Can Federal Cannabis Legalization Harm State Markets?

The Parabola Center for Law and Policy published a report that claimed federal cannabis legalization was bound to happen eventually, prohibition on the matter can only last for so long. It also mentioned that reforming cannabis would align positively with federal and state policies but could also harm or “disrupt and force the transformation of existing intrastate cannabis markets,” (1).

“How the nation will shift from dozens of individual state cannabis markets to one national market, and the implications of that shift, is unknown but likely to be dramatic,” the report stated (1). “It is also safe to assume that many advocates for federal de-scheduling are not aware of the consequences such a policy change portends for existing and entrenched state cannabis policies.”

To prevent the collapse of state markets throughout the US, Parabola is offering three key recommendations, as well as draft text to help fix the problem.

As their first recommendation, the Parabola Center for Law and Policy mentioned that federal legalization must include the preservation of states’ rights to prevent any disruption. They added that congress needs to “specifically state that it does not intend to preempt, prohibit, or otherwise limit any state law, regulation, or requirement regardless of whether the state law affects interstate commerce or favors in state interests,” (1).

The second recommendation was to prioritize small, social equity, and worker-owned cannabis businesses in interstate cannabis commerce where they are regulated via a registration system overseen by the federal government (1). Marijuana Moment mentioned that (1), “registrations should be additionally be reserved for state-licensed entities that are 1) involved in promoting industry diversity, 2) offering support and services to ‘disadvantaged individuals, veterans, or individuals and communities most affected by cannabis prohibition and enforcement’ or 3) protect workers’ rights to organize and co-own businesses.”

Lastly, for the third recommendation, it was proposed that “legalization should be coupled with provisions to minimize the potential for corporate consolidation and monopolization of the cannabis industry,” (1). This has been a problem the organization has mentioned in a previous educational campaign.

The Parabola Center for Law and Policy feels strongly that if cannabis industries continue only intrastate, state regulatory bodies potentially could become susceptible to liability under federal legalization (1). In the report, they mention there could be serious consequences for state-licensed companies throughout the US.

“If federal legalization is not coupled with explicit federal protections for state-based intra-state markets, everything will change once cannabis is de-scheduled. The world of legal cannabis will look nothing like it does now,” the center mentioned in the report (1). “But this outcome is not inevitable. Congress can protect intrastate markets if it chooses to.”

“Without protection for small businesses, a shift from fragmented intrastate markets to one large intrastate market through the end of federal prohibition and the demise of interstate barriers will likely lead to consolidation of the cannabis industry and a monopolization of the market by large cannabis companies. Additionally, large corporations currently operating in other areas will enter the cannabis market once the risks and constraints of federal prohibition are removed,” they stated (1).

“Whatever one thinks of the benefits of a consolidated interstate cannabis market, it is clear that such a market is unlikely to prioritize the social equity goals that have driven many states’ existing policies,” the report said (1). “Without specific efforts by Congress to protect state-level cannabis equity programs, and to limit market consolidation and monopolization, state efforts to create an equitable and inclusive industry will be wiped out.”

States such as, Oregon, Washington State, and California, have imposed laws which will create the infrastructure so that their states will be able to take part in cannabis imports and exports among legal states once there is federal legalization.

Reference

1. Jaeger, K. Federal Marijuana Legalization Could Endanger State Markets Without Anti-Monopoly and Interstate Commerce Protections, Report Says https://www.marijuanamoment.net/federal-marijuana-legalization-could-endanger-state-markets-without-anti-monopoly-and-interstate-commerce-protections-report-says/ (accessed Oct 26, 2023).