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.
Marijuana Legalization Opponents Ask Courts To Overturn Voters’ Will In Several States
Unable to sway public opinion and persuade voters to reject marijuana legalization on Election Day, prohibitionists have taken a different new in their efforts to block state-level reform: litigation.
In three states, there are lawsuits pending that seek to overturn voter-approved legalization initiatives. And in one state, cannabis opponents succeeded this year in preventing voters from even having a chance to decide on a reform measure.
While every single drug policy reform initiative that made the ballot passed in red and blue states alike this month, prohibitionists increasingly seem to be giving up the public messaging fight to change voters’ minds and are instead resorting to the courts, challenging reform measures on largely technical matters.
Those legal fights are ongoing in Mississippi, Montana and South Dakota, all of which ultimately legalized cannabis is some form on Election Day.
The Mississippi Supreme Court recently set deadlines for legal filings in a case from the city of Madison challenging the medical cannabis initiative that overwhelmingly passed with 73 percent of the vote. The suit was filed days before the election, with the mayor not weighing in on the merits of the measure but contending that its placement on the ballot was unconstitutional due to statutory signature gathering requirements.
The secretary of state and attorney general condemned the action as a “woefully untimely” lawsuit. The Supreme Court said the filers have until December 7 to submit written arguments and the secretary of state has until December 28 to respond.
Over in Montana, opponents of a voter-approved initiative to legalize cannabis for adult use tried to get the state Supreme Court to invalidate the proposal ahead of the vote, but the justices rejected that request, arguing that they failed to establish the urgency needed to skip the lower court adjudication process. They didn’t rule on the merits, however.
The plaintiffs are now pursuing action in a lower court, arguing that the statutory proposal unlawfully appropriates funds, violating a portion of the state Constitution that prohibits such allocations from being included in a citizen initiative.
In South Dakota, Pennington County Sheriff Kevin Thom and state Highway Patrol Superintendent Col. Rick Miller filed a lawsuit in the state’s Sixth Judicial Circuit Court last week, claiming that the proposal to legalize marijuana that passed with 54 percent of the vote should be invalidated. The suit, which is partly paid for with state funds, says the constitutional amendment violates a 2018 requirement that “no proposed amendment may embrace more than one subject.”
In September, reform opponents successfully bumped an initiative to legalize medical cannabis off of Nebraska’s ballot on what essentially amounts to a technicality.
While the campaign collected enough signatures to qualify the measure, the state Supreme Court shut it down following a legal challenge. It determined that the measure violated the state’s single-subject rule, much to the disappointment of advocates. But activists have already started petitioning to get a simplified version of proposal on the state’s 2022 ballot.
Arizona activists, who succeeded in getting a legalization measure approved on Election Day, had a different experience following a legal challenge in the summer. Opponents there filed suit arguing that the 100-word summary of the initiative misled voters, but that argument did not hold up in court.
Legalization opponents point out that with voter support for marijuana reform increasing, prohibitionists are now left with few options to stop popular reforms.
NORML Deputy Director Paul Armentano said in a blog post that the opposition lawsuits are “cynical, and arguably frivolous, attempts to undermine the democratic process.”
“Legalization opponents have shown time and time again that they cannot succeed in either the court of public opinion or at the ballot box,” he said. “Thus, they are now asking judges to set aside the votes of over a million Americans in a desperate effort to override undisputed election outcomes. Whether or not one supports marijuana legalization, Americans should be outraged at these overtly undemocratic tactics.”
Oregon County Prosecutor Stops Drug Possession Cases Early Following Decriminalization Vote
Prosecutors in an Oregon county will no longer pursue low-level drug possession cases.
The move comes weeks after voters approved a historic initiative decriminalizing all drugs—but also months before it’s due to formally take effect statewide.
In a letter sent to police chiefs on Monday, the Clackamas County District Attorney’s Office said that while it opposes the policy change, officials recognize the will of voters and feel that “having officers investigate and submit cases for a prosecution in the weeks leading up to February 1, which will not lead to any sanction or court supervised treatment, is not the most effective use of criminal justice resources.”
Under the initiative, which passed with 58 percent of the vote, simple drug possession will be treated as a Class E infraction, punishable by a maximum fine of $100 and no jail time. That fine can be waived if an individual shows a court they have completed a substance misuse assessment.
The measure also calls for investments in substance misuse treatment, using tax revenue from legal marijuana sales.
“While we fundamentally disagree with this measure, ceasing to prosecute these matters prior to February 1 is consistent with the will of the voters, which we must respect,” the district attorney’s office said in the email, first reported by Kind Leaf Journal, adding that “misdemeanor [possession of a controlled substance] is still unlawful” until the effective date.
“The decision of our office is not intended not divest local law enforcement officers the ability to conduct lawful investigations, searches and arrests,” the letter states. “Good communication about this significant change is paramount.”
This early discretionary reform action is consistent with how several counties in the state approached cannabis policy after Oregon voters approved an adult-use marijuana legalization initiative in 2014.
“It’s a smart decision to stop arresting and jailing people for personal drug possession before Measure 110 officially goes into effect as Oregon voters have spoken loud and clear that it’s time to start treating drug use as a health issue instead of a criminal one,” Anthony Johnson, a chief petitioner for the decriminalization initiative, told Marijuana Moment.
“There is simply no reason to waste law enforcement resources and our taxpayer dollars on personal drug cases,” he said. “Other district attorneys across Oregon should promptly follow suit and enact the will of the voters.”
The vote in Oregon has also inspired efforts in neighboring Washington State to pursue a drug decriminalization model. While activists considered attempting to put it on the state ballot in 2020, the coronavirus pandemic derailed that plan—and earlier this month, the campaign said they would soon be announcing a sponsor of a reform bill to push for its passage legislatively in the 2021 session starting January.
Meanwhile, New Jersey’s attorney general issued a memo this week directing prosecutors to suspend most marijuana possession cases following voter approval of a statewide legalization ballot measure this month.
Read the full letter to Oregon police chiefs on the decriminalization policy below:
As you are aware, Oregon voters passed Measure 110, which decriminalizes, among other things, possession of up to 1 gram of heroin, 2 grams of methamphetamine and cocaine, 12 grams of psilocybin, 40 user units of LSD 40 pills/capsules containing synthetic opiates.
The measure takes effect on February 1, 2021. At that time, persons found to be in possession of these controlled substances will be referred to local municipal or justice courts and subject to the newly created Class E infraction, which carries a maximum $100 fine. This fee will be waived if the offender provides proof of participation in a substance abuse assessment. There is no requirement that the person engage in treatment.
As the voting public has overwhelmingly passed this measure, effective 11/23/20 the Clackamas County District Attorney’s Office will stop charging new Unlawful Possession of Controlled Substance cases that will otherwise be decriminalized on February 1. It is our belief that having officers investigate and submit cases for a prosecution in the weeks leading up to February 1, which will not lead to any sanction or court supervised treatment, is not the most effective use of criminal justice resources.
While we fundamentally disagree with this measure, ceasing to prosecute these matters prior to February 1 is consistent with the will of the voters, which we must respect.
Investigations where a juvenile is found to possess controlled substances in amounts that will be decriminalized should still be referred to the Juvenile Department so the juvenile can have the opportunity for supervised treatment. There is a juvenile workgroup convening who will eventually offer guidance about what to do with juvenile referrals after February 1.
Until February 1, misdemeanor PCS is still unlawful. The decision of our office is not intended not divest local law enforcement officers the ability to conduct lawful investigations, searches and arrests.
Good communication about this significant change is paramount. If you have any questions or need clarification about this decision, I encourage you or anyone in your agencies to contact me directly. We look forward to our presentation on December 15th where we will discuss additional specifics of M110 and its search and seizure implications.
Chief Deputy District Attorney
Clackamas County DA’s Office
Mexico’s President Says Legal Marijuana Is About Freedom, As Legislation Advances In Congress
Mexico’s president said on Thursday that a bill to legalize marijuana nationwide that was approved by the Senate last week is “part of carrying out a revolution of consciences, where each of us is responsible for his actions.”
“The development of freedoms is very important,” President Andrés Manuel López Obrador said at a press conference in response to a question about whether legalizing cannabis is could be a “Trojan horse that corrupts the health of young people and leads to a higher crime.”
“Things do not have to be prohibited, prohibited, prohibited,” the president said. “If something is authorized, if something is allowed, well, act responsibly. I believe that this will happen in this new legislation on the use of marijuana. Have confidence in people and seek do good.”
López Obrador’s comments come as the cannabis reform bill is advancing in the country’s legislature.
After passing the Senate by a vote of 82 to 18, the bill was formally transmitted to the other body of the nation’s Congress, the Chamber of Deputies, this week, and has been referred to several committees there.
The proposal, which was circulated in draft form earlier this month, would establish a regulated cannabis market in Mexico, allowing adults 18 and older to purchase and possess up to 28 grams of marijuana and cultivate up to six plants for personal use.
It “seeks to regulate the use of cannabis and its derivatives, under the approach of public health, human rights and sustainable development, to prevent and combat the consequences of the problematic use of psychoactive cannabis and to contribute to the reduction of the crime incidence linked to drug trafficking,” the Chamber’s Board of Directors said in an announcement about receiving the legislation, according to a translation.
The bill will also promote “peace, security, and individual and community well-being,” legislative leaders said.
📌 Turna la Mesa Directiva de la Cámara de Diputados a comisiones la minuta que expide la Ley Federal para la Regulación del Cannabis y reforma y adiciona diversas disposiciones de la Ley General de Salud y del Código Penal Federal. https://t.co/KSY7V2ZeZp
— Cámara de Diputados (@Mx_Diputados) November 24, 2020
The body’s Justice, Health, Human Rights, and Budget and Public Accounts Committees will all take up the cannabis bill over the coming weeks.
It’s unclear whether the 500-member Chamber of Deputies will push for additional amendments, requiring the legislation to be sent back to the Senate for additional consideration. Marijuana legalization advocates remain concerned about a number of provisions in the proposal as it stands.
There were several revisions made in the Senate prior to last week’s vote, but most of those were technical in nature.
However, there were a number of notable changes, such as an increase from the initial limit of four self-cultivated plants per person and to make it so people who grow cannabis for personal use will not be subject to a requirement to have regulators track plants.
An additional change mandates that the government clear criminal records of people with past cannabis convictions within six months.
Lawmakers also removed a prohibition on owning more than one type of marijuana license, allowing for vertical integration of cannabis businesses. A previous version of the bill would have only allowed people from vulnerable communities to hold more than one license type.
Another modification that advocates are not happy with says that nonprofit associations of consumers that collectively cultivate cannabis must be located at least 500 meters from schools, sports and recreation centers and anywhere that third parties who have not given their consent could be exposed to smoke.
The legalization bill cleared a joint group of Senate committees prior to the full floor vote, with some amendments being made after members informally considered and debated the proposal during a virtual hearing last week.
Members of the Senate’s Justice, Health, and Legislative Studies Committees had approved a prior version of legal cannabis legislation in March, but the coronavirus pandemic delayed consideration of the issue.
While advocates have celebrated the advancement of cannabis reform through the legislature, they have fought hard for changes to better protect consumers’ rights and promote social equity in the legal market. Namely, they remain concerned about high penalties that can be imposed for violating the cannabis rules and feel the bill should do more to allow opportunities for small farmers.
However, Ricardo Monreal, the ruling MORENA party’s coordinator in the Senate, argued earlier this month that the proposal is a significant improvement on current laws against possession, which have “only caused the detention centers to be full of people for possession of a few grams of cannabis, which is why they seek to reduce the penalties in carrying of this product.”
Lawmakers have “the historic opportunity to regulate the use of cannabis within the Mexican regulatory framework, to allow better control of the health of users, the emancipation of organized crime activities and the use of its wide benefits for society,” he said, adding “this is a momentous moment in the public life of the country.”
Senators have been working on the reform legislation for two years since the nation’s Supreme Court ruled in late 2018 that the prohibition on possessing and growing cannabis is unconstitutional. The court ordered Congress to amend the law accordingly, but the legislature has struggled to reach consensus on the issue and has been granted several deadline extensions to enact the policy change.
The current deadline to legalize marijuana is December 15.
Senate President Eduardo Ramírez said this month that there is a “consensus” to achieve the reform by the court-mandated date.
The legislation makes some attempts to mitigate the influence of large marijuana corporations. For example, it states that for the first five years after implementation, at least 40 percent of cannabis business licenses must be granted to those from indigenous, low-income or historically marginalized communities.
The Mexican Institute of Cannabis would be responsible for regulating the market and issuing licenses.
Public consumption of marijuana would be allowed, except in places where tobacco use is prohibited or at mass gatherings where people under 18 could be exposed.
Households where more than one adult lives would be limited to cultivating a maximum of eight plants. The legislation also says people “should not” consume cannabis in homes where there are underaged individuals. Possession of more than 28 grams but fewer than 200 grams would be considered an infraction punishable by a fine but no jail time.
Monreal originally said the chamber would vote on the legalization bill by the end of October, but that timeline did not work out.
López Obrador, the nation’s president, said in August that marijuana reform legislation will advance in the session that began in September.
Sen. Julio Ramón Menchaca Salazar, also of the MORENA party, said in April that legalizing cannabis could fill treasury coffers at a time when the economy is recovering from the pandemic.
As lawmakers work to advance the reform legislation, there’s been a more lighthearted push to focus attention on the issue by certain members and activists. That push has mostly involved planting and gifting marijuana.
In September, a top administration official was gifted a cannabis plant by senator on the Senate floor, and she said she’d be making it a part of her personal garden.
A different lawmaker gave the same official, Interior Ministry Secretary Olga Sánchez Cordero, a marijuana joint on the floor of the Chamber of Deputies last year.
Cannabis made another appearance in the legislature in August, when Sen. Jesusa Rodríguez of the MORENA party decorated her desk with a marijuana plant.
Drug policy reform advocates have also been cultivating hundreds of marijuana plants in front of the Senate, putting pressure on legislators to make good on their pledge to advance legalization.