{"id":1929,"date":"2015-04-12T00:44:17","date_gmt":"2015-04-12T00:44:17","guid":{"rendered":"https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/?p=1929"},"modified":"2015-04-12T00:44:17","modified_gmt":"2015-04-12T00:44:17","slug":"medical-marijuana-bill-does-not-fully-secure-industry","status":"publish","type":"post","link":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/2015\/04\/12\/medical-marijuana-bill-does-not-fully-secure-industry\/","title":{"rendered":"Medical Marijuana Bill Does Not Fully Secure Industry"},"content":{"rendered":"The nature of the marijuana debate has shifted recently. In the Senate, bipartisan legislation<\/a>–the Compassionate Access, Research Expansion, and Respect States Act of 2015–<\/a>is being considered<\/a> that permit nationwide medical marijuana and provide deference to states\u2019 decision making in its regulation<\/span>. So far, the bill is still in its introductory stages<\/a>. Nonetheless, the ways in which the bill does not normalize the marijuana industry are important to potential market participants.\n\nPolitical Headwinds and Positive Change<\/strong>\n\nThe bill\u2019s bipartisan support<\/a>\u2014<\/span>sponsored by<\/a> Democratic Senators Kristen Gillibrand<\/a> and<\/span> Cory Booker<\/a> and Republican Senators Rand Paul<\/a> and Dean Heller<\/a>\u2014<\/span>marks a change in the political headwinds. While traditionally any attempt to legalize marijuana was considered a left-wing position<\/span>, now conservatives are embracing states\u2019 prerogative<\/a>s<\/span> to legalize medical and\/or recreational marijuana in keeping with a federalist philosophy.\n\nSurely, this will incentivize states interested in legalizing recreational marijuana to simply adjust the regulatory scheme for medical marijuana by lowering the threshold for access. In doing so, virtually all those interested in legal marijuana use will qualify for \u201cmedical\u201d marijuana even if they are only interested in marijuana for recreational use. As result, states would create de facto recreational marijuana, yet they will effectively circumvent the federal government\u2019s Schedule II regulations.\n\nMedical Marijuana Industry<\/strong>\n\nThe medical marijuana industry<\/a>, including thousands of affiliated businesses, will gain new frontiers working with throughout the United States. They will be, at least partially, legitimate. The entire country will have marijuana rescheduled, making legal the sale, distribution, and research of marijuana for medical use. In many states that are without medical marijuana laws, the drug will fall under blanket Schedule II regulations concerning refills <\/a>and manufacturing registration requirements<\/a>.\n\nThe bill provides for an increase in marijuana research, <\/a>which could potentially be life-saving<\/a>. The ability for states and educational institutions to conduct marijuana research could result in medical breakthroughs. Marijuana research holds promise for discovering treatments and cures for various illnesses. This enhancement of research funding will benefit the industry, research workers, and hopefully society.\n\nAll in all, this bill would be a great boon for medical marijuana: legalizing the underlying medical marijuana would legalize investment<\/a> in the industry<\/a>. Yet, regularization of the medical marijuana industry would presumably create a patchwork of regulations that the marijuana industry would have to comply with. These regulations may impair the possibility of investment in the industry\n\nSafe Harbor<\/strong><\/a> for Banks<\/strong>\n\nCurrently, depository institutions<\/a>, or banks that do business with marijuana companies, <\/a>risk and losing their depository insurance<\/a>. This bill would make it safe for banks to work with legitimate or state-approved marijuana companies. Certainly, the bill\u2019s safe-harbor provision <\/a>for depository institutions that do business with the legitimate medical marijuana industry will stimulate investment in<\/a> and loans to medical marijuana businesses.\n\nBut, the safe-harbor provision is unclear regarding regulation of recreational marijuana<\/a>. While the safe-harbor provision<\/a> does not limit itself to medical marijuana, the rest of the bill<\/a> only authorizes states to create their own regulatory system regarding medical marijuana. As such, a bank would need further regulatory guidance<\/a> to know whether a recreational marijuana shop in<\/a>,<\/a> say<\/a>,<\/a> Colorado <\/a>is worth doing business with. This is an ambiguity that Congress should clarify before passing the bill and leaving it to regulators to interpret.\n\nA Medical Incentive for States<\/strong>\n\nNumerous states and areas\u2014Alaska, Oregon, Washington, Colorado, and Washington, D.C<\/a>.\u2014have recognized legal recreational marijuana. However, even if this bill passes, businesses and consumers in these states would not be given a shield: recreational use of marijuana would still be a federal offense. Yet, the states are allowed to set low thresholds for medical marijuana<\/a>, meaning easier access to the legal medical marijuana.\n\nThis could result in large disparities in the treatment of two businesses serving the exact same type of customer. For example, imagine State A permits medical marijuana for patients with relatively minor medical conditions. On the other hand, State B legally permits recreational marijuana. Almost all patients in State A will become qualified for medical marijuana use; essentially anyone who seeks legal access to medical marijuana will be granted permission. Comparatively, State B could find its businesses subjected to the onerous banking and tax regulations that are currently crippling the marijuana industry. Further, State B will fall under Schedule II regulations. Thus,\n\nSurely, this will incentivize states interested in legalizing recreational marijuana to simply adjust the regulatory scheme for medical marijuana by lowering the threshold for access. In doing so, virtually all those interested in legal marijuana use will qualify for \u201cmedical\u201d marijuana even if they are only interested in marijuana for recreational use. As result, states would create de facto recreational marijuana, yet they will effectively circumvent the federal government\u2019s Schedule II regulations.\n\nTax Implications<\/strong>\n\nSenator Paul\u2019s proposal may also be hindered by one of his least favorite federal bureaucracies<\/a>: the IRS<\/a>. Further, a much-cited impediment to marijuana legalization, the Internal Revenue Code \u00a7<\/a>280E<\/a> prohibition on regular business deductions for drug-related business, could arbitrarily remain in effect. Certainly, \u00a7<\/a>280E<\/a> was intended to include Schedule II drugs<\/a>. It is unclear whether under this bill<\/a> a marijuana business that falls outside the regulatory compliance safe harbors would be treated as a drug dealer for tax purposes.\n\nFor instance, what if a medical marijuana dispensary lets a bureaucratic permit expire or else falls outside the letter of state law? Will the IRS interpret this bill to let non-compliant marijuana businesses fall into \u00a7280E? Not being allowed to deduct expenses could put a businesses at risk of staggering tax bills that would otherwise be reduced by tax deductions. A perfect bill would clarify that this risk should be contained.\n\nWhat About Puerto Rico and Guam?<\/strong>\n\nAn interesting \u201cbug\u201d in the bill<\/a> is that it gives no special local decision making to , such as and Guam<\/a>. States are given the right to make regulations granting more access to marijuana<\/a> or special compliance schemes outside the confines of federal Schedule II regulations<\/a>. Guam and Puerto Rico, as well as other non-state territories called insular areas, are given no such rights. As such, this disparity could negatively impact the economy of these regions that may wish to incentivize cultivation of marijuana.\n\nConclusion<\/strong>\n\nUltimately, the Compassionate Access, Research Expansion, and Respect States Act of 2015 promises to do a lot of good for patients, businesses, banks, and investors who are interested in the marijuana industry. However, the bill, as it stands, contains numerous issues that need to be resolved before signing in order to achieve its aim of producing a marijuana industry that is safe, stable, and secure.","protected":false},"excerpt":{"rendered":"

Bipartisan legislation would permit medical weed and defer to states.Also important are the ways this wouldn’t normalize medical marijuana.<\/p>\n","protected":false},"author":1,"featured_media":1930,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18,19],"tags":[],"class_list":["post-1929","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-feature","category-feature-img"],"acf":[],"_links":{"self":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/1929","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/comments?post=1929"}],"version-history":[{"count":0,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/1929\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media\/1930"}],"wp:attachment":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media?parent=1929"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/categories?post=1929"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/tags?post=1929"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}