Every day, millions of products move across state lines, from fruits and vegetables to construction materials. But, for now, any cannabis that is legally grown in a state must be purchased in that state.
As of last week, the entire west coast of the United States wants that limitation to change. Oregon’s former Gov. Kate Brown signed SB 582 in 2019, California Gov. Gavin Newsom signed SB 1326 in late 2022, and, on May 4, Washington Gov. Jay Inslee signed SB 5069. All of these bills have one thing in common: if and when the federal government allows for it, they can ship their cannabis east.
That these three states ended up here is no coincidence; their common ground goes decades back. Long before states began to legalize cannabis, the west coast was home to the country’s most productive and well-known illegal cannabis cultivation hubs, like the Emerald Triangle. And when reform did enter the picture in the U.S., it began on this coast, too. This history has led to a dual scenario today: lots of newly legal cultivation, but a persistent flow of illegal cultivation. One reason for the persistence? There remain plenty of consumers in jurisdictions, in- and out-of-state, without legal access. The consequences for the legal farmers? They range from unfair competition to glut, to name just two.
How these factors are specifically playing out differs from state to state. Illegal production is far less of an issue in Washington state than in Oregon and California, for example. And, solutions put forth have varied, too. California, for example, eliminated its tax on legal cultivators. But lawmakers along the coast have landed at the same proposal in an effort to both bolster legal cultivators and to prepare for a post-federal-prohibition future in which these states solidify their position as national production hubs.
“California produces three times the amount of cannabis that it can consume, creating an oversupply issue that is destabilizing the market,” California Senator Anna Caballero, who led the legislative effort in the state, told Cannabis Wire last year. “Market expansion is a key piece of the puzzle to stabilize the industry and build a workable framework today that will create a competitive advantage in the years to come as we move closer to federal legalization.”
What comes next for these three states and their efforts toward interstate commerce could depend on a few factors: the federal government, Congress, or the courts. And, of course, on buy-in from other states.
First, the feds. One might wonder: every state that has legalized cannabis is already breaking federal law, so what’s stopping them from shipping cannabis to one another? So far, only California has publicly engaged the feds on this question. In January, California’s Department of Cannabis Control sent a letter to the state AG’s office, asking for an opinion on whether proceeding with interstate commerce “will result in significant legal risk to the State of California under the federal Controlled Substances Act.”
The Department argues “no,” concluding: “Under the U.S. Constitution’s anti-commandeering principle, the Controlled Substances Act could not criminalize the State’s legalization and regulation of commercial cannabis activity (as a matter of state law), including commercial cannabis activity with out-of-state licensees. By its terms, the Controlled Substances Act does not criminalize the State’s legalization and regulation of commercial cannabis activity, including commercial cannabis activity with out-of-state licensees.”
The AG’s office has yet to respond.
In the courts, specifically the United States District Court for the District of Oregon, there’s Jefferson Packing House, LLC, an Oregon cannabis wholesaler that argues that the state’s prevention of interstate commerce is “unconstitutional.” They focus on the dormant Commerce Clause, which, in short, means that states can’t pass laws that interfere with interstate commerce.
In its motion to dismiss, however, the state wrote in January: “If this case involved state regulations relating to marionberries, there would be little debate as to whether the dormant Commerce Clause applies. Marionberries are part of a national market, where state regulations might unduly burden or discriminate against otherwise lawful interstate commerce. But this case is not about the commerce of marionberries. It is about the commerce of marijuana, a substance that Congress exercised its affirmative Commerce Clause power to eliminate from any form of lawful interstate commerce,” referring to Congress’ placement of cannabis in Schedule I of the Controlled Substances Act.
The suit is ongoing.
In Congress, no legislation introduced so far this session focuses on the issue of interstate commerce, but one bill last session hit it on the head: the Small and Homestead Independent Producers Act of 2022. The bill aimed to allow “small cultivators of marijuana and small manufacturers of marijuana products to ship and sell the marijuana or marijuana products using the U.S. Postal Service or a private or commercial interstate carrier. Specifically, marijuana or a marijuana product may be shipped or sold to individuals within a state or another state in which the possession of it is lawful by such individuals.” The bill would take effect when cannabis becomes federally legal.
Of course, the how of cannabis becoming federally legal will include interstate commerce. Language around interstate commerce was included in the two comprehensive legalization and regulation proposals put forth in Congress to-date: the Cannabis Administration and Opportunity Act and the STATES Reform Act, both of which are expected to be reintroduced in the new Congress. The language around interstate commerce in reform legislation has drawn robust feedback from cannabis stakeholders because how it takes shape will determine, for example, whether and how small, minority-owned, and local businesses are protected.
Considering how seismic interstate commerce will be, it’s no surprise that these west coast states aren’t alone in anticipating this future. Little-noticed language in Missouri’s adult use ballot measure, for example, preemptively set ground rules for interstate commerce. It noted that “any marijuana or marijuana-infused products imported into this state shall be subject to the same testing standards and seed to sale tracking system” that the amendment itself required, and that “unless federal law, rules, or regulations explicitly require otherwise, no entity shall sell, transport, produce, distribute, delivery, or cultivate marijuana or marijuana-infused products without an applicable license or certificate as required” by the amendment.