Federal Cannabis Legalization and Reform: Where Are We in 2024?

It’s been nearly eight months since the Drug Enforcement Administration (DEA) received an official recommendation to reclassify cannabis as a Schedule III drug, yet this possibility continues to be a top storyline throughout the industry in 2024.

Specifically, Attorney General Merrick Garland has to offer three findings before the DEA issues its pending decision to potentially reschedule cannabis under the Controlled Substances Act, including its 1.) currently accepted medical use; 2.) relative abuse potential; and 3.) physical and psychological dependence liability.

Garland and DEA officials also are likely weighing the U.S.’s international treaty obligations under the Single Convention on Narcotic Drugs, 1961, which rescheduling opponents continue to hammer on as a reason to keep cannabis listed as a Schedule I drug. Prohibitionists also continue to point to the dangers and health risks of cannabis as another reason.

But cannabis wasn’t always treated this way. In fact, the plant was once a legal cross-border import more than 100 years ago, when “the federal government was not overly concerned with marijuana,” according to the U.S. Customs and Border Protection.

The political climate toward cannabis began to change in the early 20th century, when immigration across the southern border spiked due to the Mexican Revolution in 1910, paving way for propagandists to play on fear and prejudice by associating refugees fleeing to the U.S. with a negative sentiment around cannabis, according to TIME.

Prohibition in the U.S.

Federal cannabis prohibition dates back roughly 90 years in the U.S., with the 1937 passage of the Marihuana Tax Act, which outlawed the nonmedical use of cannabis, and regulated cannabis importation, cultivation and distribution. This legislation came following the 1936 production of propaganda film “Reefer Madness,” which infamously claimed, “marijuana is … the real public enemy number one.”

Many states began prohibition of recreational cannabis in the preceding decades, starting in 1913 with states like Wyoming and California, which have vastly different approaches to cannabis in today’s age of reform. By 1933, there were 29 states that banned cannabis, according to authors of the 2014 book “Prohibition, Religious Freedom, and Human Rights: Regulating Traditional Drug Use.”

Two decades later, the Boggs Act of 1952 and Narcotics Control Act of 1956 stepped up America’s cannabis war by enacting stricter drug sentencing laws. These laws set mandatory sentences for cannabis-related offenses, including two to 10 years imprisonment with a fine of up to $20,000 for first-time offenders of cannabis possession.

But it wasn’t until President Richard Nixon signed the 1970 Controlled Substances Act (CSA) that cannabis became classified as a Schedule I federally controlled drug, right up there next to heroin, LSD and ecstasy—the only classification on the CSA where drugs have no accepted medical use. Meanwhile, cocaine and fentanyl are considered Schedule II drugs.

Despite the Schedule I designation, 11 states decriminalized cannabis in the 1970s, starting with Oregon in 1973, according to The Oregonian. This wave came following the bipartisan Shafer Commission determining that cannabis should be decriminalized for personal consumption. (Although Nixon appointed nine of the commission’s members, he rejected its recommendation.)

Still, the drug war continued. President Ronald Reagan signed the Anti-Drug Abuse Act of 1986, which then-Sen. Joe Biden co-crafted to authorize new funding for drug treatment programs and stricter penalties for drug offenses. And in 1989, President George H.W. Bush declared a new drug war in a national televised speech: “All of us agree that the greatest domestic threat facing our nation today is drugs,” he said.

The Green Wave

In 1996, California ignited the present-day cannabis legalization wave when voters approved Proposition 215 with a 55.6% majority to exempt patients and caregivers from prohibition laws.

As of 2024, 38 states have legalized medical cannabis in manners that don’t severely limit access to patients, while 24 states and Washington, D.C., have legalized adult-use cannabis. As this landscape continues to evolve, a record-high 70% of Americans think marijuana should be legal, according to Gallup pollsters. It wasn’t until 2013 that the majority of Americans agreed in support of this issue.

This landscape has provided booming (and bust) business opportunities in many state-legal markets: The 20 states that had operational adult-use retail markets in 2023 sold roughly $23 billion in cannabis, according to government data collected by Cannabis Business Times.

And the industry continues to grow with each new market that comes online: Connecticut, Missouri and Maryland all launched adult-use sales in 2023, while Ohio is scheduled to commence sales in 2024, and Delaware and Minnesota are working toward starting sales in 2025.

In addition, Florida has the potential to launch adult-use sales in 2025 should Smart & Safe Florida’s “Yes on 3” campaign attract 60% supermajority support for its constitutional amendment in this November’s election.

Federal Cannabis Reform in 2024

Among countless variables that could impact the cannabis industry in 2024, many stakeholders are keen on three main reform prospects at the federal level: the DEA’s pending rescheduling decision, the SAFER Banking Act’s passage, and the Farm Bill’s reauthorization.

Although cannabis advocates with the “deschedule or do nothing” approach have said rescheduling cannabis would only continue the disparities of cannabis criminalization, incremental reform via a Schedule II or III listing could have myriad ripple effects related to industry oversight and enforcement, scientific research, criminal justice reform, and normalization should the DEA finally decide that cannabis does indeed have currently accepted medical use in the U.S.

RELATED: DEA’s 5-Factor Test Makes Rescheduling Cannabis Impossible

On the business front, reclassifying cannabis under the CSA would ease certain tax burdens on state-licensed cannabis operators, including lifting Section 280E of the internal revenue code that currently restricts cannabis companies from deducting many expenses related to running their operations.

While DEA officials have not publicly addressed a timeline for their rescheduling review process, this process was directed by President Joe Biden, who has played up his cannabis reform policies during his 2024 reelection campaign. That said, many have speculated that an announcement from the DEA will come this year.

SAFER Banking Act

Current legislation to provide safe harbor to financial institutions wishing to service the cannabis industry—the Secure and Fair Enforcement Regulation (SAFER) Banking Act—has advanced as far as it ever has in the U.S. Senate, which is leading the charge this Congress.

After a major victory with the Senate Banking Committee advancing the legislation during a markup hearing in September, the SAFER Banking Act continues to await Senate Majority Leader Chuck Schumer, D-N.Y., to call the bill to the floor for a vote.

But now with key federal government funding packages in the rearview mirror, Schumer included the SAFER Banking Act among a short list of legislative priorities this year, saying last month he’ll turn to it soon.

Schumer also said he was committed to including criminal justice provisions, like the Harnessing Opportunity by Pursuing Expungement (HOPE) Act, in the SAFER Banking Act, as well as the Gun Rights and Marijuana (GRAM) Act, which would allow state-legal cannabis consumers to purchase and possess firearms—the latter of which could help attract broader bipartisan support for the bill, which currently has 32 Democrats and four Republicans signed on for sponsorship.

Specifically, U.S. Sen. Jacky Rosen, D-Nev., reintroduced the HOPE Act on April 18. The bill would provide a federal grant program to help expunge cannabis convictions and/or seal records in states where the plant has been legalized or decriminalized.

“Having a record for something that is now legal in our state threatens Nevadans’ ability to get a job, apply for housing, and contribute to our state’s economy,” Rosen said Thursday in a press release.

The HOPE Act’s introduction is a positive sign for the SAFER Banking Act’s path forward, Schumer said on social media April 18, but the majority leader must also extend his reach to the U.S. House, which is now under Republican control.

Previous versions of safe banking legislation passed the House seven times under Democratic control between 2019 and 2022 but were stonewalled by Senate leaders each time. 

2024 Farm Bill Reauthorization

Should intoxicating cannabinoid products derived from hemp be regulated like cannabis?

This is a critical question posed by industry stakeholders to congressional leaders charged with reauthorizing the Agriculture Improvement Act (Farm Bill) later this year.

While the 2018 Farm Bill federally legalized industrial hemp—defined by having no more than 0.3% THC on a dry-weight basis—beyond state pilot programs, many hemp-derived products containing intoxicating amounts of delta-8 and delta-9 THC have proliferated the marketplace, landing on shelves at smoke shops, gas stations and convenience stores throughout the nation.

This has been great for businesses in states with prohibitive cannabis laws such as Texas, where companies in the state’s hemp and severely limited medical cannabis industries generated more than $8 billion in revenue and employed more than 50,000 workers in 2022, according to a Whitney Economics estimate.

Nationwide, U.S. hemp-derived cannabinoid sales were “conservatively” estimated to be $28.4 billion last year, according to a Whitney Economics’ 2023 national cannabinoid report. Roughly 10% of that sales total was attributed to nonintoxicating CBD products.

RELATED: How Do US Hemp-Derived Cannabinoid Sales and Craft Beer Sales Compare?

Beau Whitney, who founded the cannabis and hemp data and analytics firm in 2014, previously told Cannabis Business Times that $7.1 billion of the $28.4 billion is considered “gray or illicit sales.”

But many licensed cannabis operators in adult-use states, where these hemp-derived products often end up via interstate commerce, have taken the position that the Farm Bill was intended to separate hemp and cannabis in a nonintoxicating-versus-intoxicating manner. Otherwise, cannabis operators who often pay a premium for their state licenses—not to mention additional taxes and regulatory compliance—claim they are at a disadvantage.

In an April 10 letter to key U.S. lawmakers, the U.S. Cannabis Council (USCC), which represents many of the biggest players in the regulated cannabis industry, proposed that the new Farm Bill includes language to exclude intoxicating hemp products from the definition of hemp and instead consider them cannabis.

“This proposal protects the allowances granted to farmers, allowing legitimate agricultural and industrial hemp producers the flexibility they need to navigate the changing plant characteristics when growing in the field, while taking away the loopholes that have created the current gray market environment for unregulated hemp-derived intoxicants,” USCC Executive Director Edward Conklin wrote in the letter.

Federal Legalization Bills

There are three broad cannabis legalization bills primarily at play this Congress, including one backed by 87 House Democrats, another backed by five bipartisan House members, and another Democratic-back bill that’s teed up for reintroduction in the Senate.

In September 2023, Rep. Jerry Nadler, D-N.Y., reintroduced the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, legislation that intends to legalize cannabis at the federal level through decontrolling and decriminalizing the plant, as well as provide expungements for certain cannabis offenses and create reinvestment opportunities for those adversely impacted by prohibition.

Nadler is joined by 86 of his Democratic colleagues in backing the bill, which is indicative of the legislation’s partisan history. Previous versions of the MORE Act have passed the U.S. House twice before, most recently in a 220-204 vote that fell almost entirely along party lines in April 2022. With the House now under Republican control, the current rendition hasn’t made any headway.

On the right side of the aisle, in October 2023, Rep. Nancy Mace, R-S.C., reintroduced the States Reform Act of 2023, legislation that would legalize cannabis by amending the Controlled Substance Act and provide for federal regulation in a manner similar to alcohol.

Mace’s bill has the bipartisan support of four co-sponsors, including Reps. Tom McClintock, R-Calif.; Dean Phillips, D-Minn.; David Trone, D-Md.; and Matt Gaetz, R-Fla. But this legislation, too, has yet to receive a committee hearing.

And then there is the Cannabis Administration and Opportunity Act (CAOA), which Schumer and fellow Democratic Sens. Ron Wyden, D-Ore., and Cory Booker, D-N.J., first filed last Congress. Schumer said during the 2024 National Cannabis Policy Summit on April 17 that the trio plans to reintroduce the CAOA this Congress.

The previous version of this legislation proposed a 25% federal cannabis tax on any products produced in or imported into the U.S. And while it would have granted states the power to keep or administer their own oversight programs, it also would have transferred federal jurisdiction over cannabis from the DEA to the Food and Drug Administration. Some stakeholders and industry advocates hoped these two key provisions were amended at the time (but the legislation did not gain traction last Congress).

“I have more exciting news to share,” Schumer said Wednesday during the summit. “This month, along with Senators Booker and Wyden—my colleagues—we will be introducing the Cannabis Administration and Opportunity Act, which fully deschedules cannabis at the federal level. Cannabis legalization has proven successful at the state level. It’s high time that Congress catches up with the rest of the country.”

Of course, cannabis reform is not easy, especially in a divided government, he said.