California cannabis law anticipates interstate commerce
New Jersey to consider its own legislation
Sept. 20, 2022 (SACRAMENTO) Interstate commerce in legal cannabis took a giant step forward this week when California Governor Gavin Newsom signed a bill allowing the state to enter agreements with other states to regulate trade without waiting for federal legalization.
Senate Bill 1326, authored by State Senator Anna Caballero, allows California to enter agreements with other adult use or medical states upon either an indication of tolerance from the U.S. Department of Justice, or an opinion by the California Attorney General that doing so will not place the state in legal jeopardy.
Meanwhile, on the other side of the country, at the other end of the traditional cannabis supply chain, New Jersey Senate President Nicholas Scutari, who championed adult use legalization in the Garden State, has introduced S3012, his state’s own interstate commerce bill.
“Every advance in legal cannabis has happened because states led the way, with the U.S. DOJ indicating its tolerance for state regulation of what was otherwise federally illegal,” said Adam J. Smith, president of the Alliance for Sensible Markets, who wrote and championed Oregon’s interstate cannabis law in 2019. “States regulating the movement of existing supply to meet immediate demand is just rational economics. If governors of states with legal markets move forward, there is every reason to believe that our current DOJ will tolerate that.”
Both the Biden Administration and U.S. Attorney General Merrick Garland have said they support state decision-making in legal cannabis, and have no intention of interfering where states are regulating cannabis.
Jason Horst, a California attorney who serves as President of the International Cannabis Bar Association, said that these statements of deference to state self-determinism should help make California Attorney General Rob Bonta’s analysis of the risks of allowing interstate trade fairly straightforward.
]“Federal law makes no distinction between the state-regulated, intrastate markets we have today, and the state-regulated interstate commerce anticipated by the Oregon and California laws. Under 80 years of clear Supreme Court precedent, from Wickard v. Filburn to Gonzales v. Raich, it is all considered interstate commerce, regardless of whether cannabis crosses state lines. Allowing California growers to sell their products to consumers through licensed retailers in Newark should present no greater legal risk to California than allowing them to sell the same products at licensed dispensaries in Oakland.”
Market participants across the supply chain believe that giving states the ability to opt-in to interstate commerce would make a big difference.
“In California and nationwide, thousands of small, independently owned and operated cannabis farms and manufacturers are struggling to secure market share for their small-batch, craft products due to constraints on market access.” said Genine Coleman, Executive Director of Origins Council (OC). “If America is to build an equitable national market for cannabis that is viable for small business entrepreneurs, states need to lead the way through initiatives like interstate commerce agreements and direct to consumer marketing and sales.”
Tahir Johnson is an equity licensee and owner of Simply Pure Trenton, one of New Jersey’s first independent retail locations set to open by the end of this year..
“New Jersey’s independent and minority-run businesses in retail, distribution, delivery, product development, wellness, and so on will wait years for a steady supply of quality cannabis,” said Johnson. “Out of the gate, we’ll be at the mercy of a few large, industrial-scale suppliers, and that cannabis is likely to be overpriced and less sustainably grown than what’s available now on the West Coast. Opening up that supply chain would benefit cannabis consumers in New Jersey, not to mention my business and hundreds of businesses like mine.”
California joins Oregon to become the second state in the nation to pass an interstate commerce law. But a trade agreement between the nation’s two premier cannabis producers is not the goal, say advocates. Rather, it’s to open up the possibility of multilateral agreements to move cannabis to where it's actually needed.
“Farms and brands across California are struggling due to the state silos around production, and the lack of legal retail since the onset of the regulated market” said Joyce Cenali, who is chief operating executive of Sonoma Hills Farm. “Opening up access to even a few new adult use markets or underserved medical markets would be worth billions to the California industry. It would likely save hundreds of businesses and tens of thousands of jobs.”
Smith believes the California law signals that the industry is primed for a monumental shift.
“We are seeing real leadership from the Governors of Oregon and California toward state-regulated commerce,” Smith said. “Federal legalization is on the horizon, but states can’t wait around for Congress to fix legal cannabis. That’s never been a winning strategy.”
Lauren Coté, co-founder of the Cannabis Distribution Association (CDA), a co-sponsor of SB 1326, believes that allowing states to opt-in to interstate commerce now could in fact hasten the end of federal prohibition.
“This legislation serves a dual purpose of creating interim pathways to market for legacy operators while applying pressure on Congress to decriminalize and deschedule cannabis,” Coté said. “Interstate agreements in the existing and continued environment of federal tolerance will bring us one step closer to federal reform.”
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Contact: Adam J. Smith, Sensible Markets
