The Effects of COVID-19 on Cannabis Legalization & Legislation

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As the U.S. continues to wrestle with an epic health crisis there is no “business as usual.” COVID-19 has taken the steering wheel and health experts are riding shotgun in an attempt to grab it back as we try to keep the economy alive. Meanwhile, those with an interest in cannabis legalization and legislation are keeping their eyes on the road ahead.

The Effects of COVID-19 on Cannabis Legislation & Legalization

Cannabis lawmaking is experiencing surges and setbacks. For example, New York was primed to enact meaningful cannabis legislation this year. However, the state took a pass as the demands of COVID-19 shifted priorities from pot to the pandemic. The virus also quashed efforts in Idaho to collect signatures to put medical cannabis on the ballot.

In Arizona, sufficient in-person signatures were collected as mandated by the state’s constitution — despite the health crisis — to put the Smart and Safe Arizona Act on November’s ballot. If enacted, the measure would create a legal adult-use market while allowing limited cultivation for personal use.

There are real questions about the future of cannabis legislation in this time of uncertainty. We have insights from a seasoned cannabis industry CPA, a marketing strategist, and a cannabis industry archivist/data analyst to help shed some light on the current situation and what the future may hold.

A Need for Social Equity Legislation, Magnified

According to Stephanie Till, cannabis historian and owner of Green Rush Indexed Data, “change doesn’t happen in a vacuum.” COVID-19 is shining a light on health outcomes that are far less positive for certain groups, including African Americans — and there’s an overlapping crisis at hand.

In the throes of the pandemic, the Black Lives Matter movement has our nation’s attention focused on racial disparities in justice and law enforcement. Cannabis social equity programs that have the teeth to address issues like unequal rates of arrests and incarceration of people of color for cannabis could not be more timely.

New York’s recently proposed cannabis legislation — Bill A01617C — is among the most progressive to date. If enacted, the bill would provide people convicted of cannabis-related crimes with automatic expungement. Additionally, the bill would enable social equity candidates to enter the cannabis market by providing low-interest loans.

Furthermore, New York’s proposed 18% tax on cannabis sales would go to reparative programs, education and drug treatment, community reinvestment, and education funds. New York has proposed 10 license types. Significantly, it appears the state wants to avoid operator monopolies, including those operating across multiple verticals.

Safe Delivery & Best Practices

How consumers access cannabis has become an increasing focus of regulations in a time when health is in the spotlight. In Stephanie’s home state of Nevada, the pandemic opened up permission for dispensaries to provide curbside service to keep consumers safe. Hopefully, this is a change that will stick.

The Effects of COVID-19 on Cannabis Legislation & Legalization

Sanitary and hygienic practices are critical in cannabis cultivation, processing, and dispensing. The importance of PPE and social distancing in the age of COVID-19 can’t be overstated. New cannabis legislation could arise around consumer and employee health, with greater enforcement of existing guidelines.

Potential Perils of Federal Legalization

Jim Marty has been around the cannabis industry since its inception. Jim founded and serves as the CEO of Bridge West, an accounting firm exclusively devoted to cannabis industry clients. When it comes to federal legalization, Jim espouses the adage that the devil you know is sometimes better than the devil you don’t know.

Jim, Nancy Damato — Bridge West’s marketing guru — and Stephanie concur that mishandling of federal legalization could spell disaster for the cannabis industry as we know it. Like big pharma, big tobacco, and big alcohol, the cannabis industry could easily become a monolithic entity, eliminating “mom and pops” along the way.

Jim cautions that in the above scenario, businesses could expect a parade of federal agencies knocking on their door. “The Federal Bureau of Alcohol Tobacco and Firearms, the FDA, the (Federal) EPA — the list goes on.”

A Possible Federal Consensus

The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act is co-sponsored by U.S. Senators Elizabeth Warren (D-Massachusetts) and Cory Gardner (R-Colorado). The act would confer to each state, Washington, D.C., U.S. territories, and tribal nations the right to determine the best approach to cannabis within their borders.

The STATES Act would stop short of legalizing cannabis federally. However, it would sanction the decision of states, territories, and tribes by allowing them to implement their own policies without fear of federal repercussions.

If the STATES Act is passed, it could provide a framework for eventual federal legalization that doesn’t completely dismantle and reconfigure the cannabis industry. Unfortunately, with COVID-19 sticking around, any federal cannabis legislation is unlikely to be considered until the new Congress is seated in January 2021.

Economic Incentive & Getting Out the Vote

As states struggle economically in the time of COVID-19, the prospect of job creation and additional tax revenue are likely to make new or expanded cannabis legalization more attractive. Trust that advocates will seize upon that message as they press to expand legalization.

New Jersey’s legislature voted last year to place a “yes or no” question on the November ballot for the legalization of adult-use cannabis. Yet, one unknown of COVID-19 is its potential impact on voter turnout this fall. Arizonans voting on a cannabis measure this fall are accustomed to voting by mail, but the same is not true of New Jerseyans.

Focus on What You Can Do Now

For now, proposed legislation is on pause. Consequently, those seeking to enter the industry have some extra time to prepare. Stephanie points out that you have an opportunity to plan while polishing your license application to a “mirror shine.” When your state finally moves forward, you’ll be well ahead of the curve.

In the meantime, cannabis legislation that has stalled due to COVID-19 may create an opportunity to come up with new and improved versions that better serve businesses and communities.

Those in the industry may be experiencing real struggles. Nancy advises
cannabis businesses to stay in front of current clients, customers, and referral sources. Times have changed. Your marketing should, too. For business-to-consumer companies, creating trust that you put customer health first has become paramount.

Are you hoping to start or move forward with your cannabis business? The team here at Higher Yields Consulting would love to help. Contact us to schedule a consultation.

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