1 July 18, 2019 The Hon. Jerrold Nadler, Chair The Hon. Doug Collins, Ranking Member House Judiciary Committee 2141 Rayburn House Office Building United States House of Representatives Washington, DC 20515 CC: Hon. Nancy Pelosi, Speaker Hon. Kevin McCarthy, Minority Leader Hon. Lindsey Graham, Senate Judiciary Chair Hon. Dianne Feinstein, Sen. Ranking Member House Judiciary Committee Members
Re: Comprehensive Cannabis Reform and the Need for Social Equity and Reparative Justice
Dear Judiciary Chair Nadler and Ranking Member Collins: Over the course of the past decade, attitudes and laws concerning cannabis have shifted dramatically. Prior to the 2012 election, fewer than half of the states had medical cannabis laws, Congress was still
funding the Department of Justice’s efforts to pro
secute medical cannabis patients while the DEA was conducting paramilitary-style raids on the collectives that provided patients with their medicine. But with the 2012 elections came the first two states to legalize the regulation of marijuana for adult-use customers and with it, the legal industry as we know it today began to emerge. To date, 33 states along with the District of Columbia, Puerto Rico, and several U.S. territories have adopted comprehensive medical cannabis laws, while 11 states and the District have legalized possession and use of cannabis for adults 21 and over. National polling consistently shows there is now support for legalization across age ranges and the political spectrum. An October 2018 Gallup poll showed national support for legalization at 66%, up from 46% in 2010. Majority support is now found across all age ranges and the political spectrum, with 53% of Republicans and 59% of individuals 55 and older supporting legalization. And while Congress has been slow to act in response to these changes, it has recognized that prosecuting individuals complying with state medical cannabis laws is bad policy. In December 2014, it passed a spending amendment that prohibits such prosecutions. In the years since, DOJ has largely allowed state cannabis programs to exist without significant interference, enabling states to take advantage of this new economy beginning to take root. In 2018, combined sales of regulated medical and adult-use cannabis topped $10.4 billion, and the 7 states with active adult-use markets generated nearly $1.2 billion in tax revenue. The industry is now employing well over 200,000 people. And yet, with this rapidly growing new industry and broad popular support for legalization, many of the communities who were devastated by the decades-long War on Drugs are now being left behind. Some of those being left behind are currently locked up for engaging in conduct that is now legal in several states. More than 600,000 Americans were arrested last year for cannabis-related crimes. These
2 arrests are almost exclusively made in low-income areas and overwhelming take place in communities of color. Many others are being left behind because a previous conviction often is a disqualifying factor to become an owner or employee in th
e new legal “green
-
rush.” The focus on enforcing cannabis laws
rather than addressing the educational, health, and employment needs of these communities means we have long been failing them and are now punishing them again by denying them access to this emerging economy. Still others are being left behind because they are unable to come up with the capital necessary to break into the industry. For example, many states have steep application fees that prevent all but the most well-financed players from even attempting to get a license. There are many who would argue that Congress should not get into the business of picking winners and losers. We would argue that if Congress chooses to end federal cannabis prohibition but chooses not to address these glaring racial and economic disparities in the process, it will in fact pick those who are already the most well-financed, the least likely to have suffered an arrest and conviction, and almost certainly do not come from the communities that were severely harmed by decades of prohibition to be the winners of the new economy. Indeed, it will have also picked the communities who suffered the most under prohibition to continue to lose once cannabis is no longer a criminal offense. For these reasons, we the undersigned cannabis businesses and organizations urge Congress to take the following steps to ensure that all Americans and all communities are on a more equal footing when it comes to the potential to benefit from this new industry:
Remove marijuana from the Controlled Substances Act (CSA).
Descheduling cannabis from the CSA must be the cornerstone of any truly comprehensive approach to federal reform. Other means of dealing with the core issue of federal prohibition, such as exemptions from the CSA in states that have legalized, are less predictable in their implications from a legal standpoint. Many of the following urgent requests below would not be possible if Congress merely exempted from the CSA in states that have legalized it.
Allow banks to work with businesses like they can with any other ordinary business.
Only the largest operators in the industry can weather the substantial financial inefficiencies of being forced to work in an all-cash environment. While this is feasible without removal of cannabis from the CSA and legislation such as the SAFE Banking Act would be beneficial to the industry, descheduling would fully enable the financial service industry to embrace cannabis businesses.
Provide tax relief to businesses who currently pay an effective federal rate that is more than double that of other businesses
.
State legal cannabis businesses are subject to Section 280e of the Internal Revenue Code which forbids those selling Schedule 1 or 2 substances from making ordinary business deductions. Again, this relief would provide the most benefit to small and mid-sized businesses that are not able to grow when paying an effective federal tax rate of approximately 50%. This can be addressed through narrow exemption legislation but would be more pragmatic through a descheduling bill.
Create a source of federal funds to support state equity programs to foster participation in the industry from underrepresented groups
.
We are seeing in real-time what an industry without adequate equity programs looks like, and we know that it means women, minorities, and low-income individuals
3 are the least likely to own these businesses or even be promoted into management positions. Funds for equity programs should come from tax revenue earmarked from cannabis businesses. This will help ensure that those who have benefited the most from fortunate circumstances will not monopolize the benefits of this economy. This can only take place if cannabis is descheduled.
Utilize existing federal programs to facilitate access to capital and other assistance for small cannabis businesses.
Another hurdle imposing a barrier to entry into the cannabis industry is the lack of capital available to emerging cannabis businesses. Cannabis businesses also are denied access to emergency relief aid following a natural disaster. The federal government already has programs, such as those under the Small Business Administration, that could potentially help remedy this problem but cannabis businesses are ineligible. Comprehensive access to these programs can only occur if cannabis is descheduled.
Retroactive justice for those with convictions.
If cannabis is no longer a crime, those with a previous cannabis conviction should no longer be punished. This means expunging old convictions and creating an opportunity for those currently incarcerated to vacate their sentences. Additionally, people should not be denied any public benefit, such as student loans, public housing, or nutritional assistance, for engaging in state-legal cannabis activity. This can only take place if cannabis is descheduled.
Investing in communities that suffered the most.
The communities that incurred the most harm caused by the disproportionate enforcement of cannabis laws deserve to be given the greatest priority when it comes to receiving the public benefits that flow from legalization. This means that tax revenue collected from cannabis businesses should fund programming for a broad range of services to help repair these communities. Again, this can only take place if cannabis is descheduled. Some in Congress may feel it is too soon to end federal cannabis prohibition or that Congress does not have a responsibility to address the harms created by how this policy has targeted certain communities. But if Congress declines to harmonize state and federal cannabis laws or fails to take responsibility for the consequences of disproportionate enforcement, the problems caused by prohibition will continue to persist. The time to wait and see is over. Now is the time for Congress to take the bold but ultimately pragmatic step to deschedule cannabis along with approving the necessary funding and programming to support the communities that incurred the most harm because of federal prohibition. Sincerely,
Multi-State Businesses 4Front Ventures
National, HQ: Phoenix, AZ
American Cannabinoid Clinics
National
Berkeley Patients Group
Berkeley, CA and Nevada
CannaAdvise, a division of The Gooch Agency
MD, DC, VA, PA
CannaGather
National, HQ: New York, NY
CanSact LLC
National
Consumer Research Around Cannabis
National
DatapointPOS
National
Denver Relief Consulting
CO, IL, OH, MD, NV
Indiva Advisors LLP
10 states
kindColorado, LLC
National, HQ: Denver, CO
MJ Freeway
29 US States and 13 countries