During a UC Berkeley-hosted conversation on Tuesday, regulators and experts discussed the challenges and opportunities that will arise when cannabis can freely cross state lines.
The UC Berkeley Cannabis Research Center invited Gillian Schauer, executive director of the Cannabis Regulators Association (CANNRA), and Matt Lee, general counsel for California’s Department of Cannabis Control (DCC), among other experts, to discuss how best to craft policies for the inevitable interstate commerce of cannabis.
Over the years, as regulators launched adult use cannabis markets, they did so following Department of Justice guidance that broadly suggested the feds would not interfere with states that followed eight priorities, including not allowing cannabis to cross state lines.
How that played out is that states took this “chance at intrastate markets to their advantage, to favor their own resident businesses, to foster small businesses, develop social equity programs, and advance some very state specific policy goals,” said Tamar Todd, the legal director for New Approach PAC. (This PAC, as Cannabis Wire has reported, has supported several reform initiatives.)
But, these siloed markets are a byproduct of federal prohibition. And the United States stands at a tipping point on legalization, with 24 states and D.C. having legalized for adult use. In the meantime, as the possibility of federal legalization looms, states have begun to pass legislation that would allow for commerce with other adult use states – but even these laws require a federal blessing.
“All of these different pathways through which interstate commerce could come to our country have very different ramifications on state programs,” Schauer said. “The implications are broad, and would impact equity, small business, existing licensed businesses of all types.”
Lee said that the Pacific Northwest is carving its own path, where California, Oregon, and Washington have all passed laws that would allow “those states to negotiate voluntary state to state agreements with other states, to allow the import and export of state regulated cannabis,” subject to all parties agreeing to the terms.
“We’re doing it in a very different way,” Lee said, “in a voluntary and controlled way through our state’s political branches rather than, you know, trying to throw open the floodgates in federal court.”
However, “trigger conditions” would need to occur for these laws to go into effect. For example, if federal law changed, Lee said, the state’s attorney general might be “willing to rule out the possibility of ‘significant legal risk’ to the state.” Last year, after Gov. Gavin Newsom signed an interstate commerce bill into law, as Cannabis Wire reported at the time, the DCC requested an opinion from state Attorney General Rob Bonta about the topic, which regulators received in December. It wasn’t quite what they “hoped” for, Lee said, but it was an “interesting response,” and Lee believes there is “much common ground.”
“We are in a place where we think interstate commerce makes sense, can be made to work, both for us and for partner states. And we think it can be done, in ways that don’t need to antagonize the federal government. And we are looking forward to continuing to pursue those ways,” Lee said.
Litigation could also play a role. A lawsuit filed in 2022 in Oregon argued that restrictions on interstate commerce of cannabis “should be struck down because it violates the dormant Commerce Clause of the United States Constitution by discriminating against and unduly burdening interstate commerce.” While that suit was dropped earlier this year, it is unlikely to be the last.
“I don’t want any possibility of facing an order from the court a year or two from now that forces me to open the floodgates. I would much rather try to start working now to figure out how to get ahead of this issue, how to figure out a way that it can be made to work not just for me, but for other state regulators, for the partners,” Lee said. “I see the approach that we are taking as an important prophylactic to help guard against that more chaotic possibility.”
Robert Mikos, a law professor at Vanderbilt University Law School, said that cannabis is an outlier when it comes to interstate commerce.
“Every state is doing something now that would be unheard of in any other market. They’re discriminating blatantly against interstate commerce,” said Robert Mikos, a law professor at Vanderbilt University Law School. “If the dormant Commerce Clause applies to the cannabis market, these state restrictions on interstate commerce are going to come tumbling down. And that’s going to make the lives of state regulators a lot more complicated.”
The tumult that cannabis regulators are bracing for when the walls come down on state cannabis markets was a repeated topic of discussion during the webinar. Regulators will have, for example, many new vendors from out-of-state that they’ll have to contend with and somehow incorporate into their state systems.
The one area of cannabis policy that could take the biggest hit, at least in the short-term, is social equity programs.
“As they are being constructed right now by the states, they typically rely on a form of geographic discrimination,” Mikos said. For example, if a state prioritizes people who live in an area where there’s a disproportionate number of cannabis-related arrests, that could be “suspect,” Mikos said.
“The key point to get across here is that the dormant Commerce Clause would clearly invalidate a lot of what the states have done in the cannabis law space, if it applies to the states,” he added.
Schauer, the executive director of CANNRA, also reminded attendees that “we already have interstate commerce of cannabinoids. And it would be naive not to recognize that we do.”
Schauer highlighted that hemp-derived cannabinoids, like CBD, made federally legal through the 2018 Farm Bill, are now sold from coast-to-coast in brick and mortar retailers like gas stations and grocery stores, as well as through online e-commerce outlets.
California, which has been a leader in cannabis for decades, has seen its fair share of recent industry struggles, including companies laying off staff, and in some cases, shuttering altogether.
“I think that a lot of the interest in interstate commerce that exists is a tacit acknowledgment, at the very least, that this is one of the few things that needs to open up in order for some historical cannabis markets, like California, like Oregon, to start to thrive in the way they should,” Lee said. “I have the nagging suspicion that one of the reasons our jobs are hard is that we have incompletely legalized cannabis.”
Ultimately, Schauer said, there are many reasons that people are paying attention to what California is doing on cannabis policy.
“The really big markets drive the policy for everybody,” Schauer said. “I think all eyes are kind of on what the big, big cannabis markets are doing. And it’ll be important to think carefully about how that will impact the smaller markets.”
