Cannabis Musings - April 22, 2025
STATES Act! Part Deux
Friends, let’s take a quick look at The STATES 2.0 Act that was filed in Congress last week. Is it good? Probably. Does it matter? Almost certainly not. Why? Well, as we’ve said for a long time around here (as recently as last Friday), cannabis policy is inherently irrational.
The very first STATES Act (“Strengthening the Tenth Amendment Through Entrusting States,” which seems like cheating to have the acronym include the word itself) was proposed in 2018 by Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA), back when the licensed cannabis industry was on top of the world and everyone thought that major federal cannabis reform was just around the corner. As opposed to other legalization schemes, such as the Cannabis Administration and Opportunity Act (‘CAOA’ is a much less fun initialism), introduced by then-Senate Majority Leader Chuck Schumer (D-NY), Senator Cory Booker (D-NJ), and Senator Ron Wyden (D-OR) in 2022, which posited a fairly comprehensive federal regulatory structure for cannabis (taxes, social equity, banking, etc.), STATES basically said “let’s make it the states’ problem.”
Needless to say, neither STATES nor CAOA went very far, but they were important because they signaled a sort of progress in that Congress was finally willing to talk about cannabis in a positive way. There was a lot of interesting, purely academic debate over the merits of each approach, particularly over whether social equity policies/remedies belonged in cannabis reform. Momentum died, but whether you blame the Republicans in Congress, the Democrats in Congress, President Trump, President Biden, or all of the above for that, the die had been cast.
So now we have STATES Act 2 (Federalism Boogaloo), which is pretty much the same idea as its ancestor. You can read the text here – it’s fairly perfunctory because it does so much and so little. Basically, it lets the states decide for themselves, kicks regulation to the FDA, opens up interstate commerce, makes sure kids can’t buy cannabis. Its brevity is why I don’t think this will get very far – do we really, honestly think that the federal government is going to fully legalize cannabis (which many, right or wrong, group with alcohol and nicotine) without specially taxing it? Do we really, honestly think that alcohol and tobacco groups are going to allow cannabis products to be packaged and marketed without the very strict regulations that severely limit those products? Do we really, honestly think that a stripped-down FDA could move quickly, or at all, to facilitate the rollout of federally-legal cannabis, when it couldn’t even decide in five years whether hemp-derived CBD was safe? Do we really, honestly think that Congress really cares about cannabis right now (remember that SAFE(R) has been unsuccessfully tried nine times)?
To be perfectly frank, and this is admittedly very cynical, I think that the only thing that would get STATES 2.0 any real action is if someone from our industry were to make a very large donation to the United States Semiquincentennial Commission. Or something like that (Marijuana Moment just reported what appears to be a pretty good start). You get the point.
It’s great (really!) that Congress is still talking about cannabis legalization, particularly on a bipartisan basis. Progress has to start somewhere, and I do think that our industry needs to focus all of its attention on full legalization. But, unless something changes, or unless someone wants to endow the National Garden of American Heroes, oyfen himmel a yarid (“much ado about nothing”).
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© 2025 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín.
Yes! Interesting but not impactful
I agree with all of the issues you raised, which make the latest State's Act introduction largely symbolic.
I would also highlight another aspect that will be fought tooth and nail: interstate commerce. I would argue that interstate commerce is the most significant single risk facing the only consistently profitable segment of the industry, the limited license midwest and eastern state silos.
It comes down to winners and losers. The winners from interstate commerce are the western states like California and Oregon who are desperate to market their considerable overcapacity to a market with currently stronger pricing. Another winning group would be the cannabis consumer, who would benefit from lower prices. Losers? practically everyone else. That includes all eastern states and most MSOs as well as smaller competitors in Eastern limited license states.
Let's face the fact that States created medical programs and progressed them to adult rec programs for two reasons: jobs and tax revenue. Note, any belief in the plant or its benefits to its citizens ranks a very distant third in my cynical opinion.
Interstate commerce without some heavy restrictions would upend the limited license state silos and threaten both jobs and tax revenues in those states. Similarly, it would cause massive writedowns of stranded assets in those states. Who in their right mind would build indoor grow operations in New York if they could ship products from a state with a better growing climate, lower real estate costs, lower energy prices, lower wages, lower taxes, and a generally more business-friendly environment?
Meanwhile, most cannabis users already have what they most care about, easy access to the product. They don't care about the ability of their cannabis supplier to avoid 280E taxes, uplist to senior exchanges etc. Ergo, no popular push for this legislation.
And fundamentally, the law of unintended consequences applies more sharply in cannabis that practically anywhere else. "Be careful what you wish for" is the most critical advice that can be given to those contemplating the flavor du jour of cannabis refo