Folks are wondering how the landscape for cannabis will appear after the election. Will it be very different to what it is now? Will it stay the same? Will it regress? Voters will have the final say. They will decide how they want it to look by whom they vote for in 2020. Marijuana is already legal in many states. You can order weed delivery in most of them. However, at the federal level, what will happen?
Cannabusinesses can enjoy removal of Section 280E of the federal tax code, federal banking reform, relaxing of prohibition, and maybe even tax-and-regulate legalization now the Democrats won. Since the Democrats are retaking the U.S. Senate and the White House while maintaining their majority in the House of Representatives, there are unlikely to be any further delays in federal legalization.
Very High Stakes
However, cannabusinesses might still get to enjoy these breakthroughs regardless, even if just one of the Senate or the White House turns blue. If Republican Donald Trump had won over Democrat Joe Biden, and Republicans managed to retain Senate control, then analysts predicted more gridlock and delays on cannabis policy, even if some progress still occurs to make banks more weed friendly.
“The best chance of anything getting done is a Biden-Harris White House and the Democrats taking the Senate,” explained Geoff Bacino, former regulator for the federal bank and partner at consulting firm Bacino & Associates. This in reference to U.S. Senator Kamala Harris, who is Joe Biden’s very popular vice-presidential running mate. With a Biden win, Harris is now second in command.
“Republicans are much less socially elastic and morally elastic on cannabis than the Democrats,” Bacino continued. The majority of senators holding up reform for cannabis banking are Republicans. They controlled the Senate, had 35 seats up for grabs. Of 23 Republican senators, thirteen were racing competitively, compared with just two of the 12 Democratic candidates.
Five of the defending senator seats sit on the Senate banking committee. The result of these races could be the deciding factor for the passage of the SAFE Banking Act of 2019. Currently stuck in the GOP-controlled committee, that measure would permit financial institutions to provide cannabusinesses with financial services without fear of federal reprisal.
Cannabis Banking Reform
If the House remains blue, then the likeliest chance of banking reform would be a Democratic Senate and White House majority. As Bacino explains, “If you have a Democratic takeover of the White House and the Senate, I think you are going to see legislation that is probably more favorable to cannabis banking. He reiterated it might not happen immediately with a Biden win, but certainly within a year.
Although the Democratic Party of 2020 is not calling for cannabis banking reform explicitly, Harris was the one to sponsor the SAFE Banking Act. Therefore, support from a White House with Biden and Harris seems inevitable. “The issue with the Senate right now is not really a vote-counting issue as much as it is a committee-control issue,” explained Washington DC-based attorney Steve Fox.
In speaking of control of the committee, Fox said, “That is really what held things up more than anything else. It is not that the SAFE Banking Act is controversial.” No. Fox also believes that the SAFE Banking Act will pass with a Democrat victory in the White House, even if the GOP keeps the Senate. Bacino believes a third of Republican senators support weed reform. A third opposes it. The last third are on the fence.
An administration under Biden and Harris that supports SAFE would permit fence-loving Republicans to vote yes to reform without causing too much controversy. “I think if you had a Democratic administration, even if the Senate stayed Republican, you might find a few more Republicans willing to cross over if only to get things done,” Bacino explained.
A Trump administration with a GOP-kept Senate would have just continued the current gridlock, according to analysts everywhere. Fox, who is also the co-founder of the National Cannabis Industry Association, puts into words what the majority of the country is feeling, “It is just really hard to envision a Republican-controlled Senate pushing forward on this,” with this being cannabis banking reform.
Analysts are also hoping that cannabusinesses will finally see the end of 280E, a measure that prohibits companies that sell federally illegal drugs, like cannabis, from making standard tax deductions for business. Although eliminating 280E will not achieve what banking reform will, the goal to see its end is actually very realistic and possible.
“When a new administration comes in, one of the first things they tend to do is reform the tax code in one way or the other,” says Fox. “So I would expect there would be a push to do that, and therefore 280E would be on the chopping block.” The Democratic platform makes clear that states should determine their own policies for cannabis, such as whether to legalize or allow marijuana delivery.
Trump also believes in states making their own decisions on the matter. If the STATES Act gives states control over their own legalization choices, then it is also possible to carve 280E out of it for cannabusinesses operating legally in states with legal markets. The only other way to get rid of 280E entirely is for the federal government under Biden to deschedule cannabis completely.
The Federal Swing
There are likely to be huge changes in regards to the federal prohibition of cannabis, but it is very unlikely that they would involve a huge move like outright legalization, with federal taxation and regulation. The status quo would continue if the current political balance remained. However, Democrats call for legalizing medical marijuana and descheduling it as a drug to attract opportunities.
It seems most Democratic senators support the legalization of medical marijuana. Their numbers, combined with several weed-friendly Republicans, should pass this legislation easily. What regulations governing federal legalization would look like is unclear, as are how state markets would continue operating in the interim, but descheduling would make research and other studies easier and cheaper.
While Biden opposes legalization of adult use at the federal level, at least thus far, Harris is an outspoken supporter of legalizing recreationally too. Harris also sponsored the MORE Act, which would deschedule cannabis and effectively legalize it nationwide. As more states legalize at the ballot box, it will compel Biden to look more seriously at a tax-and-regulate approach, with the support of Harris.