Cannabis has been on an upward trajectory in recent years, both in usage and acceptance. While 2021 failed to provide the clear federal legislative path to legalizing cannabis that many speculated at the start of the year, several developments and activities are shaping up to create reform incrementally.
The Secure and Fair Enforcement (SAFE) Banking Act of 2021, which would open the door for cannabis businesses to access commercial banking services, stalled in the Senate despite passing in the House for the fifth time in September 2021. If passed into law, the SAFE Act will provide a way forward for cannabis industry participants to gain access to complete services from U.S. financial institutions without reprisals. It removes the current restrictions barring financial institutions from dealing with the cannabis industry. The House voted to strategically include the SAFE Act as part of the more significant bipartisan National Defense Authorization Act in its most recent occurrence. However, the tact proved unsuccessful as the Safe Act alone fails to uphold the social justice ideals that Senate leadership strives to achieve with the passage of broader cannabis laws.
Two additional pieces of legislation which emerged this past year – the Cannabis Administration and Opportunity Act of 2021 (draft discussion form) and the Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2021 – remain on the table in 2022. Though doubtful as-is, if passed into law, either piece will effectively end the federal prohibition of cannabis in the U.S.
You may recall the MORE Act that previously passed the House in December 2020 but was ignored by the Senate. The 2021 reintroduction has again passed the House Judiciary Committee and now awaits a full floor vote.
A development worth following is the H.R.5977 – States Reform Act introduced in November 2021 by Representative Nancy Grace, a Republican Congresswoman. The Act advocates for cannabis to reschedule under the current Federal Controlled Substances Act. It allows individual states to determine how to regulate cannabis. The possibility of decriminalization of cannabis through this proposed Act sets the stage for enabling U.S. financial institutions to serve the needs of all the legal cannabis industry participants.
In addition, the States Reform Act seeks to allow for interstate transportation of cannabis and to negate the impact of federal tax code Section 280E, which will allow for Cannabis Industry participants to seek federal tax deductions beyond the cost of goods sold. Currently, at the state level, states such as New York, New Jersey, and Missouri are pondering unique ways to provide relief to the cannabis industry to offset part of the heavy tax burden of Section 280E.
The stage is set for 2022 – and while there is no guarantee of federal reform, the momentum towards it shows no sign of stopping.