How Will Joe Biden Affect the Marijuana Industry?

As the new presidential administration unfolds ahead of the United States, investors and cannabis industry leaders across the country are seeking an answer to the question: how will Joe Biden affect the marijuana industry? After a uniquely challenging election year, and an election unprecedented in its bellicosity followed by a similarly difficult transition period, there are many questions about what President-elect Biden’s priorities will be. Similarly, questions about his Vice-President Kamala Harris’ interests, given her record as California’s Attorney General, abound.

Joe Biden on the Legal Status of Cannabis

Oddly for a candidate who built a great deal of political capital out of his outspoken support for the War on Drugs in the 90s, Biden’s current approach to legalizing marijuana has been woolly. It is on record that he opposes recreational use of marijuana, and in November 2019 Biden courted controversy by alluding to the view that it has been considered a gateway drug. He insists that more research is needed to determine whether the plant is harmful before he will reverse the policy of national drug control for recreational cannabis. However, he is in favor of federal legalization of medical cannabis, though he does, it should be said, regard it as a flawed tool unworthy of a ‘humane society’.

Joe Biden on the Cannabis Industry

At present, the national status of cannabis is clearly at odds with the states where recreational cannabis is permitted: states with a population of approximately 110 million, or over a third of the US population. Cannabis is the only Schedule I drug with state-legal markets in the country. A major pillar of Biden’s cannabis policy is the rescheduling of cannabis from Schedule I to Schedule II, classifications defined by the Controlled Substances Act of 1970. However, this reclassification will not do anything to resolve its legal status, nor makes it more accessible to researchers. Schedule II drugs, such as cocaine, or methamphetamine, can also be illegal.

Could President Joe Biden Legalize Marijuana?

In a word: no. Unilaterally, the Biden administration lacks the power to make recreational marijuana or even medical marijuana federally legal. Biden’s powers only go so far as to reschedule the drug, from its current Schedule I status, on parallel with heroin, to Schedule II, on parallel with cocaine. However, cannabis businesses do not want this.

For the marijuana industry, rescheduling is an insufficient measure. It has been criticized as pandering to the anti-drug lobby, as not being based on science, and as being anti-business. Industry leaders and academics both have criticized cannabis rescheduling, warning that it would undermine the extant legal marijuana industry by enshrining the substance’s research and development as a solely pharmaceutical endeavor. Rescheduling as Schedule II, and federal enforcement of those standards, would lead to the shutdown of all present state-legal activities. For business to continue as normal, the cannabis industry would need to lobby for an exemption along the same lines as those that the alcohol and tobacco industries currently enjoy. Many small marijuana businesses would be pushed out, consolidating the control of the industry between a handful of corporations. This would likely lead to a negative effect on employment and tax income for affected states. Sean Donahoe, an Oakland, California-based cannabis industry consultant, says “His stance is to blow up 90 percent of the existing regulated and traditional market…shows [Biden’s] fundamental worldview is framed through a corporate lens with no regard for existing operators, nor good public policy.”

Joe Biden on the War on Drugs

The Democrats in general are in favor of criminal justice reform to correct the trend of federal mass incarceration, which began in the 1970s but escalated in terms of drug-related prison sentences in the 90s and early 21st century. Joe Biden’s marijuana policy involves decriminalizing marijuana use, automatically expunging prior possession convictions, and deferring to states with regard to rules about recreational use. This is a considerable departure from his previous stances on marijuana as a member of the Senate Judiciary Committee, where he drafted and supported federal drug legislation that was ‘tough on crime’, including the advocation of civil asset forfeiture. His ostensible goal was to combat drug trafficking and a burgeoning crime wave. He worked with the Reagan administration to establish the Office of National Drug Control Policy, which rapidly soaked up more and more federal funding, and the role of the ‘drug czar’.

Perhaps his change of heart on these issues is because his children have been speaking to him about their own experiences. In 1998, his daughter Ashley Biden was arrested in Louisiana for possession of marijuana, though appeared to evade any serious legal ramifications. His son Hunter Biden was discharged from the Navy Reserve after testing positive for cocaine in 2014.

Is There Popular Support for Legal Cannabis?

There’s no denying that marijuana is more popular than ever. Many have turned to cannabis during the COVID pandemic to make social distancing more tolerable. Marijuana legalization is a popular position both in swing states and with swing voters. A national poll found that every state in the union supported federal legalization, with the weakest support being 55% in North Dakota, and the strongest being 79% in Oregon and Washington. Even the notoriously anti-cannabis Mitch McConnell, leader of the GOP-controlled Senate, represents a pro-cannabis state: Kentucky is 59% in favor of legalization. While President Donald Trump was lukewarm in his support of states’ rights to establish their own cannabis laws, and ultimately ineffectual in the drive to have those laws respected by the federal government, President-elect Biden may be the first President with the inclination and political will to deliver a victory for the American public that has long been anticipated.

OF SPECIAL NOTE

Statements, estimates and forecasts are subject to significant legal, business, economic, and competitive uncertainties, including competition, limited access to bank services, litigation, enforcement actions, and the receipt of government authorizations. This includes differences in, among other things, laws, regulations and guidelines relating to the manufacture, transportation, and storage of cannabis, and the conduct of operations, which vary among the U.S. federal government, various states, and foreign jurisdictions. There can no assurance that such estimates and/or forecasts will be realized, and these are not indicative of future investment performance. Historical data is not indicative of future performance.

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Investing involves risk, including possible loss of principal. The cannabis industry is subject to rapidly evolving laws, rules and regulations, and increasing competition which may cause such companies to change business model, shrink or suddenly close. These may limit access to banks, and create significant burdens on company resources due to litigation, enforcement actions, receipt of necessary permits and authorizations to engage in medical cannabis research or to otherwise cultivate, possess or distribute cannabis. Possession and use of cannabis is illegal under federal and certain states’ laws, which may negatively impact the value of Fund investments. Where legalized by states, cannabis possession and use remains a violation of federal law. The companies in which the Fund invests are subject to various laws and regulations relating to the manufacture, management, transportation, storage and disposal of cannabis, including health and safety, conduct of operations, and environmental protection. Even if a company’s operations are permitted under current law, they may not be permitted in the future, and a company may not be able to continue operations in its current location. Controlled substance legislation differs significantly between countries and may limit a company’s ability to sell products.

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