A congressional committee held a hearing on Wednesday to discuss opportunities for small businesses in the marijuana industry and the unique financial challenges those companies face under federal cannabis prohibition.
The House Small Business Committee convened for a meeting titled “Unlocked Potential? Small Businesses in the Cannabis Industry.” It came as pressure mounts on Congress to free up financial services for state-legal marijuana businesses in order to increase transparency, mitigate public safety risks and protect banks from being penalized by federal regulators.
One area that the panel focused on was access to resources provided by the federal Small Business Administration (SBA), which includes low-interest loans for small businesses and guidance for entrepreneurs.
Watch the hearing below:
“Entrepreneurship and small business owners are essential to America’s ingenuity,” the National Cannabis Industry Association (NCIA) said in testimony submitted to the committee. “These businesses enable economic development, provide high-quality jobs, and spur significant product innovation.”
“Addressing the challenges created by conflicting federal and state laws will allow state-compliant entities to operate in a fully regulated environment and encourage the expansion of regulated markets, increase consumer safety standards, reduce availability to minors and combat illegal trafficking throughout the country,” NCIA said.
In a memo detailing the issue in advance of the hearing, the committee said that the “current marijuana legalization movement presents new opportunities for entrepreneurship and business start-up in the cannabis industry.”
Not only are there opportunities for businesses that directly deal with marijuana such as cultivators and retailers but also for ancillary businesses such as “payment processors, accountants, insurance agents, agriculture-technology companies, technology companies developing apps, and countless more.”
Because the cannabis industry is in its formative stage, lawmakers have the chance to create policies designed to promote equity in the marketplace and ensure that communities disproportionately impacted by prohibition are given the tools to participate in the industry, the memo explains.
Consumer spending in the cannabis industry is expected to hit $23 billion by 2022. Today, the Committee will question experts on how we can help ensure that small businesses can fully participate in this emerging legal industry. pic.twitter.com/bAybUfCgiB
— House Committee on Small Business (@HouseSmallBiz) June 19, 2019
Access to capital is a primary concern that was addressed at the hearing. The panel said that revising SBA policy—which currently prohibits businesses that directly and indirectly work with marijuana from obtaining certain loans—would be a step in the right direction.
SBA issued a revised policy on its loan programs earlier this year, clarifying that while direct and indirect marijuana businesses are not eligible, hemp businesses can qualify for the loans since the crop was federally legalized under the 2018 Farm Bill. The new policy stipulates that “a business that grows, produces, processes, distributes or sells products made from hemp… is eligible.” That policy went into effect on April 1.
“SBA provides vital tools to the development and support of minority businesses and communities,” the Minority Cannabis Business Association’s Shanita Penny testified. “We believe access to SBA loans and services, with Congressional oversight, would help decrease the equity gap in the cannabis industry and keep cannabis revenues in the communities suffering the greatest economic and social harms of the War on Drugs.”
“SBA access is also critical to business owners dealing with a newly, regulated, constantly evolving industry. As more mature state programs course correct and improve regulations, small businesses are often left scrambling to remain compliant when packaging or labeling regulations change, businesses must either find new sources of capital to cover the cost of the changes or face significant fines for violations.”
The committee added in its memo that small marijuana businesses need assistance to “compete against well-financed conglomerates and other larger companies that have resources dedicated to locating and utilizing loopholes in laws.” And cannabis firms often incur “operating and pricing challenges” in addition to the lack of access to capital.
“In order to provide for inclusiveness within the legal industry, federal policy should strive to reduce roadblocks for qualified entrepreneurs in order to encourage participation from formerly disenfranchised populations,” NORML said in written testimony. “Particularly, in consideration for enterprising individuals who would benefit most from the critical resources that [SBA] provides for job creators around the country.”
Another issue that came up, which doesn’t get as much attention as banking issues in the industry, is the “challenge small business owners face is recruiting and retaining workers because the talent pool is unable to keep up.”
The committee noted that training and education for workers can be costly for small marijuana businesses, especially because it’s not traditionally a skillset that’s taught in universities or vocational schools.
“As increasingly more states legalize cannabis, it will be important for Congress and the agencies it oversees to work cooperatively to ease legislative and regulatory burdens on small businesses in states with legal cannabis,” the committee memo notes. “At the same time, the entrepreneurship opportunity the legitimate cannabis industry presents for entrepreneurs from traditionally underserved communities, including minorities and veterans, must be recognized.”
“However, small businesses in states with legal cannabis are currently struggling to fund and operate their businesses, due in part to conflicting federal and state guidance. Accordingly, this hearing will offer Members an opportunity to hear about the challenges faced by ‘ancillary’ or ‘indirect’ cannabis businesses, and how Congress can help remedy those challenges. Furthermore, the hearing will enable Members to explore ways to ensure a newly-legalized cannabis industry reflects our nation’s diversity, and is able to fairly compete with foreign and large companies.”
Other witnesses who appeared before the committee include Veterans Cannabis Coalition’s Eric Goepel and Dana Chaves, who is an executive at First Federal Bank and also chairs NCIA’s Banking Access Committee.
One of the most surprising pieces of testimony came from a representative of the conservative think tank the Heritage Foundation. Paul Larkin, a senior legal research fellow with the organization who otherwise raised concerns about cannabis reform during the hearing, said that “if Congress were to legalize recreational marijuana use, it should require that states own and operate distribution facilities.” The comment raised eyebrows, leaving some wondering why a representative of a right-leaning institution like the Heritage Foundation would essentially float socializing the marijuana market.
Though there was not a specific piece of legislation that the committee discussed, a source told Marijuana Moment last month that there are plans to introduce a bill this summer to tackle the small business issues at hand. Committee Chair Rep. Nydia Velazquez (D-NY) signaled at the hearing that she’d lead that effort.
“Despite growing economic opportunities around legal cannabis, factors like federal law enforcement, conflicting rules among the states and our current banking regulations are hindering the ability for entrepreneurs and small business to fully engage in this new industry,” the congresswoman said. “I am currently working on legislation that will work to open some of the agency’s programs to businesses in areas where the industry is legal.”
ICYMI: In her opening statement at today’s hearing, Chairwoman @NydiaVelazquez spoke about the plight of small cannabis firms and the need for dialogue on how we can better support these entrepreneurs. pic.twitter.com/u1G1pIqizA
— House Committee on Small Business (@HouseSmallBiz) June 19, 2019
“The trend of legalization at the state level is not going to slow down, which will lead to more jobs in many sectors of our economy and we need to see what role the federal government can play,” she said.
Rep. Steve Chabot (R-OH), the panel’s ranking minority member, repeatedly pressed witnesses on whether they were aware of various harms of marijuana as shown by certain studies, though he seemed to acknowledge that pro-reform attitudes are winning the day.
“All the stuff that we’ve talked about here is inconsistent with federal law. It’s illegal if the law was enforced at the federal level,” he said. “And that’s something that I think probably the Congress ought to take it up and make a decision to let people know what they can do… I think we owe that to the public. And I don’t know which way the vote would go.”
I hear from farmers in #NY19 about the need for new industries & opportunities to counter the down farm economy. In @HouseSmallBiz, I asked what steps the FDA should take to make it easier for dairy farmers to work in the hemp industry & spur economic growth in rural communities. pic.twitter.com/Ug87sMY8TI
— Congressman Antonio Delgado (@repdelgado) June 19, 2019
“I’ve been around a long time. It seems like the older generation more feel that [marijuana should remain illegal],” Chabot said. “The younger generation seems to be just the opposite. And a lot of things have changed in the country in recent years, and that seems to be one of them.”
Florida Agriculture Commissioner Nicole Fried also submitted written testimony for the hearing. She argued that “America’s emerging cannabis industry has the potential to lift up every community from coast to coast” and that “now is the time for Congress and our federal government to empower small businesses and embrace the economic revolution of cannabis that puts American jobs, families, and livelihoods first.”
Today, I shared this statement with Chair @NydiaVelazquez & Ranking Member @RepSteveChabot for @HouseSmallBiz hearing on cannabis industry.#Cannabis can create billions in economic potential and hundreds of thousands of jobs — that’s why we need Congress & federal govt onboard. pic.twitter.com/qeNTT2KCVq
— Commissioner Nikki Fried (@NikkiFriedFL) June 19, 2019
This congressional hearing is one of two focusing on marijuana policy that is scheduled for this week, with another concerning veterans and cannabis set for Thursday.
This story was updated to include quotes from the hearing and written testimony.
Santa Cruz City Council Approves Psychedelics Decriminalization Measure
The Santa Cruz, California City Council unanimously voted in favor of a resolution on Tuesday that would effectively decriminalize a wide range of psychedelics by making them among the city’s lowest law enforcement priorities.
The measure—which was originally sponsored by then-Vice Mayor Justin Cummings (D), who’s since become mayor—says the city shouldn’t expend “resources in the investigation and arrest of persons twenty-one (21) years of age and older solely for the personal use and personal possession of Entheogenic Plants and Fungi” such as psilocybin, ayahuasca and ibogaine.
It further stipulates that possession and use of psychedelics by adults “should be considered among the lowest law enforcement priorities for the City of Santa Cruz.”
This is the latest in a series of local policy victories for the psychedelics reform movement, which kicked off with a successful ballot measure vote in Denver to decriminalize psilocybin mushrooms last May. Oakland’s City Council then unanimously approved a measure to make a broad range of plant- and fungi-derived psychedelics among the city’s lowest law enforcement priorities.
Now activists across the country are hoping to replicate that resolution, with organizers in roughly 100 cities aiming to decriminalize certain psychedelic substances through ballot initiatives and legislative action at the local level.
In November, Santa Cruz’s City Council heard testimony from the group behind the resolution, Decriminalize Santa Cruz. It was then referred to the Public Safety Committee and was amended prior to returning to the full body for a final vote.
Councilmembers revised the original measure in order to “to recognize the need for harm reduction and education for youth and families about drug prevention.” A provision was also inserted to clarify that “the sale, use and cultivation of Entheogenic Plants and Fungi to and by minors should be considered an exception that should require appropriate investigation by the Santa Cruz City Police Department.”
The word “cultivation” was also removed from provisions specifying the measure’s scope. But before the full Council vote on Tuesday, several advocates used the public comment portion of the meeting to urge that it be added back in, and members adopted that request before approving the final resolution.
“With possession and use being inserted without cultivation, that actually encourages the black market because there’s nowhere else to go,” Cummings, the mayor, said. “If people are are cultivating at themselves they know exactly what they’re producing.”
Activists celebrated their city becoming the third in the U.S. in less than a year to decriminalize certain psychedelic substances.
“These eight months we’ve been working on the resolution, I’ve met so many people whose lives were saved by entheogenic plants and fungi,” Julian Hodge, a founder of Decriminalize Santa Cruz and a member of Students for Sensible Drug Policy, told Marijuana Moment. “The Santa Cruz City Council took a great step to help those people today. I am incredibly proud to be part of this movement, and can’t wait to see the change we continue to make in the future.”
Another provision of the measure instructs the city’s state and federal lobbyists to “work in support of decriminalizing all entheogenic psychoactive plants, and plant and fungi-based compounds listed in the Federal Controlled Substances Act.”
Beyond Decriminalize Santa Cruz, a newly formed group called Project New Day also advocated for the reform move. The organization, which is focused on promoting research into psychedelics for the treatment of addiction and other mental health conditions, sent a press release on Tuesday highlighting comments from a military veteran who overcame addiction with the help of medically supervised psychedelics treatment.
“Psychedelic-assisted therapy saved my life,” Dylan Jouras said. “It’s important that people know there is an effective way to get better from addiction and deep mental health issues.”
While the local Santa Cruz resolution wouldn’t allow legal sales of psychedelics, another group of advocates is currently collecting signatures toward placing a broad statewide psilocybin legalization initiative before California voters on the November ballot.
In Oregon, organizers are hoping to put a proposal before voters that would legalize psilocybin for therapeutic use. Separately, a campaign in that state is pushing a measure to decriminalize possession of all drugs with a focus on funding substance misuse treatment.
Democratic presidential candidate Andrew Yang said at an Iowa campaign stop last week that he wants to legalize psilocybin for military veterans.
New Mexico Lawmakers Approve Marijuana Legalization Bill
A New Mexico Senate committee approved a bill on Tuesday that would legalize marijuana for adult use.
With a little more than three weeks left in the state’s short 2020 legislative session, lawmakers are making clear their intent to advance the legalization proposal in a timely fashion.
The bill, which is supported by Gov. Michelle Lujan Grisham (D), cleared the Senate Public Affairs Committee in a 4-3 vote.
Sen. Jacob Candelaria (D) led the introduction of the bill before the committee, testifying that he believes “2020 is the year New Mexico becomes the third state to enact legalization of cannabis through legislative action,” following Vermont and Illinois.
“We know that New Mexicans across the state, from rural to urban centers, are with us on this issue.”
“Bringing an underground market aboveground takes a lot of deliberation, statewide input from community members and stakeholders, ingenuity and learning from other states’ experiences,” the senator, who is himself a medical cannabis patient, said. “The criminalization of cannabis disproportionately harms and criminalizes young people and people of color, sponsors violence and corruption by those who currently exclusively trade in cannabis in the black market. The current situation, our status quo that relies on a black market outside of the medical program, does nothing to curb youth access to cannabis.”
The governor included legalization in her formal 2020 legislative agenda and discussed the importance of establishing a well-regulated and equitable cannabis market in her State of the State address this month.
✅ SB 115, legalizing recreational adult-use cannabis, successfully passes out of its first committee! Recreational cannabis will be the next frontier of our economic expansion, creating 11,000 jobs across New Mexico & true economic potential for every part of the state. #SB115 pic.twitter.com/jgLnRX8UDY
— Michelle Lujan Grisham (@GovMLG) January 29, 2020
The day after Lujan Grisham’s agenda was released, lawmakers filed the legalization bill, which would allow adults 21 and older to possess and purchase marijuana from licensed retailers. The legislation also contains social justice provisions such as automatic expungements for prior cannabis possession convictions.
The proposal would not allow home cultivation; however, it does decriminalize the cultivation of up to three plants and six seedlings, making the offense punishable by a $50 fine without the treat of jail time.
Additionally, the bill would eliminate the gross receipts tax for medical cannabis sales, mandate that recreational dispensaries service registered patients and create a subsidy program for low-income patients to access marijuana.
Recreational cannabis sales would be taxed at nine percent, with revenue going toward that subsidy program in addition to a “cannabis industry equitable opportunity investment fund” to support entrepreneurs from communities most impacted by the drug war, a “community grants reinvestment fund” and a workplace training program, among other programs.
— NM Senate Democrats (@NMSenateDems) January 29, 2020
According to a fiscal analysis, the state stands to bring in nearly $6.2 million in recreational cannabis revenue in Fiscal Year 2021. By FY20204, that amounts would rise to nearly $34 million. Municipalities and counties would rake in additional revenues.
“Legalizing and regulating will bring one of the nation’s largest cash crops under the rule of law, generating an estimated between 11,000 and 13,000 jobs for New Mexicans in every corner of the state,” Candelaria said.
The legislation must still pass in two other panels—Judiciary and Finance—before it gets a full vote on the Senate floor.
This latest development at the committee-level is the product of months of work from legislators and the governor’s administration. Last summer, Lujan Grisham formed a working group tasked with reaching out to community members and stakeholders, studying various components of cannabis regulation and submitting recommendations ahead of the current session.
The final report, which was released in October, laid out a number of proposed rules and restrictions for a legal marijuana market.
Earlier last year, the New Mexico House of Representatives approved a bill to legalize marijuana but it later died in the Senate. Lawmakers did send Lujan Grisham a more limited bill to simply decriminalize cannabis possession, which she signed.
While it’s possible that the current committee-passed legislation will be amended as it makes its way to a full Senate vote, or that companion legislation could be changed in the House, recent polling shows that New Mexico residents are widely in favor of the general policy change. Three-out-of-four residents who participated in a state-funded survey that was released last month said they back legalization.
If all goes according to the governor’s plan, a final legalization bill will be delivered to her desk by the end of the session—and upon her signature, New Mexico would likely become the 12th state to legalize recreational marijuana.
That said, lawmakers in states across the U.S. are eyeing cannabis reform this year, and a marijuana legalization bill advanced in a New Hampshire House committee earlier on Tuesday.
Photo courtesy of Philip Steffan.
New Hampshire Lawmakers Approve Marijuana Legalization Bill
A New Hampshire House committee approved a bill on Tuesday that would legalize marijuana for adult use in the state.
While the legislation doesn’t provide for retail sales, it would allow individuals 21 and older to possess and gift up to three-fourths an ounce of cannabis and grow up to six plants. The model would be similar to neighboring Vermont’s non-commercial cannabis system.
The Criminal Justice and Public Safety Committee advanced the bill in a 13-7 vote.
“I think that the legalization of cannabis is more popular than the legislature itself or the governor or any other political entity in the state of New Hampshire,” Chairman Renny Cushing (D) said prior to the vote. “This is something that the people of the state of New Hampshire want. They don’t want to be treated like they’re criminals if they have a plant.”
Watch New Hampshire lawmakers discuss the marijuana legalization bill below:
This vote comes a week after the panel held a hearing on the proposal, with advocates and stakeholders testifying in favor of the reform move.
“Like most Granite Staters, this committee understands that it’s time for New Hampshire to stop prohibiting cannabis,” Matt Simon, New England political director for the Marijuana Policy Project, said in a press release. “Adults in the ‘Live Free or Die’ state should not be punished for their choice to use a substance that is objectively less harmful than alcohol.”
“Now that New Hampshire is literally surrounded by jurisdictions where cannabis is legal for adults, our current policies can no longer be justified in any way,” he said. “It’s time for the House, Senate and Gov. Chris Sununu to work together and move cannabis policies into the 21st century.”
A floor vote by the full House of Representatives is expected on February 6.
Tax-and-regulate marijuana legislation has advanced in the legislature in prior sessions, but it never arrived on the governor’s desk.
Even if it did make it that far, however, it’s unclear if Sununu, a Republican, would sign it. He’s voiced opposition to commercial legalization, and he vetoed a bill last year that would’ve allowed medical cannabis patients to cultivate their own marijuana, raising questions about whether he’d be willing to support this latest measure extending that right to all adults over 21.
In any case, the New Hampshire development comes amid a flurry of legislative activity around cannabis in the Northeast.
New York Gov. Andrew Cuomo (D) included legalization in his budget last week, as did Rhode Island’s governor, who pitched a state-run cannabis model in her plan. In New Jersey, the legislature approved a referendum to put the question of recreational legalization before voters during the November election. Top lawmakers in Connecticut are also confident that marijuana reform will advance this year. In Vermont, advocates are hopeful that lawmakers will add a legal sales component to the state’s current noncommercial cannabis law.
Photo courtesy of Philip Steffan.