Most states in the U.S. are in violation of a major federal drug statute.
The 1971 Controlled Substances Act lists marijuana in the most dangerous category defined in the law, on par with cocaine and heroin because of its supposed potential for abuse and lack of medical applications.
But 36 states plus the District of Columbia allow either full legalization for adult use or wide scale medical use, putting them at odds with federal law. Congress so far has been unable to come up with a solution, despite support from leading Democrats for a smoother relationship between the states and the federal government.
State acceptance happened quickly, with Colorado and Washington the first to legalize adult use less than 10 years ago. By the first of the year, marijuana possession will be legal for all adults in 18 states — including Arizona, Colorado, Maine, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon and Virginia –— that make up 44 percent of the national population.
That number has recently been growing: The governors of New Mexico and Virginia signed their legalization laws just this year. Montana’s, enacted through a ballot measure in 2020, will go into effect New Year’s Day.
The disconnect between a federal ban and increasing state liberalization has not stopped the marijuana industry from blossoming where it is legal. Since Colorado and Washington’s moves in December 2012, the federal government has largely stayed away from enforcing federal law in states where the drug is legal.
But the policy gap widens as more states join in legalization, touching on everything from banking to tribal jurisdiction.
“While the federal prohibition of cannabis clearly is not preventing states and territories from enacting cannabis legalization laws, federal prohibition is still creating a number of hurdles for states, for businesses and for consumers,” said JM Pedini, the development director of the advocacy group National Organization for the Reform of Marijuana Laws, or NORML, and the executive director of the group’s Virginia chapter.
Banking
Among the most obvious problems — and the lowest-hanging fruit for legalization advocates — concerns banking.
Marijuana businesses, and some that sell related goods, are denied credit, small business loans and even checking accounts.
That’s because banks fear federal authorities may prosecute them for working with businesses that technically fit the federal definition of drug traffickers, said Mason Tvert, a communications adviser with the Denver-based cannabis specialty law firm Vicente Sederberg, and partner with the firm’s separate public policy office, VS Strategies.
“A lot of financial institutions will look at the law and determine that it’s not worth the risk because cannabis is illegal at the federal level,” he said.
“They worry there is a potential risk of running afoul of federal money laundering and drug trafficking charges.”
Banks and insurers that do work with marijuana businesses often add a major markup for their services, Tvert added.
Nick Kovacevich, the CEO of Greenlane Holdings, said that affects even businesses like his, which sells marijuana-related products but doesn’t cultivate or sell the plant itself.
A proposal in Congress to allow banks to do business with state-legal marijuana sellers would provide…
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