The Layers of Cannabis RegulationsAs with any topic that is regulated at many levels of government, it is best to first look at the laws closest to home.Many local laws begin with ballot initiatives, and local control is subject to interpretation and amendments. In Massachusetts, some municipalities ran cannabis ballot initiatives twice, with the second one aimed at banning adult use cannabis sales and production in their towns. The first initiative was on the statewide ballot in 2016, a presidential election year when turnout was high. The local initiative was on the midterm ballot when voter turnout is usually lower.State law gives municipalities control over zoning and Host Community Agreements (HCA’s). HCA’s are contractual agreements between cannabis companies and host communities that set the fees and stipulations required to do business within the community. Most of the bottlenecks that the cannabis industry encounters are at the local level, but the state process is also a lengthy one. Some cannabis-friendly communities don’t add stipulations in addition to the state regulations and local zoning laws. Of course, landlords may have rules for both residential and commercial properties that ban use by consumers and do not allow retail or manufacturing on their property.At the state level, the Massachusetts legislature added amendments to the 2016 voter-approved law. The legislative action included a significant increase in state and local taxes. The amendments banned the use of pesticides and created an energy standard for production. Procedural controls that were added to the licensing process are viewed by many advocates as barriers to entry, especially financially. Bank financing is unavailable due to federal laws, so prospective business owners must have enormous amounts of capital to survive the lengthy regulatory process. They must be prepared to secure property, pay rent for months or years, pay employees’ salaries and benefits, and retain legal counsel for extended periods without knowing if there is or will be an opening date.
There are, of course, other state laws related to cannabis consumption. See “Cannabis 101” in our blog.
At the federal level, cannabis is still illegal. This creates more roadblocks for both the industry and consumers. The Schedule 1 classification prevents banks and other institutions or individuals who receive any federal funding from consuming cannabis or from participation in business financing.
Federal employees or employees of municipal departments that receive federal subsidies cannot consume cannabis. If tested, they can face serious consequences, including job loss. Veterans and anyone else who receives disability might lose their benefits. Gun rights advocates or owners could also lose their firearms licenses which are reviewed by ATF and subject to federal law. In addition to these examples, patients who could benefit from medicinal cannabis may be hesitant to request a prescription because their personal data can be subject to federal oversight. These are all important reasons for the Schedule 1 designation to be removed. However, in this writer’s opinion, removing the Schedule 1 designation is of even greater importance to allow for cannabis research. There is anecdotal evidence that cannabis is or has potential to treat a number of medical conditions. However, scientific researchers cannot study those possibilities because they and their institutions receive federal funding or research grants. It is, therefore, impossible for them to obtain sufficient quantities (or quality) of cannabis to carry out extensive studies.
All the above factors create a challenging and confusing environment for banking, legal, and research institutions. But it is the entrepreneur who carries a heavy burden due to the need to generate revenue to recoup losses. The process becomes more complicated for the entrepreneur and the product becomes more costly for the consumer.
In all fairness, this is a new concept for municipalities and state legislatures. The advocacy community and individuals (voters) can shape the future of the cannabis industry. It is important to stay active and to present well thought-out ideas to local, state, and US representatives. They do listen.