Working in the cannabis industry sometimes feels like a blur. It seems like just yesterday that states like Colorado and Washington voted to legalize recreational cannabis. Almost ten years later, the U.S. has a maturing nationwide cannabis industry that is experiencing consolidation in certain markets through mergers and acquisitions. This activity has created multi-state operators (“MSOs”) that are now expanding internationally. Those states that have recently legalized medical and/or adult-use marijuana have implemented cannabis programs that include rules and regulations adopted by those states that have had time to test the effectiveness of their requirements. At the same time, state-by-state cannabis regulations continue to evolve and are updated regularly in every jurisdiction. Since Simplifya, through its team of regulatory affairs specialists, constantly monitors and updates its regulatory technology platform to ensure its content is current in those jurisdictions it services, Simplifya is uniquely positioned to provide insights about some of the regulatory trends it expects to see in 2022.
State-by-State Expansion without Interstate Commerce
Despite the industry’s rapid growth, cannabis is still in the early stages of development. Marijuana remains illegal federally, and 13 states still prohibit and criminalize the purchase of THC-containing products. Even in those states that have legalized medicinal marijuana, it is illegal to purchase it in 24 states unless a patient has a qualifying, debilitating health condition and an accompanying medical recommendation from a doctor. In those states that have legalized recreational marijuana, 5 have not yet conducted any sales. Most of the remaining states that have yet to legalize marijuana are also states that don’t allow their citizens to vote on things like marijuana reform. In such states, marijuana reform must come from legislatures like it did in Illinois and New York. Regardless of the changes brought about at the state level, because of federal prohibition, marijuana cannot be sold across state lines. And although industry supporters were hopeful that meaningful marijuana reform would occur at the federal level when President Biden was elected, industry participants and insiders are now less hopeful. Marijuana reform in 2022 will likely continue to be piecemeal on a state-by-state basis.
Without federal marijuana reform and the ability to participate in interstate commerce, states are increasingly collaborating with each other. When states initially began to legalize marijuana, early participants were determined to create their own statutory schemes and essentially reinvent the wheel. Each state made its own program from scratch, with its own supply chains, license types, and terminology. Not only was the industry forced to comply with wildly different rules and regulations, but these state-by-state programs don’t agree on basic terms like what processing and manufacturing mean. For example, some states define “processing” to mean drying and curing flower (California), while in other states it means making full products like concentrates and infused edibles (Ohio). “Manufacturing” can mean either of the previously mentioned interpretations for “processing” and can even be defined as “cultivation” under federal law. While this confusing patchwork of programs creates a niche for companies like Simplifya, it only serves to create headaches and inefficiencies for licensed operators, especially those who operate in multiple states. Finally, in 2021, Colorado’s cannabis regulators, along with regulators from 18 other states, founded the Cannabis Regulators Association (“CANNRA”) in an attempt to facilitate interstate knowledge-sharing. CANNRA membership has rapidly expanded and now includes 37 states, two of which don’t even have marijuana programs yet! Additionally, with sales in the Tri-state area just around the corner, Northeastern states have been meeting with the goal of creating programs that are interoperable. At Simplifya, we have already included content for New Jersey and Pennsylvania, while Connecticut is in development, and will include the details of New York’s adult-use program when the rules are finalized. While Simplifya remains skeptical about regulators’ abilities to make a well-functioning, inclusive program on the first go, we are encouraged that CANNRA participants are trying to wade into legalization with the benefit of foresight, rather than jumping in headfirst like earlier state markets did.
Simplifya’s Regulatory Predictions for 2022
Simplifya expects more expansion and reform at the state level without any federal legalization. State reform will increasingly come in the form of (slower) bills from the legislature as opposed to voter initiatives. Expect more uniformity of laws as new states learn from the lessons of older states. Expect these laws to be more inclusive, for tribes and other disenfranchised groups as states wrestle with their uncoordinated attempts at social equity. Finally, expect the more mature states to tinker with things at the margins.
By: Luke Ewing, Esq. (Senior Regulatory Affairs Analyst) & Katrina Skinner, Esq. (General Counsel & Chief Banking Officer)