United States: Federal Cannabis Descheduling Bill Needs More Clarity

The third version of the Marijuana Opportunity Reinvestment and Expungement, or MORE, Act was introduced on May 28.

Most importantly, this is a descheduling bill, and descheduling is the only way in which we comprehensively address the social justice inequities that exist and the federal-state conflict that persists in the cannabis industry.

Although potentially a boost to the nation's growing cannabis industry, the draft bill contains numerous gaps that are problematic from a business perspective.

These include a lack of clarity as to a regulatory framework that encompasses both state and federal authority, a failure to lay out a specific role for the U.S. Food and Drug Administration, and virtually no consideration for the challenges of interstate commerce and importations.

Importantly, the findings contained in H.R. 3617 make a strong case for cannabis reform, including alarming figures from the American Civil Liberties Union indicating that enforcing cannabis prohibition laws costs taxpayers $3.6 billion in support of 600,000 arrests annually.¹

These arrests disproportionately affect people of color, who are four times more likely to be arrested for possession of cannabis.² According to Congress, fewer than one-fifth of cannabis business owners identify as minorities, and only 4% are Black.³

Clearly, the time is ripe for comprehensive cannabis and criminal justice reform, but we must be intentional and thoughtful in our lawmaking and make sure that we get this right. Soliciting substantive input from experts in the cannabis industry, including business leaders, lawyers, policy experts and advocates, would lead to a better result for the industry and lawmakers alike. There is a lot at stake.

Legislative descheduling is the best path forward to achieve the desired results.

While it is laudable that the U.S. House of Representatives continues to introduce critically important descheduling legislation and social equity reforms, this bill's legislative language - and that of bills before it - lacks clarity. That is reflected substantively and definitionally, beginning with a misleading section title.⁴

By descheduling cannabis and removing it from the Controlled Substances Act, we are legalizing cannabis, not merely decriminalizing it. Of course, people can no longer be criminally prosecuted postdescheduling. But they also cannot, and should not, be civilly fined for a cannabis offense, because no such offense would exist in federal law.

This is an important distinction, because, above all, we all share a duty to protect those most deeply affected by the war on drugs and make certain that people are no longer unfairly punished - civilly or criminally - for possession of this plant. By descheduling cannabis, we are legalizing it.

More significantly, the bill also lacks sufficient clarity in how descheduling will be completed. For instance, the latest iteration of the MORE Act legislatively deschedules cannabis while simultaneously providing for a seemingly duplicative administrative rulemaking process by the U.S. Department of Justice.⁵

The MORE Act not only deschedules cannabis but also mandates that, within 180 days of the bill's enactment, the DOJ must finalize a rulemaking removing cannabis from the list of controlled substances.⁶ This apparent legislative belt-and-suspenders approach may cause significant procedural headaches. The statutory authority for this rulemaking, Section 201(a)(2) of the CSA, permits the DOJ to administratively deschedule controlled substances, such as cannabis, but only after statutorily defined procedures.⁷

Congressional mandate is not one of the three defined mechanisms that would prompt such a rulemaking, meaning that the DOJ would need to initiate the process. That could take some time.⁸

Further, pursuant to existing statute, the DOJ must (1) provide an opportunity for public hearing and (2) undertake a complex set of interactions with the U.S. Department of Health and Human Services, which will, in turn, provide the DOJ with a recommendation regarding (de)scheduling of the substance.⁹

With a six-month deadline for finalizing a rule pursuant to this complicated interagency procedure, the agencies may be hard-pressed to meet their statutory obligations, including an assessment of the public health implications of descheduling.

Federal and state agencies need clear and intentional regulatory authority.

Businesses need and want more clarity in legislative drafting so that they can comply with federal and state law. Although some industries formerly rejected government oversight, many businesses now see the value in understanding the rules of the road and prioritizing compliance within reasonable guardrails.¹⁰ It makes their jobs easier, and it is less costly in the end.

But regulation must be intentional, particularly in providing both state and federal government public health and safety officials with clear authority. Substantively, the recently introduced bill does not provide for clear regulatory authority for the states. More certainty is necessary because the majority of states already have regulatory regimes in place, many of them well-established, and it would be disruptive and counterproductive to uproot them entirely. That would set things back, not move the ball forward.

And while the bill carves out a specific regulatory role for the U.S. Department of the Treasury and requires rules to be promulgated by the Treasury, the DOJ and the Small Business Administration, it misses the mark by neglecting to define a specific role for the FDA - other than vague references to allowing the promulgation of FDA regulations - in protecting public health.

Regulating intentionally and granting clear regulatory authority to state and federal government officials is the only way to avoid the problems that currently plague the state-legal industry, and it is the only way to protect public health.

If anyone doubts this imperative, we should take a lesson from Congress' descheduling the hemp plant without a clear regulatory pathway to protect the public health, resulting in continued confusion and uncertainty in the marketplace. This lack of clarity in statute and delay in regulation has resulted in untested, unregulated and potentially unsafe products readily available in gas stations and convenience stores, without regard for public safety or age verification.

Congress should take note and refrain from making the same mistake with cannabis by regulating purposefully and specifically.

Packaging and labeling requirements are a public safety imperative.

The bill leaves significant discretion to the Treasury to develop packaging and labeling rules, rather than providing for robust congressionally mandated requirements.

However, the Treasury is charged with certain regulatory powers relating to the operation of a cannabis enterprise - defined as cannabis producers, importers and export warehouse operators - including inventory tracking, packaging and labeling requirements. Pursuant to the bill, cannabis products must be placed in approved packages bearing certain required labels, marks and notices before they can be transferred or released.

Further, cannabis products may not bear any indecent or immoral language or images on their labeling - similar to the prohibition against obscene or indecent labeling that applies to alcoholic beverage products.¹¹

The secretary of the Treasury is also required to prescribe specific labeling and marking requirements for cannabis goods that will be exported by authorized export warehouses. Cannabis products labeled for export may not be brought back into the U.S. unless such products satisfy certain partial duty exemptions and are removed from their export packaging and relabeled into new packaging that does not contain export labels.

Just how these new regulations may interface with existing state requirements is not fully fleshed out.

The bill further requires cannabis enterprises to accurately track inventory in a manner that can be verified. While the bill requires that cannabis companies "shall make a true and accurate inventory," it does not specifically contemplate how this should be done.

Incorporating mandatory electronic tracking requirements into descheduling legislation is critical to ensuring public safety. Electronic tracking technology allows for the ability to follow cannabis through every stage of the cannabis supply chain, providing visibility and transparency, preventing diversion, and protecting consumers. Congress should be specific in requiring that the industry leverage existing technology solutions to protect public safety.

Footnotes

1 See MORE Act, § 2(6) "Findings"; ACLU, A Tale of Two Countries: Racially Targeted Arrests in the Era of Marijuana Reform (2020), https://www.aclu.org/report/report-war-marijuana-black-and-white (last accessed Jun. 25, 2021).

2 See MORE Act, § 2 "Findings."

3 Id.

4 See MORE Act, § 3 "Decriminalization of Cannabis."

5 See MORE Act, § 3(a)(2) ("Not later than 180 days after the date of the enactment of this Act, the Attorney General shall finalize a rulemaking...removing marihuana and tetrahydrocannabinols from the schedules of controlled substances.").

6 See MORE Act § 3(a)(1) ("Removal in Statute"); § 3(a)(2) ("Removal from Schedule").

7 In relevant part, 21 U.S.C. § 811(a)(2) reads, "[

[The] Attorney General may by rule... remove any drug or other substance from the schedules if he finds that the drug or other substance does not meet the requirements for inclusion in any schedule."

8 See 21 U.S.C. § 811(a) ("Proceedings for the issuance, amendment, or repeal of such rules may be initiated by the Attorney General (1) on his own motion, (2) at the request of the Secretary, or (3) on the petition of any interested party.").

9 See 21 U.S.C. § 811(a) ("Rules of the Attorney General under this subsection shall be made on the record after opportunity for a hearing pursuant to the rulemaking procedures prescribed by subchapter II of chapter 5 of title 5."); § 811(b) ("The Attorney General shall, before initiating proceedings under subsection (a) of this section to control a drug or other substance or to remove a drug or other substance entirely from the schedules, and after gathering the necessary data, request from the Secretary a scientific and medical evaluation, and his recommendations, as to whether such drug or other substance should be so controlled or removed as a controlled substance.").

10 Letter from Business Roundtable to Members of the U.S. House of Representatives and Members of the U.S. Senate (Sept. 10, 2019), https://s3.amazonaws.com/brt.org/BRT-CEOLetteronPrivacy-2.pdf.

11 See, e.g., 27 CFR § 5.42(a)(3) prohibiting obscene or indecent statements or designs on distilled spirit labels.

Co-authored by Yoko Miyashita, CEO of Leafly

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Originally Published by Law360

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