Demonstrating the Social and Economic Benefits of a Legal Cannabis Market
National Cannabis Industry Association (NCIA)
The primary message of the National Cannabis Industry Association (NCIA) is that the cannabis industry must take an active role in policy making and lobbying in order to change the laws that directly affect the industry. The necessary changes include specific factors such as ending the 280E tax code application that unfairly taxes cannabis businesses and allowing for safe access to banking as well as comprehensive cannabis policy reform such as removing marijuana from the schedule of controlled substances and implementing legislation that allows states to determine their own policies.
Traditionally, marijuana policy reform has been funded by large philanthropic donors and other small donors; however, many of those philanthropic donors have started to pull back in terms of their donations for policy change efforts, largely due to the idea that the industry should be stepping up. “Even though there are a lot of things that make working in the cannabis industry more expensive than other industries given the federal prohibition and the strict regulatory environment, it’s absolutely vital that the people in the industry get involved in policy change efforts. Cannabis is not going to legalize itself and there is still a long way to go,” says Morgan Fox, Media Relations Director of the NCIA.
Cannabis is a nascent industry and due to its background in activism and social justice, there is a real opportunity to create an industry that is truly built on a strong foundation of corporate responsibility, community-based best practices and social justice. Those factors need to be taken into account as the industry moves forward and should be considered to be primary goals for any sort of policy change that affects the industry.
The NCIA exists to promote the best interests of the cannabis industry with a focus on consumer and public safety. It encourages the growth of a legitimate and responsible cannabis industry in the United States and lobbies for federal policy changes that will allow the industry to operate without fear of federal interference. The NCIA provides more than 1700 member businesses with resources that will help them institute best practices and navigate the complex regulatory environment.
The NCIA was formed in 2010 by long-time marijuana policy reform leaders, Aaron Smith and Steve Fox, as an offshoot project of a group called the Marijuana Policy Project, which is primarily a policy and advocacy organization. It was established to fill the need for an organization to unite members of the cannabis industry and help push for policy that would benefit all of them. The purpose was to conglomerate all of the businesses that are a part of the cannabis industry in any way and help them to solidify their voices.
The tagline of the NCIA is, “Advocacy. Education. Community.” It advocates for the cannabis industry and also for the greater social good. Education is a key part of the NCIA; it educates the public about how the safe and legal cannabis industry is far preferable to the illicit market, and it also educates its members in best practices and ways that they can thrive in the current environment to achieve success in the future. Community is about showing these business that they are not alone and helping to foster an overall industry that incorporates collaboration instead of competition. The NCIA encourages members to assist each other and share resources with the communities in which they operate in order to make life better for everybody around them.
There are a number of different types of businesses that are members of the NCIA. Members include growers, cultivators, retailers, processors and testing laboratories, as well as those from ancillary industries such as lighting, vaporizer cartridges and secure product transportation services. There are also members that provide other services such as insurance and accounting to cannabis businesses.
Members of the NCIA receive a variety of benefits for being a part of the organization and there are a plethora of opportunities available beyond the special access to resources and information. “There are a lot of opportunities to get involved in the many events that we host throughout the year where people can go and learn and meet others that are in the industry, or thinking about getting into the industry, in order to connect, network and hopefully help each other’s businesses,” says Morgan.
The annual Cannabis Business Summit and Expo, held in July of this year, was without a doubt the largest it had ever been. There were over 400 exhibitors, 8,000 attendees and over 150 speakers including the former Deputy Attorney General James Cole, who was responsible for writing the Cole Memorandum that essentially allowed the industry to develop and flourish in 2014.
In the United States, there are currently nine states as well as the District of Columbia where marijuana is legal for adults and eight of those states have regulated it similarly to alcohol. There are 31 states that have effective medical marijuana laws and 46 states in total have allowed some form of cannabis use ranging from very restrictive CBD programs all the way up to adult legalization. Unfortunately, marijuana is still illegal under federal law and the federal government has the ability to arrest any citizen for doing something that may be legal in their state. There has not been a lot of practical application of this issue, yet people are understandably still apprehensive, despite the fact that it would be a disaster for the Department of Justice to start cracking down on legal tax-paying businesses.
Currently under federal law, marijuana businesses are not able to deduct taxes under IRC code 280E, which makes it very expensive for them to operate legally. It is also very difficult to obtain financial services for cannabis businesses and other businesses that support the industry. The banks are allowed to work with these businesses, yet they are required to follow a very strict recording schedule and some find that it is simply not worth dealing with the logistics. Many legitimate cannabis businesses are afraid of using banks and sending information to the federal government on a regular basis and there is no safe harbor for them. The alternative is working primarily in cash, which causes public safety issues and increased expense.
Fortunately, there are a number of pieces of legislation in place right now at the federal level to change these things. “There is an appropriations rider that prevents the federal government from prosecuting people who are in compliance with state medical marijuana laws, but that does not apply to adult use programs and it is also a temporary measure that will expire on Sept. 30th when the budget expires,” Morgan explains. The rider will have to be renewed and the NCIA is hoping for stronger language in the next budget that extends the protection to all state-legal marijuana behavior.
There are other smaller appropriations in motion that involve banking and taxation as well as some that are trying to make it easier for veterans to be able to access medical marijuana. There are pieces of legislation that would basically prevent the federal government from interfering in state cannabis programs and some that would make it legal at the federal level.
Unfortunately, many of these bills have been barred from hearings or from consideration by the United States Congress because the House Rules Committee is chaired by a Congressman named Pete Sessions who will not allow any marijuana legislation to be considered. It is a serious problem that has held up a lot of reform and there are people currently working to unseat him. “We’re very hopeful that we can get hearings in the next year and with any luck be able to get a positive vote in the next couple of years, because support for this issue in Congress right now is broad and bipartisan,” says Morgan.
Nonetheless, a significant milestone was reached for the cannabis industry during the recent appropriations negotiations in Congress. The language that would prevent the Department of Justice from interfering with medical marijuana programs was included in the base bill; it was such a non-issue that it did not even require a debate. That piece of legislation had always been included in the final budget since 2014, yet it had never before been included in the base bill.
Another achievement is witnessing the number of co-sponsors of federal marijuana-related legislation increase at a dramatic rate, far greater than in the past. This is partially due to the repudiation of Jeff Sessions rescinding the Cole Memorandum in January 2014 and threatening to interfere with state marijuana programs. It is also due to a much greater understanding about cannabis as it becomes clear that regulation is working successfully, and to NCIA’s lobbying efforts to ensure that information gets in front of Congress.
A challenge for the organization is that there are individuals in the cannabis industry who view legalization as inevitable and have not been participating in advocacy and lobbying. The NCIA hopes to change that attitude through education and various attempts to get members involved in as many ways as possible, whether it be letter writing campaigns, attending town hall meetings during August recess, fundrasiers, or invitations to Washington for the annual lobby days.
The rapid innovation within the cannabis industry has been driven by the regulatory requirements and the freedom to explore opportunities legally. Business owners have the ability to be much more creative in a legitimate industry. There are many innovators listed among the NCIA membership that are using advanced technology to add new and interesting products to the cannabis market and helping the industry evolve.
“When I was at the expo, I was blown away by the innovation and technology that was on display and some of it I couldn’t identify if you paid me. It looked like something from a physics lab,” says Morgan. “It’s emblematic of what can happen when you stop prohibiting a substance and start treating it like other substances are treated, like alcohol.” The development of technology that has taken place since these laws have started to change has been astounding. People are not as afraid to work in the field and they are able to bring their expertise to bear in a way that cannot be done in an illicit market.
Today there are complex chemical extraction devices, pieces of equipment to trim and process cannabis flowers in bulk, self-contained cultivation sites, misters and impressive growing technologies such as aeroponics. Additionally, the lighting technology has improved tremendously over the last couple of years and people are able to use low wattage LEDs that are extremely effective and can produce multiple spectrums of light instead of the formerly expensive and hot light bulbs. Everything is getting better and less expensive in terms of the technology needed to cultivate cannabis.
Tens of thousands of people are no longer being arrested for using a substance that is objectively safer than alcohol and that has certainly been a benefit for society in general. “The fact that the businesses that supply consumers are now legal and all these ancillary businesses have been affected as well, it’s creating a lot of economic opportunity where none had existed before and I think that’s going to be a great boon for states that have decided to make marijuana legal,” says Morgan. Many states are already seeing the tax benefits of legalizing cannabis. For instance, in Colorado, new schools are regularly being constructed with the new taxes from marijuana sales.
Police officers in these areas have more time to focus on serious crimes and many consumers no longer have to meet up with potentially dangerous drug dealers. “The benefits in terms of job creation, tax revenue and pulling money out of the criminal market have been immense,” says Morgan. The customer experience is much better for the consumer purchasing legal marijuana since they are aware of what is in the product and how strong it is. This is particularly beneficial for the millions of people across the country who use cannabis to help treat their medical conditions. The product is much safer and free of contaminants due to the measures put in place that prioritize safety and health. Also, the general quality of cannabis has improved greatly since the legalization process began and from a consumer standpoint that is a major benefit.
The NCIA is solely focused on United States policy and primarily on federal policy within the U.S. However, it has discussed branching out into international work and potentially getting more involved in state-level policy making as the needs of the industry evolve and as more countries begin to change their cannabis policies. “Discussions are currently ongoing about the scope of what we can do effectively and whether or not we should get involved in global and/or more state-oriented policies,” Morgan shares. “It’s definitely something we’re looking at and paying attention to but it remains to be seen whether or not we’ll be able to get directly involved or whether we need to focus solely on U.S. federal policy.”
The members of the NCIA are all eagerly looking forward to the initiatives that will be on state ballots this November. Michigan is looking at one that would regulate marijuana similarly to alcohol for adults, Utah is looking at a medical marijuana initiative, Missouri is looking at a series of medical initiatives and North Dakota will be voting on an adult use legalization initiative. These potential changes may open up very large new markets within the United States. Michigan in particular stands to be one of the most populated states that has made marijuana legal and will be the only one in the Midwest to have made marijuana legal for adults. That will provide a lot of opportunities for businesses in that state.
The NCIA is also enthusiastic to see what sort of progress it can make with the new Congress next year. “One of the bills, the STATES Act which is co-sponsored by Elizabeth Warren and Cory Gardner, is gaining a lot of steam and Trump has said that he would support such legislation, so we’re very excited about potentially getting a hearing on that bill sometime in the near future and then hopefully a vote,” says Morgan.
It will be interesting to see how the next election impacts Congressional representation and whether it plays a factor in reform efforts in the next Congress. The topic of marijuana itself could play a role in some of the state and federal races for lawmakers.
Almost two thirds of Americans live in states with some form of cannabis access and it is now up to the Congress of the United States to make changes at the federal level. It is time to end federal marijuana prohibition and allow each state to set their own laws accordingly. It is time to create legal cannabis markets, enable access to banking services and have fair tax equity for legitimate businesses in the cannabis industry. It is time for the U.S. to experience the economic and societal benefits of cannabis legalization.