In an October Surprise for the ages, President Joe Biden issued a proclamation on Thursday, granting a sweeping, executive pardon for the offense of “simple possession of marijuana” for all U.S. citizens who have been convicted, prosecuted, or charged with the crime under federal law. He doubled-down on the announcement with an attendant statement requesting that the heads of both Health and Human Services and the Department of Justice “initiate the process of reviewing how marijuana is scheduled under federal law.” The joint actions were transparently political as there’s nothing but upside for Biden heading into the midterms backing an issue that polls with 60% favorability among all voters, and 71%, 61%, and 47% favorability among Democrats, Independents, and Republicans respectively. For critics who have since chastised the President for “buying votes”, I say, you’re absolutely right! But hey, don’t hate the player…hate the game.
Though it remains to be seen if Biden’s proclamation and instructions to HHS and the DOJ will finally remove marijuana from its Schedule 1 classification under the Controlled Substances Act, there are some meaningful, short-term consequences which ought to positively impact the cannabis and marijuana sector. Not the least of which being the legal marijuana industry’s ability to access traditional banking and financial services, payments processing, and a pathway for uplisting to the major U.S. stock exchanges.
Though the House of Representatives has passed narrow legislation in the form of the SAFE Banking Act to solve these constraints seven times before, the legislation, or anything resembling it, has yet to get through the Senate, even though it enjoys bi-partisan support in the lower chamber. In a bit of political irony, it’s been progressive Democratic Senators, most notably Corey Booker of NJ and Chuck Schumer of NY, who have vowed to block any legislation that doesn’t also include meaningful social justice provisions. They both seek redress (and I believe rightly so) for the disproportionate number of minorities who have been negatively affected by arrests, prosecutions, and convictions of marijuana related offenses in the federal government’s “War on Drugs.”
Well, in one magnificently shrewd and politically fell swoop, Biden has delivered cover fire to Booker and Schumer on the social justice complement needed to pass any form of marijuana banking legislation. Though Biden’s pardons will have little, short-term practical effect (there are less than 200 people currently in prison for having been convicted of simple marijuana possession by the federal government), the proclamation does telegraph to voters that he acknowledges the social injustices perpetrated against minorities and lower-income communities, and it greenlights congress to move forward with some form of Safe Banking legislation in the lame duck session following the November midterms.
I had originally planned on writing about marijuana legalization and its impact on financial services because of a different story this week, one that Politico published last Sunday. Per the story, the 1st Circuit Court of Appeals ruled in a 2-1 opinion that a provision of the State of Maine’s medical marijuana law violates the ‘Dormant’ Commerce Clause of the Constitution. The offending section provides a residency requirement for all dispensary owners. By requiring all owners to be residents, even if the intent is to protect in-state, lower income entrepreneurs, the state is implementing a protectionist trade policy that violates the interstate, free trade that is explicitly protected by the Commerce Clause, and falls squarely under the jurisdiction of the federal government. This ruling isn’t significant just in its assessment of the law’s constitutionality, but because so many of the states that have already legalized some form of marijuana sales have done so within a similar, residency-centric framework.
Thus, the takeaway from this ruling is that the current regulatory regime under which marijuana is legal in a majority of states, but still illicit under federal law, is untenable, and cannot be sustained.