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Monday, February 6, 2023

Federal legalization of cannabis: the return of the CAA!

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Yesterday, Senate Majority Leader Chuck Schumer and Senators Cory Booker and Ron Wyden presented Cannabis Management and the Law of Opportunity (CAOA) in the Senate. This version of the CAOA is a big deal, as it’s been more than a year since a draft discussion of the bill was presented to the public. It’s also a big deal because we finally have a meaningful cannabis bill (with input from many stakeholders) from the Senate, which is notorious for killing House cannabis legislation – including Safe Banking Act.

The CAA is now headed for consideration by a Senate committee. No one knows their chances of success, whether it is written, modified, or embedded One or more proposals of the House of Representatives.

What does this version of the CAOA Act do?

Senator Booker’s website states that the CAA will:

“Ending the federal cannabis ban by removing cannabis from the Controlled Substances Act; enabling states to establish their own cannabis laws; ensuring that federal regulations protect public health and safety; and prioritizing restorative and economic justice.”

Details, among many Other (including research, employment, and work effects), is that the CAOA:

  1. It completely removes cannabis from the Controlled Substances Act (CSA) but allows federal enforcement of trafficking in those states that choose to keep the ban. Notably, interstate commerce is expressly permitted. As with cannabis under the Farm Act 2018, licensed operators will be able to move cannabis through prohibitions, although they cannot sell it there.
  2. It allows states to maintain their licensing programs with their own barriers to entry, just as we have them now.
  3. Removal of the Drug Enforcement Administration as the primary law enforcement agency for the Food and Drug Administration (FDA) and the Alcohol and Tobacco Trade Bureau (which will be renamed the Alcohol, Tobacco and Hemp Tax and Trade Bureau (“TTB”)). Treats cannabis regulations similar to those of alcohol and tobacco (we’ve seen some repetition of this on the fade away states reform law).
  4. An excise tax is imposed on cannabis products as follows:
    • For small and medium-sized producers, the excise tax will start at 5 percent and gradually increase to a maximum of 12.5 percent.
      ○ For larger cannabis businesses, the indirect tax will start at 10% and gradually increase to a maximum of 25%.
  5. Establishes market competition rules to protect smaller independent operators.
  6. It implements strong anti-conversion rules, including a track and trace system, and has limits on the amount of retail purchases. The TTB, in coordination with the Secretary of Health and Human Services, will develop additional regulations around these areas.
  7. It requires the Department of Transportation to create a disabled driving standard for cannabis within three years to be adopted by states. Motivating states to adopt a ban on the use of cannabis in open containers with best practice guidelines that must be issued no later than one year after the law is passed. Even a national leadership standard can be implemented despite what individual states decide here.
  8. It establishes a Center for Cannabis Products within the FDA to regulate production, labeling, distribution, sales, and other manufacturing and retail elements of the cannabis industry for such things as fraud and brand manipulation.
  9. Directs the Food and Drug Administration to establish standards for labeling cannabis products, including potency, doses, servings, place of manufacture, and directions for use. Even cannabis-specific cannabis recalls are enshrined in law, and the Medicines and Cosmetics Act will be amended to include cannabis.
  10. Develop programs and funding to prevent youth use of cannabis, including through media campaigns, to educate the public about the health and social effects of cannabis.
  11. Electronic cannabis product delivery systems are prohibited from containing added flavors. Electronic Cannabis Product Delivery System means an electronic device that delivers a cannabis product via a mist solution to the user who inhales from the de24 vice and any component, liquid, part or accessory of such a device, whether or not sold separately.
What about social justice?

The CAOA may have the most comprehensive set of social justice guidance we’ve seen in a piece of proposed federal legislation. If the bill passes, it would use federal tax revenue to reinvest in “the communities and individuals most affected by the failed war on drugs,” by providing them with legal aid, re-entry assistance, health education, and more.

The Central Auditing Organization has also established a fair licensing program. This program will provide funds to states, tribes, and localities to implement licensing programs that reduce barriers to cannabis licensing and employment for individuals negatively affected by the war on drugs.

There will also be opportunities under CAOA for loans and technical assistance for those small businesses “owned and controlled by socioeconomically disadvantaged individuals in cannabis legal states,” including a ten-year pilot program with loans from the Small Business Administration.

And like some states and cities, not everyone can qualify it here – it’s mainly down to the “eligible entities” and individuals, who are identified on the invoice.

What are the long term prospects?

Overall, CAOA is well thought out (it definitely took a while!) and covers a lot when it comes to cannabis industry issues. Having said that, Senate Democrats may never get this giant out of a bill. Parts of the CAA may have been brought up to gauge what the Senate might support in a tougher reform bill in the future. In this case, legalization will come in a series of “parts” of the law, rather than the overall CAOA effort.


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