Navigating the Complexities of Cannabis Legislation: Challenges and Opportunities
Navigating complex cannabis legislation can be challenging for both large and small cannabis businesses, but our team of experts is here to help.
It’s no secret that the differences in federal and state cannabis legislation can hinder business growth and financial stability, making it difficult for cannabis businesses to thrive in this highly regulated industry.
Cannabis businesses face challenges in accessing financial services, limiting their banking options and impacting their operations and growth. And, with conflicting federal and state laws, cannabis companies face conflicting regulations and legal uncertainty.
However, public opinion is shifting, with over 68% of U.S. adults supporting the legalization of cannabis, and federal policy changes may soon follow. Don’t let the unique legal challenges hold you back!
By staying informed, streamlining operations, and adapting to the evolving federal and state cannabis legislative landscape, businesses can position themselves for success and make the most out of the rising opportunities.
Federal and State Cannabis Legislation
The Controlled Substances Act
The Controlled Substances Act (CSA) federally classifies cannabis as a Schedule 1 substance, making it difficult for cannabis businesses to legally operate. However, the Rohrbacher-Farr amendment, passed in 2014, prohibits the United States Department of Justice from using federal funds to interfere with state medical cannabis laws. Despite this small level of protection, cannabis businesses still face challenges due to the prohibition of manufacturing, distribution, and possession.
Additionally, the Federal Drug Administration (FDA) has not approved cannabis for the treatment of any disease or condition, with the exception of Epidiolex for the treatment of epilepsy-related seizures.
State legislation
Nevertheless, many states have taken their own approach to cannabis legislation. Currently, 37 states, three territories, and the District of Columbia have approved comprehensive medical cannabis legislation.
Additionally, 21 states and the District of Columbia have legalized recreational cannabis, allowing adults to possess, consume, and purchase cannabis for personal use. However, state regulations differ significantly, with each jurisdiction having unique licensing, regulatory compliance, taxation, cultivation, and sale restrictions.
The difference between federal and state cannabis legislation leads to a complex legal environment. Cannabis businesses face difficulties accessing banking and financial services since banks are hesitant to work with companies engaged in federally illegal activities.
Additionally, the federal tax code’s Section 280E prevents cannabis businesses from deducting ordinary business expenses, leading to an increased tax burden. Interstate commerce restrictions due to federal cannabis legislation also limit expansion opportunities for businesses.
However, there seems to be a positive change in attitude in Washington. Cannabis industry experts are encouraged by the recent signing into law of the Medical Marijuana and Cannabidiol Research Expansion Act (H.R. 8454). While this doesn’t legalize or decriminalize cannabis on a federal level, it is a positive step forward in a complicated cannabis legislation landscape.
Legal Challenges For Cannabis Businesses
The unique legal challenges faced by the cannabis industry at both the federal and state level create significant obstacles for businesses.
- Access to banking and funding
Access to banking and funding remains limited due to the federal prohibition of cannabis, which discourages banks from servicing the industry. As a result, many cannabis companies are forced to operate on a cash-only basis, increasing security risks and hindering growth.
- Tax issues
Tax issues also pose challenges for cannabis companies. As mentioned previously, IRS Section 280E prohibits cannabis businesses from taking tax deductions for ordinary business expenses, resulting in higher tax rates. Plus, navigating state-specific tax regulations can be difficult for multi-state cultivators, as each state imposes its own unique rules and rates for cannabis taxation.
- Licensing and regulatory compliance
Finally, licensing and regulatory compliance are complicated by patchwork state-level cannabis regulation. For example, California has implemented a three-tiered licensing system, which is not similar to other state licensing processes.
States also implement varying application processes and apply different fees, further complicating compliance. It’s no wonder that operating in multiple states with varying laws and regulations can be difficult for cannabis businesses.
To survive, cannabis businesses must learn to navigate these unique legal challenges while adapting to evolving federal and state cannabis legislation. For example, this year sixteen states, including Iowa and Kansas, have introduced cannabis legislation to approve the recreational use of marijuana by adults.
Implementing a comprehensive solution, like SilverLeaf Cannabis ERP, can help businesses adapt to these legislative changes and manage, track, and comply with cannabis legislation and regulations as they change.
Opportunities for Cannabis Businesses
Despite unique challenges, opportunities do exist for cannabis businesses.
Increased access to capital
One significant opportunity is increased access to capital. As more states legalize or decriminalize cannabis, banks and investors are slowly becoming more open to working with cannabis-related businesses. Additionally, alternative financing options, such as venture capital and crowdfunding, are growing in popularity, offering valuable resources to startups and established cannabis businesses.
Emerging new markets
New markets are also emerging due to the expansion of medical and recreational cannabis legislation. This year alone, sixteen states and the U.S. Virgin Islands have introduced cannabis legislation to legalize recreational use for adults, while nine states have introduced bills to create comprehensive medical cannabis programs. Social justice and equity initiatives
Social justice and equity initiatives are also gaining traction. For example, in New York, the Marijuana Regulation and Taxation Act (MRTA) was implemented with a focus on addressing the historical harms of cannabis prohibition. The MRTA includes provisions to expunge cannabis-related convictions, helping individuals with past offenses reintegrate into society.
Additionally, the cannabis legislation establishes a comprehensive social equity program designed to ensure fair access to licensing and business opportunities for communities impacted by the war on drugs. This includes providing low-interest loans, grants, and technical assistance. Similar social equity programs have been enacted in thirty-one states and introduced in five states this year alone.
Upcoming federal cannabis legislation
In light of these changes, federal lawmakers are also taking steps to prepare for cannabis legalization. For example, Senator Hickenlooper (D-CO) has introduced a bill, the PREPARE Act, to provide resources to help states implement regulated marijuana programs, educate the public on the health effects of cannabis, and support medical research. The bill would streamline the integration of cannabis into the legal and regulated market.
Final Thoughts on Cannabis Legislation
Navigating complex cannabis legislation can be challenging for both large and small cannabis businesses, but our team of experts is here to help. With our dynamic cannabis ERP solution, SilverLeaf, we’ll help you stay compliant with multi-state cannabis legislation and regulations.
