A hazy mix of state and federal marijuana laws is creating a mess

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Marijuana can be legal and illegal at the same time: How the hazy mix of state and federal laws is creating a mess

America is a little dazed and even more confused when it comes to how legal (or not legal) marijuana is. State laws have been changing dramatically over the past decade — but they’re also inconsistent across state borders. Something legal in one state could get you arrested the next state over. It has created a dizzying patchwork of rules, regulations and exceptions made even worse by the federal government’s complete ban of the substance.

As of this year, nearly half of U.S. states have fully legalized marijuana, and many more have public programs in place for using medical cannabis. Only three states — Idaho, Nebraska and Kansas — have fully prohibited access to cannabis.

Maryland, Missouri and Rhode Island were the most recent to jump on the legalization bandwagon — making recreational marijuana use for adults lawful just this past year. By the end of 2023, a few more states may come into the fold: In Oklahoma, the issue will be on the ballot in March, Ohio’s state legislature is now considering a bill, and debates are underway in Minnesota.

And what do Americans say? About 60 percent of U.S. adults agree that marijuana should be legal for recreational and medical use, according to Pew Research Center’s survey data from last October. Thirty percent say it should be legal for medical use only.

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Grid spoke with three drug policy experts on how differing state and federal laws on marijuana are giving everyone a legal headache.

Federalism: State and federal policy are at odds — that creates some problems

Let’s say a state trooper and a federal officer walk into a bar and find someone with marijuana. And let’s say it is legal to have and use recreational marijuana in that state. Can the person get arrested by the federal officer? The answer to this very hypothetical situation is probably not.

It’s looking more and more like the federal government isn’t going to interfere with states that have legalized cannabis, said Katharine Neill Harris, the Glassell fellow in drug policy at Rice University’s Baker Institute for Public Policy.

“Originally, years ago, there was some debate about whether or not law enforcement at the federal level was going to crack down on activity that was going on in states that had legalized, and it seems to be less and less likely at this point,” she said.

But just because federal agents aren’t exactly arresting every single person with a cannabis plant on their windowsill (there aren’t enough agents for that) that doesn’t mean there won’t be consequences.

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In child custody cases, for instance, one party can cite marijuana use as a violation of federal law when arguing that someone shouldn’t get custody.

There are also no workplace protections at the federal level, even for workers who use cannabis legally or medicinally in a state. That means that workers can be fired if they fail a drug test, even if they’re in a state where it’s legal and they aren’t currently using or high. Some states have passed worker protections for off-duty use of marijuana to address the issue.

And then there is housing: Federally subsidized public housing bans cannabis use. An applicant or tenant who is found to be in violation of this law might be denied housing or evicted — even if it’s legal in the state they are living in.

“It’s not something that becomes a day-to-day reality for everybody, but it’s part of the … challenge that federal prohibition creates for a range of other laws,” said Douglas A. Berman, the founder and director of the Ohio State University’s Drug Enforcement and Policy Center and a professor at the Morris College of Law.

Here’s the other thing: You can’t cross state lines with cannabis. Last spring, three young men brought edibles from Colorado to Texas after a birthday celebration, where they were arrested with felony charges. That can happen even if it’s legal in both states. Businesses, too, can’t transport products to the state next door, which creates hurdles for testing (and barriers to industry consolidation).

Economics: Don’t bank on a weed business loan with the federal ban in place

The federal ban on marijuana also affects prospective marijuana business startups in states where it is legal. That’s impacting who is able to be a part of the industry.

Local banks, mostly run by national banks, are generally interested in complying with federal laws over state ones. That means if you want to get in on the cannabis industry, a loan is likely off the table. You’re going to have to have raise the funds yourself if you don’t have extra cash laying around.

“A lot of banks are unwilling to do business — provide loans or any kind of banking services — for the cannabis industry,” said Harris. “The effect of that is that if you want to open a dispensary in a legal state and obtain a license, you have to have a large amount of cash because you’re not going to be able to get a bank loan for that.”

So far, the majority of people able to do that have been overwhelmingly white. As of 2017, about 80 percent of dispensary owners were white, 5.7 percent were Hispanic or Latino, and 4.3 percent were Black, according to survey data from Marijuana Business Daily. More recent state-level data, such as from Massachusetts, suggests similar trends.

The lack of banking services can also impact a small businessperson’s ability to take out a credit card or open a savings plan for their child’s college tuition: A bank might be worried about it involving marijuana-related funds, Berman said.


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Why? Most banks, insured by the Federal Deposit Insurance Corporation (which you might know as the FDIC), feel it’s too risky. “Even transporting or transmitting funds known to have been derived from the distribution of marijuana is illegal,” the Federal Reserve Bank of Kansas City said in a 2015 court case.

The lack of equal access to money to get started in the marijuana industry is actually counterintuitive to what many states are trying to accomplish in the first place: putting social equity at the forefront of legalization.

“One criticism has been that that precludes involvement among minority individuals who might want to have a stake in the cannabis industry but can’t get a loan to do so, and that it’s especially frustrating given [that] minority communities have been the ones most impacted by prohibition,” Harris said.

Health: Limited research on legalization’s public health impacts — because it’s still illegal to the federal government

For those looking for data to prove that legalizing marijuana is good or bad, the data isn’t exactly there.

“Because of the federal government restrictions on research, we haven’t been able to really look at the public health impacts of some of the newer products that have been on the market — some of the high-potency edibles and concentrates and that sort of thing,” said Harris.

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The regular use of cannabis products, particularly high-potency ones, could impede cognitive development, especially for people whose brains are still developing, Harris said.

Product testing is also not as extensive as it should be, in part because you can’t move cannabis across state lines.

Some states might not have many product testers, which is a problem since you can’t move the product out of state for testing because of federal prohibition, said Beau Kilmer, co-director of the Rand Drug Policy Research Center.

Changes at the federal level could bring a more uniform approach to testing, not only in terms of potency, but in terms of limiting molds and pesticides, he added.

That’s even more true of products in the “legacy” (aka, “illicit” or “underground”) market, which aren’t subjected to testing requirements. Some analyses show some unregulated products have pesticides and other contaminants they shouldn’t have, Harris said.

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Quashing this thriving underground market is a bit complicated because of a near-century of prohibition, thanks to the Marihuana Tax Act of 1937.

What it comes down to, Kilmer said, is priorities. How fast might someone want to eliminate the illicit market? If your goal, he said, were to get rid of the illicit market quickly, you could give out a ton of licenses, not have a lot of regulations and maintain a really low tax rate to drive prices down.

(Washington was likely more successful than California in driving consumers toward a legal market for some of those reasons.)

But for public health experts, he said, keeping higher prices, more regulation and rigorous testing might be a priority — even if it takes longer for there to be a significant decrease in the size of the illicit market.

“They’re going to continue to rely on the illicit market like they have already for years for a product that’s cheaper and just as convenient as going to a dispensary,” Harris said, citing what happened in California as one such example.

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Besides the matter of taxes and prices, the matrix of federal and state policies has allowed a thriving “gray market” to proliferate, said Harris. This market might take the form of storefronts offering marijuana as a “gift” accompanying a purchase in D.C., where buying and selling weed is illegal — but possessing it isn’t — because of congressional members opposed to legalization putting a rider in a budget bill nearly a decade ago.

Politics: And will the federal government move to legalize marijuana? Don’t hold your breath.

Before the end of last year, Congress failed to pass the Safe Banking Act, which aimed to facilitate banking activities by prohibiting the punishment of banks who did business with the cannabis industry.

One major point of contention, Harris said, was that if legalization were to occur at the federal level, there weren’t enough protections in place to ensure the entire industry didn’t get monopolized by a few very large corporations who could easily do business across state lines and push out local business owners in the process.

Other bills that never made it past the Senate include the Cannabis Administration and Opportunity Act or the More Act, and with a Republican-controlled House, Harris isn’t optimistic about any laws being passed (though that could change as more red states legalize marijuana).

It isn’t just Congress looking into the issue. Last fall, President Joe Biden asked the secretary of Health and Human Services and the attorney general to review how cannabis is scheduled under the Controlled Substances Act — but it’s unclear when or if that will result in cannabis getting moved to a different schedule (or off the schedule, like alcohol and tobacco are), said Kilmer.

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“Once these larger companies get involved, it’s going to make it a lot harder … for these smaller entrepreneurs to compete,” said Kilmer.

The removal of a federal prohibition might result in consolidation. Any huge company, which would be able to ship the product across state lines, could buy out any smaller competitors and bring down prices for legal cannabis products. (For reference, Rand previously estimated that all the cannabis used in the U.S. could be grown on a few dozen industrial-size farms.)

Some states have limited vertical integration, said Harris. That basically means one business can’t control everything from growing to selling at retail — different businesses manage different parts of the supply chain. Another thing that a handful of states have done is put limits on the types of licenses a single business can hold.

“There’s a lot of different things to balance in terms of trying to ensure equity and the success of small business owners, particularly minority business owners, while also trying to facilitate legalization as a whole,” Harris added.

Thanks to Lillian Barkley for copy editing this article.

  • Anna Deen
    Anna Deen

    Data Visualization Reporter

    Anna Deen is a data visualization reporter at Grid.