The (proposed) STATES Act: Federal Cannabis Reform

Earlier today, Senators Elizabeth Warren (D-MA) and Cory Garnder (R-CO) announced their bipartisan bill* titled Strengthening the Tenth Amendment by Entrusting States Act (STATES Act). The following is a preliminary summary of the abstract from the senators’ press release and our interpretations of what’s to come in the cannabis industry in response to this bill.

How will the STATES Act affect the cannabis industry?

What the bill does:

  • Amends the Controlled Substances Act (CSA) to that as long as states (and tribes) comply with certain protections, the act does not apply to anyone in compliance with state or tribal laws
  • Decouples industrial hemp from the definition of “marijuana” under the CSA
  • Preserves CSA provisions related to safety and prohibition of employment of minors
  • Prohibits distribution of marijuana at transportation facilities (rest stops)
  • Prohibits distribution of marijuana to individuals younger than 21 unless for medical reasons as permitted under state law
  • Compliant financial transactions are not deemed to be trafficking, and are therefore not proceeds of an unlawful transaction

What it does not do:

  • Legalize marijuana federally
  • De-schedule marijuana, or change its schedule
  • Exempt the cannabis industry from being subject to IRC Sec. 280E (see DKB’s blog on this topic here).

What could this mean for the cannabis industry?

  • FDIC backed banks may be able to allow cannabis businesses to bank there
  • Hemp growers may not have the same restrictions on agricultural interstate commerce
  • This may impact the availability to sell some cannabanoids such as cannabidiol (CBD) products in national retailers if they are derived from industrial hemp
  • May open the door for outsourced accounting services over state-lines – this could allow cannabis businesses to seek professional service assistance from a wider net of providers
  • Could encourage states to accelerate legalization of cannabis because of reduced federal risks
  • May widen the investment pool so that cannabis entrepreneurs can find more start-up capital

*This is only proposed legislation at this time. DKB will continue to watch as the debates unfold and update on the legislative process.