THE FUTURE OF MARIJUANA

It is no secret that marijuana has become increasingly accepted, socially and legally, over the past few years and last decade. But with an increased push for marijuana legalization on the federal level, it brings into question how that could affect the legal structure and economic outlook for cannabis.

While a number of states such as Colorado, California, Oregon, Washington, etc., allow recreational marijuana use, and many more have legalized medical marijuana, it is still illegal federally, classified as a Schedule 1 drug.

This matters, because in the U.S. Constitution, Article VI, Clause 2 – commonly known as the “Supremacy Clause’’ – gives the federal government’s laws more political authority, as well as priority, over state and local laws.

The federal government is supreme and state and local governments are subordinate; this means that marijuana is officially still considered illegal in the United States, broadly speaking.
However, like all things legal, actual practice isn’t exactly done as it is on paper.

According to MHCC political science instructor Janet Campbell, the U.S. Attorney General, “if he so chooses, can enforce” the federal ban on locally licensed marijuana operations, but that hasn’t really happened “as long as business is localized and does not attract (drug) cartel interest.”

While the Trump administration is significantly different in its attitude toward marijuana from the Obama administration, “There are no actual actions going on,” Campbell said. “So, yes, the feds could step in, but they are not.”

As for those states that have legalized marijuana for medical or recreational use, their position, while technically a constitutional violation of the supremacy clause, also holds political value: It’s a message from states saying that their constituents are demanding that marijuana be federally decriminalized.

As Campbell noted, a majority of states now allow for medical marijuana.

“In my opinion it is only a matter of time before the feds will budge,” she said.

CLEARING BARRIERS

Besides the constitutional conflict over enforcement, there’s the serious matter of how marijuana dispensaries are blocked from using the normal banking system in the U.S., from accepting customers’ debit/credit cards, to safely depositing their cash.

Banks are subject to, and forced to comply with, all federal regulations.

MHCC economics instructor Peter Cunningham explained that in Oregon, marijuana firms “have developed a work-around by transacting all business in cash in the short term.” But these transactions are “not sustainable and there is a need for new banking laws and legislation at the federal level to manage this situation,” he said.

Cunningham hopes the U.S. Congress will act to remove these barriers, within the next five years.

If full legalization comes, what other major changes would follow?

The most high-profile agency that enforces the eradication of marijuana is the Drug Enforcement Administration (DEA), run under the U.S. Department of Justice. Many speculate that the DEA would switch to allocate more of its resources to combat “hard” drugs, such as meth and heroin. It’s also possible that marijuana would come responsibility of the federal Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to eradicate only the illegal transaction of marijuana.

It wouldn’t really be a big change for the DEA. Campbell said that “(H)istorically, pot has been an ‘extra’ (criminal) charge, as the DEA prosecutes more serious trafficking and other crimes.”

PRICE WARS? NOT LIKELY

Aside from regulatory changes, what could be the economic impact of federal legalization of marijuana?

Both consumer and producer elements should be considered, said Cunningham.

“I project we will see an increase in sales given it will be easier for the growers and suppliers to transact business,” he said. “Demand will increase marginally by a small percentage in (Oregon) and larger for states that have not had recreational weed sales before.”

Legalization would finally rectify banking issues, likely making marijuana shops more profitable as marijuana would become cheaper to produce and credit card transactions would be easier.

But those savings might not be passed on to customers.

In the past and to a degree now, marijuana consumers had minimal say about its price: It was either buy at this price, or not at all. Some observers wonder if easy, legal access to a wider variety of products will give consumers more leverage, and make them more sensitive to price changes – known as “price elasticity.”

Cunningham disagrees. He explained that, “Legalization may impact the price elasticity of demand of marijuana slightly. But the reality is the product will remain inelastic. Marijuana is an addictive substance… Consumers will pay higher prices for the product given the addiction to the substance.”

Overall, it seems the likely impacts of legalizing marijuana, for both the legal system and the economy, range from minimal to a noticeable difference.

The legal consequences seem minimally impactful as the government has not been enforcing marijuana laws in the states and federal agents will remain largely unaffected.

The economic fallout of legalized marijuana is more complex. It is guaranteed that marijuana shops will start dealing in credit cards, have access to banks nationally and win the ability to import and export product (across state lines), which leads to safer transactions and likely makes producing marijuana cheaper. The effect on pricing is not so obvious, meantime.

Ultimately, while the results can be left to speculation and debate, it is almost universally agreed that marijuana legalization on the federal level is inevitable.