California is poised to lead the cannabis market, but illegality stops business across state lines
There is a seemingly endless list of reasons why cannabis should be legalized at the federal level. At the top of that list, of course, is simple justice: People are still getting thrown in jail for possessing weed. Others are still behind bars after being convicted for pot crimes years and even decades ago.
All this despite the fact that pot is legal for all adults in 21 states plus Washington, DC and legal for medical use in 39 states. And yet, the DEA could, theoretically, still bust anybody in the country for having a joint.
Once one gets past the gross criminal-law inequities of pot still being classified along with heroin as a Schedule 1 “narcotic,” many other severe problems remain. Just for instance, banks and some other vendors still hesitate to do business with cannabis companies because of the potential legal liabilities.
Getting cannabis stocks listed on American exchanges is so difficult that many American companies have opted to list on Canadian exchanges. And although there has been some reform, researchers are still stymied by the federal ban, often finding it difficult to study the health effects—both positive and negative—of cannabis.
Another problem that doesn’t get tons of attention outside of the legal-cannabis world is the fact that federal illegality prevents companies from doing business across state lines. Transporting weed over a state border could yield both the truck driver and his or her CEO vulnerable to major felony charges and years in prison.
But could a state nevertheless legalize interstate commerce on its own, the same way states have legalized adult-use cannabis? The California Department of Cannabis Control (DCC) believes it could, and it has asked Attorney General Rob Bonta to weigh in on the matter.
In a letter to Bonta, first reported by Politico, the DCC specifically wants to know whether legalizing interstate commerce would pose a substantial legal risk to the state. The DCC believes it would not, basing its opinion largely on the anti-commandeering rule in the U.S. Constitution, which essentially means that the Constitution applies to individual people, not to state governments.
But what about when the activity in question is between states? Much federal law applies to such activities, which is why one hears the phrase “crossing state lines” so often on cop shows. But that should have no bearing on the question, according to the DCC, which stated in its letter that the anti-commandeering rule “does not rise or fall based on the strength of any underlying federal interest.”
Of course, this doesn’t apply to the aforementioned truck driver or CEO. So what are the practical implications of this? They could be game-changing: Pot is legal for adult use in all four of the states bordering California.
In all, California operators could theoretically ship cannabis products to six states in total without crossing into a state where adult-use pot is illegal, as far east as Colorado and New Mexico. As more states legalize, the potential market for California weed will continue to grow.
Thanks to the bifurcated legal situation for cannabis (legal in states, illegal according to the feds), there isn’t really an “American cannabis market.” There are a few dozen individual state markets, each one with its own set of laws, regulations and economic conditions.
States where a lot of weed is grown, like California, end up dealing with massive surpluses that send prices plummeting. States where not much pot is grown can face shortages and price spikes.
For California to solve this problem sans federal legalization, any partner state would have to legalize interstate commerce, as California did last year when Gov. Gavin Newsom signed into law a bill authorizing the governor to make commerce agreements with other states.
But the states that have “legalized” interstate commerce, such as Oregon, or are working toward doing so, such as Washington, stipulate that cross-state trade is contingent on federal legalization.
So it will likely be a while before actual interstate commerce takes place. But when it does, California will be positioned as a leader, which it hasn’t really been since it became the first state to legalize medical marijuana in 1996.
