Last Friday afternoon, the United States House of Representatives voted in favor (228 to 164) of passing the MORE (Marijuana Opportunity, Reinvestment and Expungement) Act.
What is historic about the vote is that this is the first time that any cannabis bill addressing descheduling has been approved by Congress. It is also sweeping in its language as the legislation aims to de-schedule and remove cannabis from the Controlled Substances Act (CSA), which has been the biggest challenge facing the cannabis industry. It also looks to expunge historical cannabis convictions related to non-violent offenses and levies an additional tax on the product.
Canaccord Genuity cannabis research analyst Bobby Burleson said, "We believe the next meaningful catalyst for the sector will be the January runoff elections where Democrats will make a play for a greater number of seats in the Senate. However, even if the Democrats secure control of the Senate via successful results in the Georgia runoffs on January 5, it is very unlikely that the Senate will meet on the topic prior to Congress going into adjournment on January 3, ultimately requiring the MORE Act to be re-introduced in the House in the new year. As a result, we believe Friday's headline is largely symbolic in nature (yet important to overall sentiment)."
David Culver, Vice President of U.S. Government & Stakeholder Relations for Canopy Growth (CGC) noted that the MORE Act has fresh support from the incoming Biden Administration, pointing out that Vice President-elect Kamala Harris is an original sponsor of the Senate bill.
"We urge the Senate to recognize that cannabis legalization is on the march -- supported by a vast majority of Americans -- and pass this legislation immediately," Culver said. "It's time to unlock the economic and social equity benefits of cannabis and end this outdated prohibition that has disproportionately punished minority communities for far too long."
TILT Holdings Inc. (TLLTF) CEO Mark Scatterday said, "Now it is up to the leaders in the Senate to take meaningful action. As we continue to move forward, elected officials would be well served asking themselves what side of history they want to be standing on. We continue to be encouraged by the act's passing and remain hopeful that more of our elected officials will take the time to look at the data, which shows ending cannabis prohibition is both sound economic and public policy."
While many in the industry are thrilled to see the passage, even though it is unlikely to make it through to a Senate vote, the additional tax is not something the consumer is thrilled about. The bill would impose a 5% tax on the sale of all cannabis products for the first two years, with successive, yearly 1% increases until an 8% tax is reached. For comparison purposes federal and state tobacco taxes are roughly 44% of the retail price.
The MORE Act also would provide access to banking services for cannabis-related business (CRB), and allow these businesses to deduct certain expenses formally disallowed under Section 280E of the tax code.
In addition, the bill allows for states to self-govern policy (including opting out altogether) while imposing a series of social equity measures to re-invest proceeds from the cannabis industry into cannabis-impacted minority groups. Congressman Jimmy Gomez (CA-34) said, "Not only does it signify another step forward in our collective efforts to fight racial sentencing disparities in the justice system and invest in our communities, but it also represents a strong commitment to the health and well-being of countless Americans who rely on marijuana's medicinal properties. Once signed into law, the MORE Act will help right the wrongs that decades of failed drug policies have had on Black and Brown communities and uplift those who have been held back and defined by their previous marijuana convictions. I strongly urge the Senate Majority Leader to put this historic bill up for a vote and work with congressional Democrats to create a more equitable and just society for all Americans."
The MORE Act passing the House is certainly news for the industry to cheer about, however, most understand that this is probably the end of the line for cannabis legislation in 2020. The SAFE Banking Act was passed in the House over 14 months ago and it wallowed ever since. While there was some potential of it being included as part of various Covid-19 stimulus considerations Senate majority leader Mitch McConnell took the opportunity to criticize the House for focusing on cannabis legislation during a pandemic.
Burleson added, "Cannabis reforms continue to accelerate at the state level -- most recently with Arizona and New Jersey voting in favor of legalizing adult-use programs -- while many anticipate states such as New York, Pennsylvania and Connecticut to approve recreational cannabis as early as next year. In addition, with Biden winning the White House, we believe his previously announced Unity Task Force recommendations (which look to de-schedule all forms of marijuana and potentially legalize medical cannabis) are consistent with the main themes/ considerations included in the MORE Act."
Industry Leaders Weigh In
Charlie Bachtell, CEO, Cresco Labs (CRLBF) and the Chairman of the National Cannabis Roundtable said, "The MORE Act marks the second cannabis bill to receive a passing vote in Congress, and the simple fact that cannabis legislation can be presented on the floor, receive a vote and get passed is fundamentally important for the continued development of a respectable and responsible cannabis industry in the U.S. The MORE Act is legislation with purpose, creating social equity and social justice for those impacted by prior drug laws, and demonstrates the restorative nature of what the cannabis industry can offer going forward."
Jushi Holdings Inc. (JUSHF) President and Founder Erich Mauff said, "Cannabis legalization will result in billions of dollars in infrastructure investment, create thousands of service level jobs, and add billions of dollars in tax revenues. This groundbreaking legislation will generate and encourage unprecedented economic stimulus for an America that wants to move past the unconstitutional injustices of its past. Cohesive and meaningful federal oversight is a critical next step for this country, as we work with vigor and passion to reimagine an industry that cultivates equitable opportunities while embracing diversity and inclusion across every platform.
Medical Marijuana, Inc. (MJNA) CEO Dr. Stuart Titus said, ""It is quite exciting to see the initial steps being taken by the US Congress to deschedule cannabis and establish a national system, including taxing the sale of legal cannabis products. This historic vote will allow the public to know where each U.S. House member stands regarding cannabis legalization -- and given passage into law, this will create a new paradigm for the growth and rebuilding of our Covid-shattered economy."