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.
New Jersey Voters Will Decide On Marijuana Legalization Next Year, Senate Leaders Say
New Jersey lawmakers are giving up on plans to enact marijuana legalization through the legislature and are now seeking to put the question before voters on the 2020 ballot.
Senate President Steve Sweeney (D) and Senate Judiciary Committee Chairman Nicholas Scutari (D) announced on Monday that while they had “made further attempts to generate additional support in the Senate to get this done legislatively,” the “votes just aren’t there.” As a result, they filed a proposal that would allow residents to vote on legalization as a constitutional amendment.
“We are moving forward with a plan to seek voter approval to legalize adult use marijuana in New Jersey,” the leaders said in a press release. “We introduced legislation today to authorize a public referendum for a proposal that will lead to the creation of a system that allows adults to purchase and use marijuana for recreational purposes in a responsible way.”
— Brian Thompson (@brian4NY) November 18, 2019
“This initiative will bring cannabis out of the underground so that it can be controlled to ensure a safe product, strictly regulated to limit use to adults and have sales subjected to the sales tax,” they said.
The plan, which NJ.com first reported, is to have the legislature to approve the referendum proposal and get the ballot measure set for a vote in the general election next November. Sweeney and Scutari said they are “confident it will be approved by the Senate, the Assembly and the voters.”
“We will now move forward with a plan that helps correct social and legal injustices that have had a discriminatory impact on communities of color,” they said. “We can make real progress towards social justice at the same time that cannabis is made safe and legal.”
Gov. Phil Murphy (D) said he is “disappointed that we are not able to get this done legislatively and that our failed status quo—which sends roughly 600 people to jail a week for possession, the majority of them people of color—will continue.”
I am disappointed that we are not able to get this done legislatively and that our failed status quo – which sends roughly 600 people to jail a week for possession, the majority of them people of color — will continue.
— Governor Phil Murphy (@GovMurphy) November 18, 2019
“However, I have faith that the people of New Jersey will put us on the right side of history when they vote next November,” he said. “By approving this ballot measure before the end of this legislative session, New Jersey will move one step closer to righting a historical wrong and achieving what I have spent more than three years advocating for.”
By approving this ballot measure before the end of this legislative session, New Jersey will move one step closer to righting a historical wrong and achieving what I have spent more than three years advocating for.
— Governor Phil Murphy (@GovMurphy) November 18, 2019
After months of negotiation, it became apparent that that progress wasn’t going to happen legislatively in the short-term, with Sweeney indicating as early as May that legalization would likely have to be decided through a voter referendum.
Text of the resolution calling for a referendum doesn’t offer many details about what the proposed legal cannabis market would look like; rather it generally describes a system allowing adults 21 and older to use and purchase marijuana from authorized retail facilities. The state’s Cannabis Regulatory Commission would be responsible for regulating the program. And cannabis sales would be subject to the state sales tax, with no additional excise tax added.
As written, the draft ballot question is worded somewhat confusingly. Voters would be asked: “Do you approve amending the Constitution to legalize a controlled form of marijuana called ‘cannabis’?”
“Only adults at least 21 years of age could use cannabis,” it continues. “The State commission created to oversee the State’s medical cannabis program would also oversee the new, personal use cannabis market. Retail sales of cannabis products in this new market would be subject to the State’s sales tax, and no other form of tax.”
Assembly Speaker Craig Coughlin (D) said in a press release that his chamber “will vote on legislation to put an adult-use cannabis question before the voters.”
— NJAssemblyDemocrats (@njassemblydems) November 18, 2019
“We plan to pass the measure this year and next in order for New Jerseyans to have the opportunity to make the decision in November 2020 when we expect voter turnout to be high due to the presidential election,” he said.
Prohibitionist group Smart Approaches to Marijuana celebrated news of the legislature abandoning plans to pursue legalization legislatively this session and said it would invest resources into a campaign to dissuade voters from supporting the proposed ballot initiative.
BREAKING: New Jersey State Senate abandons push to legalize marijuana during 'lame duck' session.
The marijuana industry outspent SAM 86-1 in this effort.
Our statement: pic.twitter.com/MPtI2fNIzx
— SAM (@learnaboutsam) November 18, 2019
While adult-use legalization hasn’t panned out as advocates hoped, Murphy did sign a bill significantly expanding the state’s medical cannabis program in July. Sweeney had pointed to that reform move as one reason legalization negotiations stalled.
It’s not clear how the ballot approach is going to impact discussions about regionally coordinating legalization plans in the Northeast, which has been ongoing since New York Gov. Andrew Cuomo (D) and Connecticut Gov. Ned Lamont (D) met to talk about the issue over the summer.
During a joint meeting of governors from around the region last month, Murphy said that “doing things in an intelligent, coordinated, harmonious way is good for the entirety of not just our states but our residents” and emphasized the need for social justice components in a legal cannabis market.
Read the text of the New Jersey marijuana legalization referendum resolution below:
This story has been updated to include comments from the governor and assembly speaker.
Sanders Pledges Legal Marijuana ‘In Every State’ As Biden Faces ‘Gateway Drug’ Backlash
As former Vice President Joe Biden faces a backlash over his suggestion that marijuana could be a ‘gateway’ drug, rival presidential candidates such as Sens. Bernie Sanders (I-VT) and Kamala Harris (D-CA), as well as entrepreneur Andrew Yang, are touting their own support for cannabis reform proposals
One day after Biden said he doesn’t support national cannabis legalization because there’s “not nearly been enough evidence that has been acquired as to whether or not it is a gateway drug,” Sanders offered a competing vision, emphasizing in a speech that he wants to “make marijuana legal in every state in the country,” rather than allow prohibition to continue in certain states.
The senator also discussed other elements of a cannabis reform plan he released last month, including his pledge to “expunge the records of those arrested for possession of marijuana” and provide funding to promote participation in the legal industry by individuals from communities most impacted by the war on drugs.
“It sounds unfair that when we legalize marijuana, you end up having a handful of corporations controlling that industry,” Sanders said during the Sunday event in Las Vegas. “We have built into our criminal justice program an effort to provide many billions of dollars in help to people in the African-American community, Latino community, other communities, the people who have been hit the hardest by the war on drugs, to help them profit off a legal marijuana system.”
Watch Sanders’s marijuana comments, around 33:00 into the video below:
Sanders described his three-step plan to prevent large corporations from controlling the cannabis market during an interview on Showtime’s Desus & Mero last month.
Separately, he took to Twitter on Sunday to highlight new polling showing that a majority of Americans support legalizing marijuana.
The American people are united on issue after issue. We must legalize marijuana now—and expunge all past marijuana convictions as a matter of racial and economic justice. https://t.co/NQjp7WOko3
— Bernie Sanders (@SenSanders) November 17, 2019
Meanwhile, Harris also appeared to take a direct hit at Biden over his “gateway drug” comment, stating that the debate on that matter is already settled.
Let's be clear: marijuana isn't a gateway drug and should be legalized. Glad to see my bill with Rep. Nadler take the next step in the House this week. https://t.co/d6BcMFlpYT
— Kamala Harris (@KamalaHarris) November 18, 2019
“Let’s be clear: marijuana isn’t a gateway drug and should be legalized,” she tweeted, adding that she’s glad that a bill she and House Judiciary Chairman Jerrold Nadler (D-NY) filed earlier this year to federally deschedule cannabis is scheduled for a vote in the House this week.
Harris herself has faced pushback from reform advocates and challengers who point out that the senator was involved in criminalizing cannabis consumers, and opposed legalization, during her time as a prosecutor.
Yang, for his part, presented a visual contrast to Biden on Monday, sharing photos of him smiling, surrounded by dozens of trimmed marijuana plants in an undisclosed facility.
He also wrote in a tweet that cannabis “should be legal nationwide” and linked to a campaign site page laying out his reform plan.
Marijuana should be legal nationwide. It is already legal in several states, it reflects a safer approach to pain relief than opiates, and our administration of drug laws is deeply uneven and racist. https://t.co/0Uhl17MW98
— Andrew Yang🧢 (@AndrewYang) November 18, 2019
“It is already legal in several states, it reflects a safer approach to pain relief than opiates, and our administration of drug laws is deeply uneven and racist,” Yang said.
Biden has drawn criticism from lawmakers outside of the presidential race as well, with Rep. Earl Blumenauer (D-OR) calling him out on Monday.
Get with the program, @JoeBiden.
Not only do we have legislation that would solve the issue of research, the American people overwhelmingly support legalizing cannabis—period.
The war on drugs has ruined countless lives. It's past time we end this senseless prohibition.
— Earl Blumenauer (@repblumenauer) November 18, 2019
“Get with the program, @JoeBiden,” the congressman, who has spearheaded Capitol Hill efforts to end federal prohibition, said. “Not only do we have legislation that would solve the issue of research, the American people overwhelmingly support legalizing cannabis—period.”
“The war on drugs has ruined countless lives,” he said. “It’s past time we end this senseless prohibition.”
Photo courtesy of Facebook/Bernie Sanders.
AOC Calls For Decriminalizing The Use Of All Drugs
Rep. Alexandria Ocasio-Cortez (D-NY) voiced support for decriminalizing the use of all drugs on Sunday.
The freshman congresswoman tweeted that drug decriminalization, as well as marijuana legalization, are “matters of public health.”
Marijuana should be legalized, and drug consumption should be decriminalized.
These are matters of public health.
— Alexandria Ocasio-Cortez (@AOC) November 18, 2019
This marks a development in Ocasio-Cortez’s drug policy platform. Previously, she called for decriminalizing the use and research of psychedelics, emphasizing the therapeutic potential of the substances.
To that end, she introduced an amendment to a spending bill in June that would remove a rider that advocates argue has inhibited research into the potential therapeutic benefits of Schedule I drugs such as psilocybin and LSD. The House rejected that measure in a floor vote, however.
There’s a growing push to decriminalize the personal possession of drugs beyond cannabis. South Bend, Indiana Mayor Pete Buttigieg and Rep. Tulsi Gabbard (D-HI), both Democratic presidential candidates, are in favor of the policy. Entrepreneur Andrew Yang supports decriminalizing opioids as a means to combat the drug overdose crisis.
Ocasio-Cortez recently gave her endorsement to Sen. Bernie Sanders (I-VT). But while the senator was the first major presidential candidate to back marijuana legalization during his 2016 run, he said this year he’s “not there yet” on broader drug decriminalization. It’s not clear if the congresswoman’s role as a surrogate on his campaign will ultimately influence him to adopt the policy.
But as more candidates debate the best way forward on various drug reform proposals, with cannabis legalization being a given for almost all contenders, former Vice President Joe Biden remains several paces behind. He opposes adult-use legalization and said on Saturday that marijuana may be a gateway to other, more dangerous substances.
Photo courtesy of C-SPAN.