan, about 1:00 into the audio  below: 

Shekarchi similarly told Marijuana Moment in an email earlier this week that he’s “not opposed to the legalization of recreational marijuana,” but “there have been very divergent proposals offered by Representative Scott Slater, the Senate, the governor and various advocacy groups.”

“As I have done with other issues, my role will be to bring the parties together and see if we can reach a consensus,” he said. “I will be working on the issue this summer and fall, and if an agreement can be reached, it is possible that one piece of legislation will be brought before the legislature for future consideration. But there is a lot of work to be done to reach consensus.”

Shekarchi and other top lawmakers have previously said they will work this summer to try to reach a compromise on the differing provisions of the competing legalization plans.

Senate President Dominick Ruggerio (D) said earlier this month that he’s not disappointed the House hasn’t advanced legalization legislation yet and that “what we really wanted to do was send it over and have them take a look at it” when his chamber passed a cannabis reform measure last month.

Shekarchi previously said that he feels reform is “inevitable.”


Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

A key disagreement between the House, Senate and governor’s office concerns who should have regulatory authority over marijuana. Ruggerio was pressed on the issue during the recent interview and said members of his chamber agree that “a separate commission is the way to go with respect to this.”

The House and Gov. Dan McKee (D), on the other hand, want the program to be managed by the state Department of Business Regulation (DBR). Ruggerio noted that “it was difficult to negotiate on a bill when the House bill really didn’t come until late in the session.”

Asked whether he felt the legislature and governor could come to an agreement despite the differences, Senate Majority Leader Mike McCaffrey (D) said this month that “that’s what our goal is.”

“Obviously there’s some issues that different people have relative to different categories of licenses and things like that and how we’re rolling them out,” he said. “Are we going to limit them? what type of equity are you going to give to the different people in different communities so that they can get into the business? And social equity and things of that nature.”

McCaffrey was also asked about provisions related to allowing local municipalities to opt out of allowing marijuana businesses to operate in their area. He said “once the legislation is passed and whatever form is passed in, the communities have an opportunity to opt out.”

“They have an opportunity to opt out if the community doesn’t want to participate in it,” he said. “That’s their decision—however, they don’t get the funds that would come from the sales in that community.”

The majority leader also noted that neighboring states like Connecticut and Massachusetts have enacted legalization, and that adds impetus for the legislature to pursue reform in the state. .

Shekarchi, meanwhile, said this month that he doesn’t intend to let regional pressure dictate the timeline for when Rhode Island enacts a policy change. But it is the case that legalization has now gone in effect in in surrounding states like Connecticut and Massachusetts.

“I’m not in any hurry to legalize marijuana for the sake of legalizing it. I want to do it right,” he said. “It doesn’t matter to me if we’re the last state in the union to legalize it or we never legalize it, but I need to do it right.”

Social equity, licensing fees, labor agreements and home grow provisions are among the outstanding matters that need to be addressed, Shekarchi said.

These latest comment come weeks after the state Senate approved a legalization bill from McCaffrey and Health & Human Services Chairman Joshua Miller (D), which was introduced in March. The governor also came out with his own legalization proposal shortly thereafter.

A third Rhode Island legalization measure was later filed on the House side by Rep. Scott Slater (D) and several cosponsors. The House Finance Committee held a hearing on the measure last month.

The governor, for his part, told reporters that while he backs legalization it is “not like one of my highest priorities,” adding that “we’re not in a race with Connecticut or Massachusetts on this issue.”

“I think we need to get it right,” he said, pointing to ongoing discussions with the House and Senate.

The House Finance Committee discussed the governor’s proposal to end prohibition at an earlier hearing in April.

Both the governor and the leaders’ legalization plans are notably different than the proposal that former Gov. Gina Raimondo (D) had included in her budget last year. Prior to leaving office to join the Biden administration as commerce secretary, she called for legalization through a state-run model.

McKee gave initial insights into his perspective on the reform in January, saying that “it’s time that [legalization] happens” and that he’s “more leaning towards an entrepreneurial strategy there to let that roll that way.”

Shekarchi, meanwhile, has said he’s “absolutely” open to the idea of cannabis legalization and also leans toward privatization.

Late last year, the Senate Finance Committee began preliminary consideration of legalization in preparation for the 2021 session, with lawmakers generally accepting the reform as an inevitability. “I certainly do think we’ll act on the issue, whether it’s more private or more state,” Sen. Ryan Pearson (D), who now serves as the panel’s chairman, said at the time.

Meanwhile, the governor this month signed a historic bill to allow safe consumption sites where people could use illicit drugs under medical supervision and receive resources to enter treatment. Harm reduction advocates say this would prevent overdose deaths and help de-stigmatize substance misuse. Rhode Island is the first state to allow the facilities.

The Senate Judiciary Committee also held a hearing in March on legislation that would end criminal penalties for possessing small amounts of drugs and replace them with a $100 fine.

Ohio Lawmakers Officially File Marijuana Legalization Bill In Historic First For The State

Photo courtesy of WeedPornDaily.

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Ohio Lawmakers Officially File Marijuana Legalization Bill In Historic First For The State

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Ohio lawmakers on Friday formally introduced a bill to legalize marijuana possession, production and sales—the first effort of its kind in the state legislature. This comes as activists are pursuing a separate ballot initiative that would effectively force the legislature to consider similar cannabis reforms.

Reps. Casey Weinstein (D) and Terrence Upchurch (D) filed the legislation, weeks after circulating a co-sponsorship memo to colleagues to build support for the measure.

The 180-page bill would legalize possession of up to five ounces of cannabis for adults 21 and older and allow them to cultivate up to 12 plants for personal use. It also includes provisions to expunge prior convictions for possession and cultivation activities that are being made legal under the measure.

A 10 percent excise tax would be imposed on marijuana sales, with revenue first going toward the cost of implementation and then being divided among municipalities with at least one cannabis shop (15 percent), counties with at least one shop (15 percent), K-12 education (35 percent) and infrastructure (35 percent).

“It’s time to lead Ohio forward,” Weinstein said in a press release. “This is a big step for criminal justice reform, for our veterans, for economic opportunity, and for our individual liberties.”

The state Department of Commerce would be responsible for overseeing the program and issuing cannabis business licenses.


Marijuana Moment is already tracking more than 1,200 cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.

Individual municipalities could restrict the type and number of marijuana that operate in their area. The bill specifically states that the state’s existing medical marijuana program would not be impacted by the establishment of an adult-use market.

“This bill is much needed in Ohio, and it’s time for Ohio to become a national leader in marijuana decriminalization and legalization,” Upchurch said. “This bill is more than just about legalization, it’s about economic and workforce development, it’s about decriminalization, and it’s about healthcare! The time is now, and I look forward to getting this done in a bipartisan fashion.”

Gov. Mike DeWine (R) is likely to oppose the effort given his record, but activists have effectively demonstrated through local initiatives that voters in the state broadly support enacting a cannabis policy change.

A newly formed organization called the the Coalition to Regulate Marijuana Like Alcohol (CTRMLA) is also actively collecting signatures for a statewide ballot measure that would separately force lawmakers to consider taking up legalization legislation once a certain signature gathering threshold is met.

“I’m glad to see it! It’s added momentum toward legalization,” Weinstein told Marijuana Moment earlier this week of the ballot effort. “And hopefully a looming ballot initiative will add some incentive for my Republican colleagues to work with me on my bill.”

Meanwhile, 22 jurisdictions have adopted local statues so far that reduce the penalty for low-level cannabis possession from a misdemeanor punishable by jail time and a fine to the “lowest penalty allowed by state law.” And activists are pursuing similar policy changes in dozens of cities this year.

Don Keeney, executive director of NORML Appalachia, told Marijuana Moment that local officials have so far certified decriminalization initiatives in five cities they were targeting this year: Laurelville, McArthur, Murray City, New Lexington and New Straitsville.

Ohio activists had hoped to place a cannabis legalization initiative on the statewide ballot last year, but that effort stalled as the COVID-19 outbreak and resulting public health restrictions made signature gathering all but impossible.

Local advocates sought relief through the court system to make it so they could collect signatures electronically for 2020 ballot initiatives, but the lawsuit was repeatedly rejected—most recently by the U.S. Circuit Court of Appeals for the Sixth Circuit, which ruled on Wednesday that the challenge was no longer relevant because last year’s election has passed and the case was therefore moot.

Read the text of the Ohio marijuana legalization bill below: 

Ohio marijuana legalization… by Marijuana Moment

GOP Senator Sponsoring Marijuana Banking Bill Proposes Controversial Welfare Restrictions For Cannabis Purchases

Photo courtesy of Mike Latimer.

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