Is Weed Legal in the US?

Which states have legalized recreational cannabis? Is medicinal marijuana legal in the US? Find out in this article.

We note that the subject contained in this article represents illegal activity in certain jurisdictions. Whilst we do not condone any acts which are contrary to any such laws, we understand that readers in those jurisdictions which have decriminalised cannabis may find this article of interest.

The US is undoubtedly the biggest potential cannabis market in the world. We put it above both China and India, as we feel it is highly unlikely that these countries will ever legalise for recreational use. Hence with its population and sheer size, we believe this will be the most lucrative potential for cannabis in the coming years.

Prohibition Partners (PP) forecasts that by 2024 the US market will be worth around US$43.9 billion, up a whopping 202% on 2019 estimates.

Let's start at the top, and considers cannabis's status at the Federal Level. 

It is important to understand the relationship that hemp and marijuana have with cannabis. We have often written about it but could describe it simply as follows. Marijuana and Hemp are to cannabis as oranges and lemons are to citrus.  The reason for understanding this definition is to understand its legality.

Marijuana – which can contain very high levels of THC – is considered a Schedule 1 controlled substance and is illegal at the Federal Level. Hemp, which contains less than 0.3% THC was legalised for industrial and commercial use via the signing of the US Farm Bill of 2018.  In summary, Marijuana is illegal, but hemp (and CBD) is legal. The CBD element of hemp is a very grey area now, with the FDA and DEA still yet to finally weigh in on how they aim to treat it. 

What is also important to note is the difference between medicinal cannabis and recreational cannabis. The former is used in the treatment of certain illnesses and conditions and is – for the most part – only available through a prescription order at a pharmacy. Recreational cannabis, often termed adult-use, is for members of the population who would like to use cannabis, in the same manner they might alcohol. It is not to treat, cure or assist with any medical condition, but rather to get "high" for recreational purposes.

US Cannabis Industry

Public support for cannabis legalisation has never been higher. In a Pew Research poll conducted in late 2018, 62% of the American population was in favour of legalising cannabis at the Federal Level. Gallup also undertook a poll, with their results showing that 68% of the US population was in favour of legalising cannabis. Either way, the times they are a-changing.

There are currently a number of Acts and Bills in play, all looking – in some way, shape or form – to change the legislative landscape and bring an end to the prohibition of pot. Let's review each of them and their potential impact on the US landscape.

SAFE Banking Act

The SAFE Banking Act (Secure and Fair Enforcement Act of 2019) is proposed legislation which seeks to address the issues of how cannabis-centric companies are able to operate in the legal banking system. As cannabis is a Schedule 1 drug, this means that any company that deals with the plant (touching it or not) is deemed to be dealing with an illicit product, and hence has a number of commercial restrictions attached to it.

One of the primary restrictions is a lack of access to regular banking facilities, which includes access to credit card companies. The SAFE act aims to change that, allowing banks to deal with the cannabis industry as they would with any other business, in States where cannabis companies are operating under a legal framework.

In addition, cannabis companies are subject to the 280E tax rule. This rule states that companies dealing with illicit substances cannot write off any business expenses against the revenue generated from the illicit substance. This means that cannabis companies pay a much, much higher level of tax (and in cash mind you!)

Again, the SAFE Banking Act would remove the 280E rule when it comes to legally operating cannabis companies. By allowing cannabis companies access to normal commercial banking services, and stop dealing in cash (as drug dealers in the black market do), the SAFE Banking Act would facilitate a safer operating environment for all industry participants.

The passage of the SAFE Banking Act by the U.S. House of Representatives represents a significant first step in the effort to provide stability and security to the multibillion-dollar cannabis industry. – Cresco Labs CEO Charlie Bachtell.

The bill was introduced is the US House of Representatives in March 2019, and later that month, the Judiciary and Financial Services Committees voted in favour of the bill, advancing the it to the full House. The bill was passed by the House on September 25, 2019.

The STATES Act

One can trace the beginnings of the Act back to January 2018. On the 4 January 2018, then Attorney-General, Jeff Sessions, rescinded the Cole Memorandum. The Obama-era memo was put in place to restrict the Department of Justice from interfering with cannabis companies operating in State-legal environments. By "tearing up" the memo, Sessions made a very clear statement to the industry, that they should not get too comfortable. 

At first, this was met was fear and panic that the industry was going to get shut down, or seriously impeded from operating effectively. Colorado-Senator, Cory Gardner, was one of the most outspoken in opposition to this move, and as a result, immediately starting blocking any and all Trump-driven recommendations for the next Supreme Court Judge.

In April, Senator Gardner met with President Trump, wherein Trump gave Gardner his assurances that the DOJ would not interfere with State-legal cannabis companies. And a few days later Senator Gardiner, along with co-sponsor Democratic Senator, Elizabeth Warren, announced that they would introduce a bipartisan bill to prevent federal interference with states that had legalised cannabis medicinally and/or recreationally. The bill was introduced in the 116th Congress on April 4, 2019, in both the House and the Senate.

Get the Latest Marijuana News &
Content in your Inbox!

All your support helps The Green Fund keep writing content for all you
marijuana enthusiasts and potential pot stock investors

The MORE Act

The Marijuana Opportunity Reinvestment and Expungement Act, otherwise known as the MORE Act, was passed by the House Judiciary, sending the most comprehensive cannabis-reform act, straight to the Senate Floor.

The bill is known as H.R 3884, seeks to officially remove cannabis from the Controlled Substances Act, immediately decriminalising cannabis at the Federal Level. If this were to pass, individual States could then pass their own cannabis legislation, and on top of that, it would require the Federal Courts to expunge any and all cannabis-related convictions. 

"With the passage of the MORE Act today, the Judiciary Committee has taken long overdue steps to address the devastating injustices caused by the War on Drugs and to finally decriminalise marijuana at the federal level." – Chairman of the Committee Jerrold Nadler

The Act is also seeking to address the social and economic injustices of the failed War on Drugs. The Nixon-era policy has ravaged communities, particularly socio-economically lower ones. The MORE Act would introduce a 5% Federal tax on all cannabis and cannabis-related products, with the proceeds of this tax going directly to found and fund the Opportunity Trust Fund.

Three grant programs aimed at helping provide services to communities most affected by these policies would be funded by the trust.

Legislative change driving State by State legalisation

Although cannabis is still illegal (the marijuana portion) for both medicinal and recreational purposes at the Federal Level, each of the US States have made their own rulings and decisions on the matter. 

These rulings have not solely been based on the medicinal benefits the plant has on offer, but also the extremely lucrative tax dollars that can be earned from a regulated industry. For instance, Colorado legalised cannabis for recreational use in 2014. 

Since then, the State has collected more than $1 billion in cannabis-related taxes. And if you take into account the opportunity-saving of not needing the war on drugs in relation to marijuana in the state, then that number could be considerably higher.

Then there is the small matter of the black market and its association with organised crime. Reducing the black market makes it harder for underage teenagers to gain access to cannabis, and more importantly regulates the industry and the products, ensuring the highest levels of safety. 

The current vaping crisis sweeping through the US was another strong argument for the legalisation of cannabis as 1000's of people were treated for, and some died of, a vaping related illness that was ultimately as a result of volumisers being used in the illicit market.

The status quo is that 11 states and Washington D.C. have legalised cannabis for recreational and medicinal use. Another 22 states have legalised cannabis, but only for medicinal use. And the rest are sitting on the sidelines, currently not recognising cannabis legality for either medicinal or recreational usage.

California

California became the very first US state to legalise cannabis for medicinal use in 1996. It followed that up with the passing of Proposition 64 in November 2016, allowing California residents to carry up to an ounce of flower, and to buy up to eight grams of concentrates, all for recreational use. And with it, opened the doors to the world's 6th largest economy.

Arcview suggests that by 2024, annual cannabis legal spending could top $7 billion. To put that into perspective, Arcview predicts that the entire US market will be worth $30 billion.

According to the LA Times, an estimated $8.7 billion is expected to be spent in the illegal cannabis market in 2019 — more than double the amount of legal sales.

However, despite its legal status, the Californian market is still dominated by the black market.  Part of the reason for the lack of legal market growth is due to the legislative framework itself. Although the state legalised recreational cannabis, each municipality has the choice on whether to legalise for recreational use.

Across California, 76% of the cities and 69% of the counties have voted against recreational retail outlets. With so few cities across the state allowing for legal access, and with State Taxes making legal cannabis so much more expensive, the black market has thrived.

Texas

Texas is the second-largest state in the US both by size and population. Texas is a very strict state when it comes to cannabis. Cannabis is treated like any illicit drug, meaning that if a person is caught even with small amounts of cannabis in their possession, they can go to prison. However, with the passing of US Farm Bill 2018, and the legalisation of industrial hemp, the State felt it was making a progressive change when it legalised the cultivation and production of hemp and hemp-derived products.

However, staunch Republican, Governor Greg Abbot may have accidentally decriminalised marijuana. Hemp is defined as cannabis that contains less than 0.3% THC (the compound that gets you high). In Texas, if you are caught with cannabis, and the results show a THC content of less than 0.3%, you are legally entitled to carry (and consume) it. 

The only problem is that as of December 2019 the State does not have the necessary equipment to test cannabis for its THC content. Yup, you read that right. So, people being caught with cannabis, are claiming it's hemp, and the prosecutors are loath to take the cases to trial as they may not be able to prove their case.

Even Highway Patrol has taken a back seat on the matter, as it is impossible to tell the difference between hemp and marijuana by smell. Another clear cut instance of the legalisation of one part of the cannabis plant making the environment potentially even greyer than before.

Florida

Florida is a very big state for cannabis. With an ageing population, a good range of qualifying conditions and superb infrastructure, the State has since become the second-fastest-growing medicinal cannabis market in the US. 

As of August 2019, 1.6% of Florida's residents were registered, medical marijuana patients. To put the growth into perspective, Florida is gaining over 600 new medicinal cannabis patients – per day. Recently the laws were changed allowing patients to also smoke flower, as up until then flower had been allowed for vaping purposes. 

Although the latest poll by the University of North Florida suggests that over 64% of Florida's residents are in favour of legalising cannabis for recreational use, it is still illegal in the State of Florida to be caught in possession of cannabis. However, this could change in 2020, as bills have been put forward to not only decriminalise but even legalise cannabis for adult use.

Should Florida legalise for recreational use, it is expected to be one of the most lucrative states, especially given the number of retail outlets open and the existing distribution infrastructure.  

Nevada

Nevada legalised medicinal cannabis in 2000. However, it was the legalisation for recreational use in 2017 that once again baffled logic, as it came with very strict rules on where this legal cannabis could be consumed. 

The law dictates that legally purchased cannabis can only be consumed in a person's private residence. It is strictly forbidden in public areas, hotels, bars, and even cars (for those looking to hotbox their local parking garage).

What's more fascinating about this, is that 70-80% of the cannabis purchases made in Nevada are from tourists who, by definition, would not have their own private residence. Once again, the laws create more confusion than clarity.

Home growing weed is also not allowed unless the resident lives more than 25 miles away from a licensed dispensary, and no household can grow more than 12 plants (which is still a considerable amount of cannabis).

Washington D.C.

The Capital City and another example of the weird and wonderful when it comes to State by State legalisation of cannabis. 65% of the State voted in favour of Initiative 71 in November 2014, legalising the use of cannabis for recreational use. This granted all citizens above the age of 21 the right to possess up to two ounces and to be able to grow up to 6 plants – with only 3 being able to be mature at any one time.

And here's where it gets interesting. Even though cannabis is legal, it is illegal to buy cannabis. However, should a person buy an item or service, then it is legal to "gift" them a cannabis product. 

Cannabis can only be consumed on a private residence and given it is illegal at the Federal Level, people can be arrested no matter how little cannabis they are carrying if on Federal lands (which account for around 25% of the District).

As an example, a client can purchase a single ticket raffle, and go on to win…a cannabis product. Yeah – you read that right. Medicinal cannabis has been available since 2015, but has been restricted by a lack of access, with only a few dispensaries servicing over 6,000 patients.

New York

New York legalised the use of medicinal cannabis in 2014 via the Compassionate Care Act. The act allowed patients who met any of the qualifying conditions to obtain a medical marijuana card.

However, recreational cannabis is still illegal, even though it looked very likely that it would be legalised this year. Possession of small, personal amounts has been decriminalised, with possession of two ounces or less deemed to be a "violation", which is associated with a $200 fine and no criminal record. 

Those carrying less than an ounce could cop a maximum fine of $50. The bill that decriminalised marijuana also immediately expunged records of low-level cannabis convictions.

For too long communities of colour have been disproportionately impacted by laws governing marijuana and have suffered the lifelong consequences of an unfair marijuana conviction. – New York Governor Andrew Cuomo

Although Governor Cuomo made the legalisation of cannabis his top priority for the first 100 days of his third term as Governor, he was unable to get the measures passed before New York's legislative sessions ended in June of this year. It is very likely that New York will legalise for relational use in 2020.

Massachusetts

Massachusetts became the 18th US State to legalise cannabis for medicinal use when it did so in 2012. Interestingly, Massachusetts was also the first State to criminalise cannabis in early 1919. Cannabis was decriminalised in 2008, meaning that being caught in possession of small amounts of cannabis amounted to nothing more than a fine and warning.

Almost a century later, the state legalised cannabis for recreational use in 2016, following a ballot initiative. Again it came with very strict laws on where legal cannabis could be consumed and how much residents would be allowed to carry on them. The first recreational retail stores opened their door in November 2018.

The current laws dictate that no more than one ounce may be carried, and no more than ten ounces may be kept in a private residence for personal use. Residents are allowed to home grow up to 6 plants each, with no more than 12 plants allowed per household.

Arizona

In 2010, Arizona legalised the use of cannabis for medicinal purposes.  Proposition 203 was approved with a slight majority of 50.1%, allowing patients with a doctor's prescription to possess up to two and a half ounces of cannabis. 

However, it also limited the total number off medicinal dispensaries to 124, while home growing was made illegal unless the patient lives more than 25 miles from a registered dispensary. Qualified patients living more than 25 miles from a dispensary are able to legally home grow up top 12 plants 

Cannabis use for recreational purposes is currently illegal in the State of Arizona. Proposition 205, which was submitted for a vote in 2016, failed with only 48% voting in favour of legalisation. Being caught with any amount of cannabis without a valid medical prescription remains a felony offence.

Maine

Maine was one of the first States to criminalise marijuana in 1913. However, in 1976, possession of small amounts of cannabis was decriminalised, with only small fines and warnings being associated with the violation.

Medicinal cannabis was made legal in 1999, allowing cannabis patients to grow their own plants in the privacy of their own home.

Maine legalised cannabis for recreational use via a ballot vote in 2016. Individuals that are over the age of 21 may now possess up to two and a half ounces of cannabis for personal recreational use, and have the ability to grow up to 3 plants in their home. As per many of the other recreationally legal States, consumption is limited to the confines of private residences only.

Illinois

Illinois became the 11th US State to legalise cannabis for recreational use, when Governor Pritzker – who made the legalisation of cannabis a core component of his election campaign – signed the Cannabis Regulation and Tax Act into power in June 2019.  What was unusual about this, is that Illinois became the first US state to legalise cannabis through a state legislature rather than a ballot initiative. 

The bill legalised the possession and commercial sale of cannabis in the State, with legal sales expected to go live on January 1, 2020. Currently, the State has around 55 medicinal dispensaries, which will all be available to double up as recreational dispensaries from this date.

The State is expected to be one of the largest cannabis markets in the US, with estimates placing the value of the legal market at over $1.5 billion a year. Individuals above the age of 21 will be able to carry up to one ounce of cannabis and up to 500g of THC-infused edibles. Tourists will only be able to purchase and carry half of that amount.

The bill also contained criminal justice reforms that will expunge any previous cannabis convictions. It is estimated that over 770,000 residents may qualify for expungement.

Medicinal cannabis was legalised in 2015, and at the time of writing, there were over 93,000 registered medicinal cannabis patients in the State. 

Get the Latest Marijuana News &
Content in your Inbox!

All your support helps The Green Fund keep writing content for all you
marijuana enthusiasts and potential pot stock investors

Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

Leave a Reply

Your email address will not be published. Required fields are marked *