May 15, 2023 By Kyle Jaeger
A top California marijuana official says that the U.S. already has an established interstate cannabis market. It’s just been unregulated, forcing cultivators to make the choice between staying legal—but isolating products from each operation to one state—or engaging in illicit activity by selling across state lines.
But now that three states have enacted legislation positioning them to authorize marijuana imports and exports, the conversation about the future of cannabis commerce is evolving, with stakeholders, advocates and regulators becoming increasingly mindful about the opportunities that would be created by a borderless industry.
The Alliance for Sensible Markets hosted a webinar on Wednesday at which a California cannabis regulator, a former Washington, D.C. regulator and an attorney discussed the problems with the siloed status quo of state marijuana markets and efforts to enact legislative and administrative reform.
All three western coastal states—California, Oregon and Washington State—have enacted legislation that would authorize governors to enter into agreements with other legal states to allow marijuana imports and exports once federal policy changes. California’s law also uniquely contains a provision to trigger that authorization if the state attorney general issues an opinion that interstate activity wouldn’t create a significant risk of federal enforcement action.
Matt Lee, general counsel of California Department of Cannabis Control (DCC), said that restricting marijuana markets within state lines is economically untenable.
“If the Michigan auto industry could only sell cars to people in Michigan, or Florida orange growers could only sell oranges to people in Florida or if the California wine industry could only sell wine to California, I’m not sure that each of those would be a viable legal industry,” he said.
He also observed that it doesn’t seem like a coincidence that the three western states that have moved on interstate commerce legislation are the ones most closely associated with selling marijuana outside of state borders through illegal, unregulated means.
“A huge motivation here for me at least goes back to one key way to strengthen our legal cannabis market—is to stop forcing folks to choose between that legal market and the interstate market where historically all the action has actually been done,” Lee said, adding that states have been grappling with this “inherent tension” under federal prohibition.
Regulators want to promote participation in the legal market and keep activity aboveboard. But “on the other hand, the point of legalization is to bring this market out of the shadows and into a regulated space.”
“What grabs me about interstate is that this is a space where I’m not sure you need to make some of those hard choices or hard trade offs,” he said. “This is a way to grow the pie for everybody in a way that can still work for states and can still protect all the important interests that states are already protecting.”
Beyond normalizing the industry and fulfilling the objectives of legalization, interstate commerce would also help address the diverse supply-and-demand issues of each individual state, said Rafi Crockett, a former commissioner on the D.C. Alcoholic Beverage and Cannabis Board who is also a member of the Cannabis Regulators of Color Coalition (CRCC).
“We do not have the physical capacity in Washington, D.C. to grow enough cannabis to satisfy the 700,000 residents that live here, the 20 million plus visitors who come every single year to the city. We can’t do it,” she said. “Our cannabis is going to continue to come from Oregon, from California, from Washington.”
“So let’s work out a system that we’re able to do that in a way that’s safe, that provides patients with the best access to the best medicine that they can have and that is allowing for small businesses in those states, small businesses in my jurisdiction, to all continue to to thrive,” Crockett said.
“We have a cannabis industry—a flourishing thriving cannabis industry that has operated wonderfully for generations,” she added. “We produce it in the Northwest, then we consume it in other parts of the country. It works. We know it works. We’ve all used it throughout our lifetime. And so the imposition of this new and completely artificial industry is the real problem here.”
“What we need to be doing is looking at, how does this market work? What are the best the things that are good for that market? What are the things that we can learn from that market? What are maybe some red flags or things that we might not want to adopt from that market? But that’s one that we already know works. So let’s take that model and utilize it. We are never going to get rid of unregulated shops unless we do that.”
The panel also talked about federal policies, including the Controlled Substances Act (CSA) and the U.S. Constitution’s dormant Commerce Clause.
Marijuana is federally prohibited as a Schedule I drug under the CSA, but Lee said that the law doesn’t contain “unambiguous unmistakably clear affirmatives” that speak to the interstate commerce issue.
What’s more, a federal circuit court ruling in Maine last year affirmed that state marijuana laws with residency requirements for cannabis businesses violate the Commerce Clause, which meant to prevent states from enforcing policies that unduly restrict interstate commerce unless given specific instruction from Congress.
In November, an Oregon marijuana business filed a lawsuit in another federal court, declaring that the state’s current ban on cannabis exports and imports to and from other states violates the Constitution.
Lee said that, as a lawyer, he feels there’s “substantial theoretical force” to the Commerce Clause arguments. Though he added that cannabis lawyers in particular often “need to temper our legal theory with a bit of political pragmatism.”
Looking ahead in the short-term, stakeholders are eagerly awaiting updated federal marijuana guidance from the Justice Department—something that Attorney General Merrick Garland said that his office is actively working on—and how that might affect the conversation around interstate cannabis commerce.
Also, after California’s legislation was enacted last year, Lee authored a letter to the state attorney general, requesting that the office provide a formal opinion about potential risks of authorizing cross-border marijuana imports and exports. Lee said that regulators are “still waiting for on that opinion.”
The California attorney general’s office told Marijuana Moment last week that they have “no updates at this time.”
Adam Smith, founder of the Alliance for Sensible Markets, said during the webinar that they are working to coordinate with the west coast governors to get them to request specific interstate marijuana guidance from the federal Justice Department. But he said that, in general, “we feel like it is teed up for a political decision that will allow this to happen.”
“If we can get that tolerance in guidance from the Justice Department this year,” he said, “I think we will have conversations going on at the highest levels between states by the second half of this year on how to get this off the ground moving and that we are conceivably, and likely in my eyes, going to be moving cannabis between legal markets in the first half of 2024.”
On the other side of the country, New Jersey’s Senate president introduced an interstate marijuana commerce bill last year. A legislative committee in Maine recently rejected similar legislation, but the chair said it could be revisited through another vehicle.
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