California lawmakers last week passed a bill to allow interstate cannabis commerce between states that have legalized marijuana, provided such action will not put the state at risk of federal enforcement. The bill,
Bill 1326 from Democratic Sen. Anna Caballero, was passed by the California State Assembly on August 22 and the California Senate approved the measure three days later. The legislation now heads to Democratic Gov. Gavin Newsom for his consideration.If the bill is signed into law by the governor, it would provide exceptions to California law that forbid the transportation of cannabis or marijuana products across state lines, pursuant to certain conditions. Under the legislation, the governor would be authorized to enter into interstate cannabis commerce agreements with other states that have legalized marijuana production and sales.
Several Conditions Must Be Met
Such agreements could only be made with other states that have legalized commercial cannabis activity and are subject to the regulatory authority of the relevant jurisdictions. Although
allows cannabis businesses in other states to transport their goods to California, it does not permit them to sell directly to consumers. Instead, merchandise will have to be transported to licensed distributors and retailers before being sold to customers.“The bill would prohibit an entity with a commercial cannabis license issued under the laws of another state from engaging in commercial cannabis activity within the boundaries of this state without a state license, or within a local jurisdiction without a license, permit, or other authorization issued by the local jurisdiction,” reads a legislative analysis of the bill.
The governor would be allowed to enter into interstate cannabis commerce agreements with other states only if one of several conditions are met, such as the approval of federal legislation that permits cannabis trade between the states. Agreements would also be authorized by the legislation if federal law is enacted that specifically prohibits the expenditure of federal funds to prevent the interstate transfer of cannabis between authorized cannabis businesses or if the U.S. Department of Justice issues a memorandum or legal opinion allowing or tolerating such transfers.
Additionally, the governor could enter into such agreements with other states if the state attorney general issues an opinion that such agreements do not pose a significant risk of federal enforcement action.
The Benefits of Interstate Cannabis Commerce
Adam Smith, the founder and president of the Alliance for Sensible Markets, says that the current system of federal cannabis prohibition coexisting with legal but individual state markets is unsustainable and supports illicit cannabis cultivation and trafficking.
“We’ve broken the laws of economics. We’ve said all states have to produce all of their products in-state, whether that’s environmentally or economically reasonable,”
. “And so, you end up with the best producing regions on the planet that don’t have markets to sell their product in, and giant consumer markets that can’t get supply chains up and running to feed their demand. And it turns out that while the prohibition laws are easy to get around, the laws of supply and demand are pretty ironclad,” leading to a huge underground marijuana economy.Allowing interstate cannabis commerce, he adds, will help small businesses in legal markets and create space for a wide variety of retailers who are better able to compete with larger chains already operating in multiple state markets.
“With this one small change — allowing legal cannabis to go from one legal market to another across these invisible lines — suddenly, you have thousands of small businesses with access to thousands of the best suppliers in the country,” said Smith. “Now, you can build a retail presence that is differentiated. Now, you can build delivery and distribution that has choice, that can go get the best cannabis anywhere at the best prices, instead of everyone being beholden to a few large players.”