As we closed out 2022, we saw the federal government pass its first standalone cannabis law, the Medical Marijuana and Cannabidiol Research Expansion Act, with more possible federal reform on the horizon. On the state level, the industry has seen an ever-increasing push for additional medical and/or adult-use legalization as well. Against this backdrop, the following focuses on five cannabis laws to watch in 2023.
1. The SAFE Banking Act
What is it? The Safe and Fair Enforcement (SAFE) Banking Act would permit banks to do business with plant-touching cannabis companies. Because cannabis remains federally illegal, traditional financial institutions will not facilitate cannabis-related transactions. For banks that want to work with state-regulated cannabis-related businesses, the SAFE Banking Act would do three main things:
- Stop federal regulators from taking certain harmful actions against banks just because the bank provides financial services to state-regulated cannabis-related businesses.
- Clarify that money obtained from a state-regulated and compliant cannabis business would not be considered “proceeds from an unlawful activity” solely because the source of those funds arises from a plant-touching business.
- Provide general protection against federal liability for banks, the Federal Reserve and Federal Home Loan Banks, as well as insurers who work with state-regulated and compliant cannabis-related businesses.
Where is it now? The U.S. House of Representatives has passed SAFE seven times—even passing it as a standalone bill in April 2021 by a vote of 321 to 101, with 106 Republicans voting for it—yet the bill has died each time in the Senate. Most recently, the act was left out of large-scale spending and defense bills in December 2022.
Why is it important? SAFE would fight crime, promote diversity, and boost the economy by making more traditional capital sources available to this nascent industry. Cannabis companies are frequently constrained by being forced to conduct business in cash and the risks that go along with that, such as the risk of violent crime. By providing safe access to banks, SAFE would decrease on-hand cash at cannabis facilities and, in turn, reduce violent crime in the cannabis industry. SAFE would also promote diversity by requiring a study and report on access to financial services for minority- and women-owned state-regulated and compliant cannabis-related businesses. Lastly, SAFE would boost the economy. The United States cannabis market is projected to grow to as much as $45.8 billion by 2025. Getting that money into the traditional monetary system would provide greater access to capital from traditional sources and potentially open the door for these companies to be traded on national exchanges such as the NYSE.
2. The Medical Marijuana and Cannabidiol Research Expansion Act
What is it? This recently enacted federal law endeavors to facilitate cannabis research. It accomplishes two main goals:
It forces the Drug Enforcement Administration (DEA) to make quicker decisions on applications to (1) research cannabis; or (2) manufacture it to supply the researchers. Further, this law gives research applicants different ways to have their research protocols reviewed, allowed, and ultimately approved by the DEA.
This law also authorizes certain entities to manufacture, distribute, dispense, or possess cannabis and cannabidiol (CBD) for medical research, with the goal of developing cannabis-derived commercially available FDA-approved drugs.
Where is it now? The House passed the legislation on July 26, 2022, by a vote of 325 to 95, with 109 Republicans voting in favor. The Senate passed it by voice vote on Nov. 16, 2022. President Biden signed it into law on Dec. 2, 2022.
Why is it important? This is the first standalone federal cannabis law, which has great significance. If this law acts as intended to generate significant research supportive of the medical efficacy of cannabis, Congress may be forced to seriously consider further cannabis reform. This law also addresses the primary argument of industry opponents by asking for, among other things, research on how cannabis affects our ability to drive. Research on this and other subjects will better inform the discussion about broader federal cannabis reform.
3. Adult-Use Regulations to Come in Maryland
What is it? Maryland preliminarily legalized adult-use cannabis in the 2022 midterms when Marylanders passed Question 4 by a 65.4 percent to 34.6 percent margin. At this point, Maryland’s General Assembly must pass a law governing the consumption, distribution, possession, regulation, and taxation of cannabis. Assuming the General Assembly does so, adults 21 and over will be able to consume cannabis in the state starting July 1. However, if the General Assembly fails to pass those laws before then, adult use will not be legal in Maryland until it does.
Where is it now? The Maryland General Assembly is on the clock. Its current legislative session began on Jan. 11 and will last through April 10.
Why is it important? Maryland legalizing adult-use cannabis would do more than let people consume it. If the General Assembly passes laws governing adult use, Maryland will make money by taxing cannabis sales; build its economy by licensing adult-use businesses; pursue equity by reforming criminal justice relating to cannabis sentences; and use newly created funds to invest in communities throughout the state. Maryland is on track to join D.C. and 20 other states in allowing adult-use cannabis, reflecting a growing trend throughout the country for the further normalization of cannabis use by responsible adults.
4. Medical Cannabis in North Carolina
What is it? The North Carolina Compassionate Care Act is a bill that would legalize medical cannabis for qualifying patients.
Where is it now? This bill stalled in the North Carolina House in June 2022, after passing the Senate by a vote of 36 to 7.
Why is it important? This bill almost passed in 2022 and is worth watching in 2023. The bipartisan support in North Carolina’s Senate suggests North Carolina is close to legalizing medical cannabis. However, House Republicans reportedly had an internal conference and chose to deny the bill a committee hearing, leaving it stalled in the House. We anticipate a hard push in 2023 to adopt this law or some other version of it because North Carolinians support it. Studies in 2021 and 2022 found that about 70% of North Carolinians favor legalizing medical cannabis.
5. Adult-Use Legalization in Pennsylvania
What is it? Adult-use cannabis in Pennsylvania seems likelier with the election of former Attorney General Josh Shapiro (D) as the state’s next governor and Democrats winning enough seats to control the state’s House in the 2022 midterms.
Where is it now? Pennsylvania has not legalized adult-use cannabis despite legalizing medical cannabis in 2016. Pennsylvania’s House and Senate each had a legalization bill introduced last year. Neither got out of the legislature, but one bipartisan Senate bill reached the committee discussion level for the first time.
Why is it important? There is a real chance Pennsylvania legalizes adult-use cannabis in 2023. Governor-Elect Shapiro frequently Tweeted support for legalizing adult-use cannabis during his campaign. Democrats won enough seats (despite three currently being vacant) in this past November’s midterm elections to control Pennsylvania’s House for the first time in over a decade. Furthermore, 66% of Pennsylvanians support adult-use cannabis legalization. This legalization would also be about more than individual consumption; Governor-Elect Shapiro has said legalization efforts must include criminal justice reform, specifically mentioning expungement of non-violent marijuana convictions.
Joshua Horn is a Partner and Co-Chair of the Cannabis Law Practice at Fox Rothschild LLP. He can be reached at jhorn@foxrothschild.com.
William Bogot is a Partner and Co-Chair of the Cannabis Law Practice at Fox Rothschild LLP. He can be reached at wbogot@foxrothschild.com.
Robert H. Eisentrout is an attorney in the Cannabis Law Practice at Fox Rothschild LLP. He can be reached at reisentrout@foxrothschild.com.
Editor’s note: This story was originally published Jan. 17, 2023.
