A powerful Senate committee chairman said on Wednesday the he opposes House-passed marijuana banking legislation and laid out potential changes he would like to see to the bill before he takes it up in his panel.
Among other amendments being floated for public feedback is a 2 percent THC potency limit on products in order for cannabis businesses to qualify to access financial services as well as blocking banking services for operators that sell high-potency vaping devices or edibles that could appeal to children.
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho,” Sen. Mike Crapo (R-ID), who chairs the Senate Banking Committee, said in a press release. “I also do not support the SAFE Banking Act that passed in the House of Representatives. I have significant concerns that the SAFE Banking Act does not address the high level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system. I welcome input from all interested parties on how to thoughtfully address these concerns.”
The Secure And Fair Enforcement (SAFE) Banking Act, which would shield banks from being punished by federal regulators for working with state-legal marijuana businesses, passed the House in September with strong bipartisan support.
Crapo’s committee held a hearing on cannabis businesses’ access to financial services in July, though he had previously said that he did not support taking up the legislation in his panel while marijuana remains federally illegal. He then said he wanted to bring it up by the end of 2019, though later indicated in an interview with Marijuana Moment last month that impeachment could delay things. Now, he is taking the step of floating amendments to the House-passed proposal before moving forward with a vote.
The new document from the chairman largely tracks with comments he made in another Marijuana Moment interview in October in which he said laid out some areas of concern.
“The things we’re looking at are, first of all, to make sure we improve and clarify the interstate banking application of all of this,” Crapo said at the time. “Secondly, money laundering issues with regard to legacy cash to make sure how that is managed properly. [Financial Crimes Enforcement Network] issues and other related issues. And then finally the health and safety issues about what is going to be banked.”
“Take tobacco for example, every state I think has some kind of regulatory parameters around the utilization of tobacco, even if it’s just an age limit on who can purchase it or what have you and the types of products that are going to be allowed,” he continued. “That gets into a legal issue that I think the states need to be more engaged in, but it also impacts the question on what would be banked. Those kinds of issues—health and safety, interstate commerce and money laundering.”
Crapo is also floating new federal studies on marijuana and its effects, clarifying hemp businesses’ banking access and measures to deal with legacy cash and interstate commerce, among other areas for potential amendments. He also suggested that measures requiring studies on study on diversity and inclusion in the cannabis industry be removed from the legislation.
“I appreciate Chairman Crapo’s concerns and willingness to work on this important issue. However, there is an urgent public safety risk facing the majority of communities and Americans today that needs to be resolved, and I believe our bill, which passed the House with 321 Democratic and Republican votes, responsibly addresses the conflict between state marijuana laws and federal banking laws,” said Rep. Ed Perlmutter (D-CO), who is the lead sponsor of the SAFE Banking Act in the House. “This issue requires a pragmatic approach that takes into the account the will of voters across the country. I look forward to working with Chairman Crapo and my colleagues in the Senate as we work to resolve these differences and enact legislation to protect businesses, residents and communities.”
Legalization advocates were not pleased with the proposals.
“These guidelines are essentially gutting the intention of this bill,” National Cannabis Industry Association Director of Government Relations Michael Correia told Marijuana Moment.
“While the chairman may oppose broader cannabis policy reform, he clearly recognizes the problems created by lack of access to banking services,” he said. “The SAFE Banking Act, which has already been passed by an overwhelming bipartisan majority of the House, addresses many of the chairman’s concerns, particularly public safety and transparency. We’re happy to discuss these items with the Senate Banking Committee in a markup, but every day that goes by without addressing this particular issue results in small businesses suffering and unnecessarily puts people’s lives at risk.”
Financial services industry trade associations also reacted to the news.
“We respect Chairman Crapo’s request for additional public input on the SAFE Banking Act, and we look forward to providing the Senate Banking Committee with the information it needs,” James Ballentine, the executive vice president of congressional relations for the American Bankers Association, said in a statement. “ABA, like many other stakeholders, has already provided the committee relevant information on several of the issues identified by the chairman including legacy cash, interstate commerce and ‘Operation Chokepoint.’ We continue to believe that the SAFE Banking Act responsibly addresses the current legal limbo over cannabis banking, and a strong bipartisan majority in the House shares that view. We urge the committee to gather this information in a timely manner so the Senate can follow the House’s lead and pass legislation that will help protect communities across the country from an increasing public safety threat.”
Ryan Donovan, chief advocacy officer for the Credit Union National Association, said that his group “appreciate[s]” Crapo sharing his concerns.
“America’s credit unions are eager to continue engaging with the chairman as he seeks a solution that enhances community safety through access to mainstream financial services,” he said.
Crapo is asking interested parties to send feedback on the new proposals to [email protected], though his office did not list a date by which responses are requested.
Read Crapo’s full statement on marijuana banking below:
Chairman Crapo Outlines Concerns with Cannabis Banking Legislation
Requests feedback on potential changes to address public health and safety
WASHINGTON – Senate Banking Committee Chairman Mike Crapo (R-Idaho) is inviting public feedback on ways to address public health and money laundering concerns with cannabis banking. Input is also requested on “Operation Choke Point,” an Obama-era initiative in which federal agencies devised and relied upon a list of politically disfavored merchant categories (e.g., firearm manufacturers, payday lenders, etc.) with the intent of “choking-off” these merchants’ access to payment systems and banking services.
“I remain firmly opposed to efforts to legalize marijuana on the federal level, and I am opposed to legalization in the State of Idaho,” said Chairman Crapo. “I also do not support the SAFE Banking Act that passed in the House of Representatives. I have significant concerns that the SAFE Banking Act does not address the high level potency of marijuana, marketing tactics to children, lack of research on marijuana’s effects, and the need to prevent bad actors and cartels from using the banks to disguise ill-gotten cash to launder money into the financial system. I welcome input from all interested parties on how to thoughtfully address these concerns.”
Currently, 33 states have some form of legal marijuana for a variety of uses. This has created challenges for businesses in those states and has resulted in increased pressure for depository and financial institutions to provide financial services to both state-sanctioned businesses and ancillary services providers that may provide services to state-sanctioned businesses. The ancillary service providers offer a variety of services to state-sanctioned businesses, such as legal services, plumbing services, fertilizers and other agricultural supplies, real estate, and leasing, among many others. As a result, Senators Jeff Merkley (D-Oregon) and Cory Gardner (R-Colorado) introduced S. 1200 on April 11, 2019. While marijuana would still be illegal at the federal level, this proposed legislation seeks to provide legal certainty for banks who wish to serve not only marijuana companies, but also the ancillary service providers, meaning that banks can accept cash from legally-operating state cannabis companies and related service providers without the fear of adverse actions being taken against them by federal financial regulators.
On July 23, 2019, the Senate Banking Committee held a hearing titled, “Challenges for Cannabis and Banking: Outside Perspectives.” At the hearing, Senator Crapo discussed his concerns with the public health and safety issues surrounding marijuana; legacy cash and money laundering; FinCEN guidance and rulemaking; interstate commerce and banking; and initiatives similar to “Operation Choke Point.”
Options for addressing these concerns include, but are not limited to, the following:
- Add public health and safety solutions as a requirement for banks to do business with legally-operating state cannabis companies. Options to consider include THC potency; clear and conspicuous disclosures on products; marketing; effects on minors, unborn children and pregnant women; and age restrictions, among other considerations.
- Prevent bad actors and cartels from using legacy cash and the financial system to disguise ill-gotten cash or launder money.
- Update 2014 FinCEN rulemaking and guidance regarding marijuana-related businesses, and ensure FinCEN has all of the necessary tools it needs to prosecute money launderers and promulgate rulemakings.
- Respect state rights in interstate commerce and banking for institutions who operate in multiple states with different state rules.
- Eliminate “Operation Choke Point” and preventing future “Operation Choke Point” Initiatives. Under fear of retribution, many banks have stopped providing financial services to members of lawful industries for no reason other than political pressure, which takes the guise of regulatory and enforcement scrutiny.
Public feedback is requested on the following issues that include potential options for addressing concerns and questions outlined below. Interested parties may submit proposals to Committee staff at [email protected]
Issue 1: Options for addressing public health and safety concerns.
There is a lack of federal research evaluating marijuana and its effects. The National Institute on Drug Abuse has found that marijuana use significantly impairs a user’s judgment, motor skills and reaction time. Other studies have found a direct relationship between blood THC concentration and impaired driving ability. Additionally, the Surgeon General released an advisory on Marijuana’s Damaging Effects on the Developing Brain, noting that THC binds to receptors in the brain, producing a euphoria and a variety of harmful effects, including intoxication, and memory and motor impairments. The Surgeon General also noted the harmful effects of THC use during pregnancy and on young developing brains. Surgeon General Adams also released an Advisory on e-cigarette use among youth, and the recent surge in the market, which he states is a cause for great concern.
The appropriate federal agencies shall conduct a national study on the effects of marijuana and publicly report on considerations related to public health and safety of cannabis, cannabis products and their delivery mechanisms, including as it pertains to the marketing and varying potency of cannabis and cannabis products, particularly, but not limited to, minors, pregnant women and effects on unborn children. The federal government agencies, within the study, should also make recommendations on the manufacturing and marketing practices of the cannabis industry to minimize their appeal to minors and harm to minors, pregnant women and unborn children.
The studies shall include the following:
a. The types and delivery mechanisms (e.g., smoking, vaping, edibles, drinking, etc.) for all cannabis and cannabis products currently available or under development in the marketplace;
b. The potency of the cannabis and cannabis products, available in their final form, and how the potency has changed over time, including how it impacts addiction;
c. How various potencies and serving sizes may impact individuals’ health and safety, and whether different potencies and serving sizes are harmful to individuals’ health and safety, including how human physiology affects impairment, particularly as it relates to minors and pregnant women;
d. How different types of products and delivery mechanisms have affected minors’ access to cannabis and cannabis products, and how it impacts purchasing decisions over an individual’s lifetime;
e. The degree to which different levels of potency, serving sizes or consumption impair individuals’ judgment or cognitive reasoning, and trends of the prevalence of individuals operating a vehicle or machinery under the influence of cannabis; and
f. The extent to which other jurisdictions with various levels of cannabis legalization have made determinations, as reflected in law or public policy, on the health and safety effects of cannabis or cannabis products, require disclosure of potency or serving sizes, and have restricted or otherwise limited the potency of cannabis cultivated, sold, or purchased in their respective jurisdictions.
Question: Are there any other additional health considerations, other than those explicitly stated in the outline, that should be considered, and which federal agencies are most appropriate to be involved in the aforementioned study?
Considerations for addressing health and safety concerns associated with financial institutions who provide financial services to cannabis-related legitimate businesses:
a. Each state must implement clear and conspicuous disclosure of THC potency of cannabis and cannabis products (on a percentage and milligram basis in final products) through a label on the final packaged products at the point of sale. Among the contents of any state labeling requirements should be proper warnings, contaminants, potency and serving sizes, and ingredients;
b. A potency threshold of 2 percent THC content on a percentage and milligram basis in the final product;
c. The 2 percent threshold will apply until each state legislature affirmatively determines the appropriate level of THC potency for cannabis and cannabis products (on a percentage and milligram basis in final products) that appropriately addresses the health and safety risks to its citizens;
d. Preventing distribution to anyone under the age of 21;
e. Preventing the banking of edibles that are in many kid-friendly forms like candies and gummies; and
f. Preventing the banking of high potency THC vape and e-cigarette products.
Question: Are there any other additional health considerations that should be attached to the safe harbor?
Issues 2, 3: Options for addressing legacy cash and money laundering.
FinCEN Rulemaking and Guidance: Amend the Act to direct FinCEN to promulgate a rulemaking within a specified period of time, after enactment of this Act, to address issues pertaining to the provision of financial services to the marijuana industry and ancillary businesses, including Suspicious Activity Reports (SARs) and dealing with legacy cash.
FinCEN will retain meaningful oversight authority of the activities between cannabis-related legitimate businesses (CRLBs) and their financial institutions. FinCEN will be required to promulgate rulemakings and update their guidance pertaining to Bank Secrecy Act (BSA) expectations for marijuana-related businesses to address the following:
a. Requiring thorough customer due diligence standards;
b. Thorough processes and procedures to ensure funds from cannabis-related businesses and service providers are not associated with illicit activities;
c. Clearly delineating the BSA obligations of financial institutions when engaging in business with cannabis-related businesses or individuals who engage with cannabis-related businesses, including for indirect relationships such as ancillary businesses;
d. Requiring the filing of SARs in a manner that preserves FinCEN’s ability to address illicit activity; and
e. Clarifying the treatment of hemp.
Additionally, Section 7 of S. 1200 should be amended to ensure that the Federal Financial Institutions Examination Council (FFIEC) must consult with FinCEN on its development of uniform guidance and examination procedures for depository institutions as they relate to CRLBs and service providers.
Suspicious Activity Reports: Amend Section 6 of the Act regarding FinCEN’s guidance to ensure the guidance does not impair the ability of FinCEN to deter illicit activity, consistent with the rulemaking described above.
Question: In such a rulemaking, what additional requirements are needed for financial services firms to ensure that bad actors are not accessing the financial system, the sources of cash entering the financial system are fully understood and validated, Suspicious Activity Reports continue to be appropriately filed, and expectations for indirect relationships are clear commensurate with their risk?
Issue 4: Options for addressing interstate commerce and banking.
Interstate Commerce: Amend the Act to clarify that financial institutions must comply with all applicable laws related to cannabis and cannabis products in each respective state in which they operate, and ensure that nothing in the Act would facilitate interstate commerce of cannabis.
Additionally, given the tension between the state legality of cannabis and federal illegality, it should be made clear that the federal banking regulators should consult with state regulators ahead of any implementation, or give some notice.
Question: Does the bill, as drafted, facilitate interstate commerce? Should there be an explicit statement in the bill clarifying that the bill does not permit interstate commerce of marijuana?
Issue 5: Options for addressing hemp provisions and “Operation Choke Point.”
Add the following new provisions:
a. House hemp provision; and
b. The Financial Institution Customer Protection Act language included in the House-passed version of H.R. 1595, but with the following additional amendments: (1) change the term “may” to “shall”; and amend to reflect and add the following:
(1)An appropriate Federal banking agency shall not formally or informally request or order a depository institution to terminate a specific account or group of customer accounts or to otherwise restrict or discourage a depository institution from entering into or maintaining a banking relationship with a specific customer or group of customers unless –
(A) the institution is engaging in unsafe or unsound practices or violating a rule, law, regulation or other condition imposed in writing due to its relationship with the specific customer.
(B) an appropriate Federal banking agency shall not take any action under (A) with respect to a group or category of customers and shall only take action under (A) after it has made a determination in writing with respect to specific customer that the conditions set forth under (A) are satisfied.
(C) for purposes of (A), reputational risk shall constitute neither an unsafe or unsound practice nor a violation of rule, law, regulation or other condition imposed in writing.
Under (b) Notice Requirement, amend (2) to reflect the following: (2) Justification Requirement – A justification described under paragraph 1(A) should only be based on if the institution engaged in an unsafe or unsound practice or violated a rule, law, regulation or other condition imposed in writing.
Under (c) Customer Notice, add the following: (2) In the written notice and determination, the depository institution shall also provide the determination and justification for why the termination is needed, including any specific laws or regulations, or unsafe and unsound practices, the depository institution believes are being violated by the customer or group of customers.
Question: Do the proposed amendments to the Financial Institution Customer Protection Act, as passed in the House, adequately curb potential future choke point scenarios?
Additional amendments for consideration:
Studies: Strike Sections 8, 9 and 10 directing studies. Section 8 of S. 1200 requires the Federal banking regulators to issue an annual report to congress on diversity and inclusion; Section 9 of S. 1200 requires the Government Accountability Office (GAO) to conduct a study on diversity and inclusion; and Section 10 requires the GAO to conduct a study on the effectiveness of reports on suspicious transactions filed.
Preserving Regulatory Actions: Amend the Act to clarify that federal banking regulators can still take certain actions, including enforcement actions, against depository institutions, such as those actions related to poor underwriting and engaging in unsafe or unsound practices.
This story was updated to include reaction from advocates.
Number Of Banks Working With Marijuana Industry Continues To Drop Amid COVID, Federal Report Shows
For the third fiscal quarter in a row, the number of financial institutions reporting that they service state-legal marijuana businesses has declined, new federal data shows.
As of September 30, there were 677 banks and credit unions that filed reports saying they were working with cannabis clients. That’s down from 695 in the last fiscal quarter ending in June and 711 for the quarter preceding that, according to a report published by the Financial Crimes Enforcement Network (FinCEN) late last week.
But the reasoning behind the trend appears to be multifaceted and not necessarily a reflection of an increasing unwillingness for banks to take on the marijuana industry.
One of the most significant factors is related to a change in Suspicious Activity Report (SAR) requirements for hemp firms. FinCEN, which is part of the Treasury Department, stopped including hemp-only businesses in their quarterly reports since the crop was federally legalized under the 2018 Farm Bill—which accounts for at least part of the dip as compared to prior figures that counted hemp-focused accounts.
The federal agency also said in its latest report that the “COVID-19 pandemic may be adding to this apparent decline for two reasons.”
Some marijuana-related businesses “have likely been closed during this time period due to government imposed Phase 1 quarantine restrictions,” FinCEN said, adding that the pandemic may have also led to staffing shortages among depository institutions, leaving fewer resources to process SARs.
That said, most states allowed cannabis companies to continue to operate as essential services during the pandemic, and states like Illinois continue to see record-breaking sales month-over-month.
Under FinCEN guidance issued by the Obama administration in 2014 that remains in effect, banks and credit unions are required to submit SARs if they elect to provide financial services to marijuana businesses. In the years since, the number of depositories taking on marijuana clients has gradually increased—until this more recent downward trend.
“Short-term declines in the number of depository institutions actively providing banking services to marijuana-related businesses (MRBs) may be explained by filers exceeding the 90 day follow-on Suspicious Activity Report (SAR) filing requirement,” FinCEN said. “Several filers take 180 days or more to file a continuing activity report. After 90 days, a depository institution is no longer counted as providing banking services until a new guidance-related SAR is received.”
As of the end of last quarter, there were 502 banks and 175 credit unions reporting active marijuana clients.
But while fewer banks and credit unions seem to be working with the cannabis market, that could change dramatically if congressional legislation to protect those institutions from being penalized by federal regulators is approved. And the chances of that happening are improving.
The House has passed the Secure and Fair Enforcement (SAFE) Banking Act three times over the past year—first as a standalone bill and then twice as part of COVID-19 relief legislation. Meanwhile, even if Republicans maintain control of the Senate—which has under its current leadership refused to take up cannabis reform—the would-be GOP chair of the Banking Committee recently indicated his panel would advance the proposal.
Senate Minority Leader Chuck Schumer (D-NY) also filed his own COVID-19 bill last month that contained the marijuana banking language, but that has not advanced.
When the House approved its coronavirus legislation with the SAFE Banking Act attached, it attracted controversy, with multiple Republican lawmakers and White House officials criticizing its inclusion and arguing that it is not germane to the issue at hand.
Senate Majority Leader Mitch McConnell (R-KY) in particular has been a vocal opponent of the measure, though he’s largely focused his criticism on certain provisions of the SAFE Banking Act that require industry diversity reporting.
Democratic leaders in both chambers, however, have made clear that they’re willing to keep up the fight, and the House even highlighted the diversity component in a summary of its legislation. House Speaker Nancy Pelosi (D-CA) said in July that she agrees that the banking measure is an appropriate component of the bill.
Also in July, bipartisan treasurers from 15 states and one territory sent a letter to congressional leadership, urging the inclusion of the SAFE Banking Act in any COVID-19 legislation that’s sent to the president’s desk. Following GOP attacks on the House proposal, a group of Democratic state treasurers renewed that call.
Virginia Will Be A Leader On Marijuana Legalization In The South, Governor Says
Virginia Gov. Ralph Northam (D) on Friday said the state will lead the way on marijuana legalization in the South, pledging to move forward with a cannabis measure in 2021 that he wants to serve as a model for the region.
“There are 15 or so other states that have moved toward legalizing marijuana,” he said Friday on WAMU radio’s The Kojo Nnamdi Show. “Virginia will be the first in the South, but we tend to be leaders, and now that’s what we’re going to do this year. And we’re going to do it the right way.”
Northam campaigned on cannabis decriminalization but had long declined to take a position on broader adult-use legalization. That changed last week, when he called on state lawmakers to pursue legalization in the coming legislative session.
“Marijuana laws have been based originally in discrimination, and undoing those harms means thins like social equity licenses, access to capital, community reinvestment and sealing or expunging people’s prior records,” he said in coming out for the policy change.
Listen to Northam’s new marijuana comments, around 8:10 into the audio below:
In Friday’s interview, Northam revealed more of his thinking on legalization, expanding on his ideas for social equity and desire to keep cannabis away from minors. “We want equity to be part of this,” he said, “and I as a pediatrician certainly want to protect our youth.”
Northam said he’s still undecided on whether to allow residents to grow marijuana at home.
“That’s something we’re looking into. We’re looking at what other states have done” he said. “The bottom line is, if we’re going to do that, we want it to be done safely.”
“Now, you could make the argument or the point that we’re able to brew beer in our home, why not grow marijuana?” the governor continued. “I’ve heard that. I understand that. But it’s something that, again, we want to do this the right way. There’s going to be a lot of people at the table to discuss how we move forward. And that’s certainly a part of the discussion that we will undertake as we move forward with this.”
.@GovernorVA supports legalizing marijuana in Virginia. But, he says, “It’s going to be done with equity.”
He says people of color use marijuana at the same rate as non-people of color, but are incarcerated at a much higher rate.https://t.co/JcomypueGx
— The Kojo Nnamdi Show (@kojoshow) November 20, 2020
Nearly every state where cannabis is legal for adults allows residents to grow marijuana for personal use, although recent legalization proposals in both New Jersey and Rhode Island would prohibit home cultivation, at least initially.
Northam already successfully led a measure to decriminalize marijuana possession across the finish line this year. The new law, which took effect in July, makes possession of up to an ounce of cannabis punishable by a $25 fine with no threat of jail time.
He also signed two expansions of that policy that were passed in a special session.
One stipulates that “no law-enforcement officer may lawfully stop, search, or seize any person, place, or thing solely on the basis of the odor of marijuana, and no evidence discovered or obtained as a result of such unlawful search or seizure shall be admissible in any trial, hearing, or other proceeding.”
The other will allow people issued summonses for cannabis offenses under the state’s new decriminalization law to prepay their civil penalty rather than having show up in court.
Full legalization, however, could be a bigger fight. Northam acknowledged earlier this week that the policy change is “not going to happen overnight.”
A report published Monday by the Joint Legislative Audit and Review Commission (JLARC), however, provides plenty of fodder for Northam. While the panel did not make a formal recommendation on whether lawmakers should legalize, it found the change would reduce arrests, raise tax revenue and help repair past drug war damages.
Legalizing marijuana would lead to an 84 percent reduction in cannabis related-arrests, the report said, while also boosting the economy: A state-legal industry would create upwards of 11,000 jobs by year five, JLARC said, and could bring in between about $150 million and $300 million in annual tax revenue if taxed at a rate of 25 to 30 percent.
Top lawmakers in the state, meanwhile, signaled earlier this month that legalization could have enough votes in the Legislature to pass if a bill is introduced in 2021. House Majority Leader Charniele Herring (D) said there is a “good chance” it could happen, and Senate Majority Leader Dick Saslaw (D) put the odds at “slightly better than 50–50.”
Beyond the JLARC study, several executive agencies—including the Secretaries of Agriculture and Forestry, Finance, Health and Human Resources, and Public Safety and Homeland Security—have formed a working group to study the potential implications of legalization, an action required under the new decriminalization law.
A report from the group is due by the end of this month.
Photo courtesy of Ralph Northam
South Dakota Police File Lawsuit To Overturn Voter-Passed Marijuana Measure
Two law enforcement officials in South Dakota are asking a judge to throw out a marijuana legalization measure that state voters approved this month, filing a court challenge that appears to have the backing of Gov. Kristi Noem (R) and is being paid for at least partially with state funds.
Pennington County Sheriff Kevin Thom and state Highway Patrol Superintendent Col. Rick Miller sued on Friday. The lawsuit seeks to declare all ballots cast for or against Amendment A null and void and invalidate the changes it makes to the state Constitution.
“I’ve dedicated my life to defending and upholding the rule of law,” Thom said in a press release. “The South Dakota Constitution is the foundation for our government and any attempt to modify it should not be taken lightly. I respect the voice of the voters in South Dakota, however in this case I believe the process was flawed and done improperly, due to no fault of the voters.”
The challenge, filed in state’s Sixth Judicial Circuit Court, attempts to overturn Amendment A, which won just over 54 percent of the vote on Election Day, on what some might see as a technicality. It claims that because the marijuana legalization question, a constitutional amendment, covers multiple issues—including the legalization and regulation of marijuana for adults 21 and older, as well as the regulation of medical cannabis and hemp—it violates a 2018 requirement that “no proposed amendment may embrace more than one subject.”
In all, the challenge claims the constitutional amendment contains at least five distinct subjects involving the legalization and regulation of various forms of cannabis. Rather than package those subjects into a single proposed amendment, the challenge argues, organizers needed to split them into separate questions on the ballot.
“A major purpose of the one-subject rule is to avoid requiring voters to accept part of a proposed amendment that they opposed in order to obtain a change in the Constitution that they support,” the complaint says, “resulting in votes that do not accurately reflect the electorate’s approval of the proposed amendment.”
A challenge along similar lines removed a medical marijuana legalization measure from Nebraska’s ballot in September, when the Nebraska Supreme Court ruled that the proposed constitutional amendment violated that state’s single-issue rule.
South Dakota has had the single-subject requirement in place since voters passed a 2018 constitutional amendment on the issue.
“Our constitutional amendment procedure is very straightforward,” said Miller of the South Dakota Highway Patrol. “In this case, the group bringing Amendment A unconstitutionally abused the initiative process. We’re confident that the courts will safeguard the South Dakota Constitution and the rule of law.”
The law enforcement officials’ complaint also argues that the legalization measure was not properly constitutionally ratified. “The proponents of Amendment A failed to follow that basic textual requirement,” their press release says.
The group behind the South Dakota legalization measure said over the weekend that its legal team is reviewing the lawsuit and developing a strategy that it will share soon.
“We are prepared to defend Amendment A against this lawsuit,” South Dakotans for Better Marijuana Laws said in a statement. “Our opponents should accept defeat instead of trying to overturn the will of the people. Amendment A was carefully drafted, fully vetted, and approved by a strong majority of South Dakota voters this year.”
State money is funding an unspecified portion of the lawsuit, the Rapid City Journal reported on Friday, citing a spokesperson for Noem. “The governor approved this because she took an oath to support and defend the Constitution. This is part of her duty as governor,” Ian Fury told the paper.
Private lawyers are representing the officials.
In the days after the election, the governor said she “was personally opposed to these measures and firmly believe they’re the wrong choice for South Dakota’s communities.”
“We need to be finding ways to strengthen our families,” Noem said, “and I think we’re taking a step backward in that effort.”
In a statement to the Rapid City Journal on Friday, she said she’s eager to see the challenge go to court.
“In South Dakota we respect our Constitution,” Noem said. “I look forward to the court addressing the serious constitutional concerns laid out in this lawsuit.”
The case doesn’t seek to challenge the separate statutory medical cannabis ballot measure that voters also approved this month.
A handful of other legal challenges are in the works across the U.S. after voters approved every major marijuana and drug reform measure on state ballots on Election Day.
In Mississippi, where voters legalized marijuana for medical use, the mayor of the city of Madison asked the state Supreme Court to invalidate the measure on procedural grounds, arguing it was improperly put before voters. But unlike in South Dakota, Mississippi state officials are siding with voters.
“Even if their interpretative argument is correct, petitioners’ action is woefully untimely,” says a filing made earlier this month by the secretary of state and attorney general, who are defending the law in court. “They could have asserted their so-called ‘procedural’ challenge years ago.”
State officials said the high court “should deny petitioners’ requested relief and dismiss their petition.”
In Montana, meanwhile, the group Wrong for Montana is suing to overturn a cannabis legalization measure passed by 56.9 percent of state voters. In that suit, plaintiffs argue the measure unconstitutionally involved the appropriation of state funds.
Separately, some Montana lawmakers had planned to undo the legalization law through a bill in the state legislature, but the leader of that effort, Rep. Derek Skees (R) backed away from that plan after noting the measure’s wide margin of victory.
“The only branch of government in this state dumb enough to overturn citizens’ initiative is the [state] Supreme Court, which has done it repeatedly,” he said.
Read the full lawsuit against South Dakota’s marijuana legalization law below: