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Anticipating the Inevitable: Preparing for Federal Cannabis Legalization

Cannabis leaf against sunlight

Federal cannabis legalization is coming. When it arrives, and in what form, remains unknown. And while it is easy to assume that things would drastically improve in terms of financing, access to capital, taxation and security, there might be some downsides as well.


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What Type of Legal Federal Cannabis Framework?

In anticipation of federal legalization, Colorado’s U.S. Senator John Hickenlooper introduced the Preparing Regulators Effectively for a Post-Prohibition Adult Use Regulated Environment (PREPARE) Act late last year. The bill directs the Attorney General to develop a regulatory framework for when the federal government legalizes cannabis.

Republican Congressman Dave Joyce, the sponsor of the bipartisan bill in the House of Representatives, said: “This legislation gives lawmakers…the answers they need to effectively engage on cannabis reform, safely and effectively regulate it, and remedy the harms caused by the failed war on cannabis. With those answers, Congress can develop a much-needed federal regulatory framework that not only respects the unique needs, rights, and laws of each state, but also ensures a responsible end to prohibition and a safer future for our communities.”

That’s all well and good, but we have seen several examples across multiple legal markets where attempts to remedy harms from the War on Drugs have failed. And it is easy to be skeptical that an effective cannabis regulatory infrastructure might eventually emerge from Congress. Will the unique rights and needs of each state market be maintained, or will states be forced to enter into a federal system that makes running a cannabis business even more onerous than it can be now?

What We Can Expect

The most positive outcome of federal cannabis legalization will most likely be the elimination of cannabis falling under Internal Revenue Code Section 280E and its incumbent financial challenges. The shackles of operating in a primarily cash-based industry will be lifted, bankruptcy will be allowed and access to capital and traditional banking options will dramatically improve cannabis business operating options. Transporting cannabis between states—and internationally—will become routine and prices will go down. Trademarks on everything from cultivars to manufacturing and processing techniques will surge, and intellectual property will be clearly defined and easier to protect.

At the same time, if the Federal Drug Administration (FDA) and United States Department of Agriculture (USDA) get involved, Big Pharma will enter the game. Cannabis products sold as medicine would become subject to FDA regulation and doctors would have to follow the same regulations that apply to other drugs in their state. Additionally, once approved by the FDA for any type of medical use, doctors will be able to prescribe cannabis for other conditions, and medical cannabis as we know it could become a thing of the past as insurance companies determine they will no longer cover prescriptions by claiming it is not a truly medical product. All of these changes will benefit the larger players in the sector; legacy operators and mom and pop businesses will suffer greatly as companies consolidate.

Prepare for Federal Cannabis Legalization Now

In order to be best situated in what will be a sea change for the cannabis sector, cannabis business owners and operators should partner now with cannabis attorneys who possess a strong cannabis law acumen. Cantafio & Song’s cannabis lawyers know the ins and outs of how to handle potential regulatory statutes and how to support and guide companies so they are prepared for the day when cannabis is no longer illegal at the federal level.

As one of the top cannabis law firms in Colorado, Cantafio & Song understands the complex nature of the cannabis industry and how quickly it can change. As a full-service law firm, we assist clients in all aspects of cannabis, as well as other areas of law such as criminal defense, estate planning, litigation, real estate and more. If you have needs in any of these areas, contact Cantafio & Song’s legal team today.

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