TD has acquired Cowen Inc. Please bookmark TD Securities for further updates.

Reviewing the Timeline for Cannabis Legislation

cannabis in a field at sunset
Insight by and

Jaret Seiberg, Financial Services & Housing Policy Analyst and Vivien Azer, Beverages, Tobacco, and Cannabis Analyst discuss the draft cannabis legislation from Senators Schumer, Wyden, and Booker. They highlight key items of contention including cannabis legalization at the Federal level and broad expungement of marijuana possession criminal convictions. They also highlight next steps for the legislation’s advancement in the Senate and its impact on the STATES Act.

Press play to listen to the podcast.


Speaker 1:                           Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Vivien Azer:                        I’m Vivien Azer, Cowen’s cannabis, beverages, and [00:00:30] tobacco analysts. Delighted to be joined today by my colleague, Jared Seiberg in the Washington research group, who focuses on cannabis policy at the federal level. Thanks for joining us, Jaret.

Jaret Seiberg:                     Pleasure to be here and let’s talk some cannabis, Vivien.

Vivien Azer:                        Indeed, let’s. It was a busy week last week on Capitol Hill, as we got the draft legislation from Schumer, Booker, Wyden. Why don’t we level set the conversation, Jaret. Talk to us about this piece of draft legislation.

Jaret Seiberg:                     [00:01:00] You know, for the first time, since the Georgia special election, we actually have a sign of progress on the cannabis front. We’ve been waiting to see what the Senate Majority Leader was going to say, what his bill was going to look like. Everything pretty much has been on hold as we awaited this discussion draft. Now that the draft is out there, we can proceed with the broader debate and discussion. [00:01:30] So, on that sense it’s a really positive development. The problem is I think we’re going to get into is that the draft can’t pass as written.

Vivien Azer:                        That is a problem. So, maybe let’s follow up on that, key pieces of contention that you see in the draft, either from the perspective of Democrats and probably more importantly Republicans.

Jaret Seiberg:                     Sure. So, the name of the game here is to get to 60 votes in the [00:02:00] Senate, and that’s why we focus really exclusively on the Senate. The House will pass whatever bill can get out of the Senate. We believe President Biden will sign whatever bill clears Congress, and so the real hurdle is the United States Senate. There are 50 Democrats. There are 50 Republicans, but you need 60 votes to end debate, the so-called filibuster role. That means [00:02:30] you need to get all 50 Democrats on board, and you need to get 10 Republicans. It’s hard to see how the bill that Senator Schumer unveiled gets you there. It’s very much aimed at progressive side of the equation. It includes pretty much everything that Progressive’s wanted and there isn’t any cover for the Republicans and to say, ” [00:03:00] Okay, this is a bill that we can get behind, and we can break with Senator Mitch McConnell and other Republican leaders, and support.

Vivien Azer:                        Is that largely a function of the social equity or are there broader issues beyond that?

Jaret Seiberg:                     I think there’s really three provisions in here that make this bill unworkable for Republicans and either a couple of moderate Senate Democrats. [00:03:30] The first is the fact that this is a legalization bill, so it’s not the States Act. The States Act would simply respect what each state is doing. Most legalizes cannabis, is legalized, is interstate commerce. It legalizes imports from Mexico. So, it is the full legalization, and I think that is probably a step too far [00:04:00] for the vast majority of Senate Republicans. The other big problem that we see with the bill politically is that it includes broad expungement of criminal convictions for marijuana possession. I think the argument is going to be that this goes beyond what somebody who gets arrested for very minor amount in their possession, and [00:04:30] really would extend to what I think some Republicans detractors are going to argue are drug dealers.

                                                So, I think that’s another concern with the bill. Then, the third thing that I think Republicans are going to have a problem with is that there’s no brakes on this. There’s sort of no governors, and by that, [00:05:00] I mean, there is a concern about how do you measure impaired driving? How do you ensure that this doesn’t really get in the hands of children? What can you do when it comes to edibles, other products that might be more attractive to those under the age of 18 or under the age of 21? It does deal with [00:05:30] flavors. You can’t create bubble gum flavor of cannabis, but it doesn’t do much else. I think that, that may be the right call from a policy standpoint to simply defer those questions to the Food and Drug Administration and other aspects of the federal government. But if you’re a Republican looking for cover, looking to be able to say that, your vote [00:06:00] isn’t going to put children at risk, this doesn’t really give you any cover to be able to say that.

Vivien Azer:                        So, with all that in mind, it doesn’t sound like you’re terribly optimistic about the draft legislation as written, but what should we be looking for in terms of next steps to understand how this draft legislation will progress?

Jaret Seiberg:                     Yeah. So, I think when you think about next steps, it’s going to be [00:06:30] a bunch of small moves over the next, let’s say six months or so, and then we’ll be setting the stage for broader action next year. I think that you’ll start to see the House pass spending bills that will include cannabis measures. Those are really just about headlines and talking points. Very difficult and fairly ineffective to legislate on cannabis [00:07:00] through the spending bills because those measures expire after the end of the fiscal year. So, permanent legislation really is the only thing that works. So, while we’re distracted by these spending bills, Schumer’s going to be getting feedback on his legislative proposal. He asked for all the feedback by the end of September. I expect this will easily go [00:07:30] well into October or November, simply because the fall schedule is so packed for the Majority Leader, beyond the infrastructure package that they’re trying to move quickly.

                                                You also have a reconciliation bill that’s going to be one of the signature achievements. Democrats believe of the Biden administration. There’s a need to raise the debt ceiling this fall. The spending [00:08:00] bills all have to be enacted by September 30th and you’ll have a defense production bill that also has to pass. That’s a lot to do in September, October, beginning of November. It’s why I don’t really think there’s a lot of room for cannabis. Then, they’re going to go away for Christmas and they’re going to come back, and that’s when I think you’re going to start to see them get a little bit more serious. To me, the real question [00:08:30] is when does a Schumer simply publicly acknowledged that there’s not 60 votes for his package, because until Schumer does that, it’s going to be very difficult for Senator Sherrod Brown, the Chairman of the Banking Committee to start advancing the Safe Act on cannabis banking.

                                                Whether happens late in the first quarter or sometime in the second quarter, [00:09:00] we do expect that Schumer will move on past his discussion draft, and we’re going to see attention then shift to what can get added to the Safe Banking Act. The good news here is we do see a path for an expanded Safe Banking Act to become law. How big that expansion is, really is going to depend upon whether [00:09:30] Senator Schumer is content with compromising, or if he’s just looking for the narrowest of packages so that they can at least claim to pass the first major cannabis bill. From our perspective, I still think there’s a good shot they go big, and that could mean adding in the States Act, which simply for federal law recognizes [00:10:00] how each state has decided on cannabis.

                                                That’s de facto legalization at the federal level in states that have legalized. You would get commercial banking access. You would get capital markets access under this expanded bill. That means uplistings are, and there would be social justice priorities added there. It might not be as expansive as what’s in his draft bill, but certainly minor possession, [00:10:30] convictions would be expunged. I think there would be an excise tax imposed on cannabis, and those funds would be used to support grants, to help minority communities participate in the legal cannabis business. If we can get there, I think that would be a pretty positive outcome for this Congress.

Vivien Azer:                        Given that next year is a midterm [00:11:00] year, how does that influence the timing of what you just outlined?

Jaret Seiberg:                     So, that’s one of those good news, bad news situations. Realistically, for a bill like an expanded Safe Act, I actually think that could get significant Republican support. But, you probably get to a point at some point in the summer where it’s just going to be politically difficult [00:11:30] to get agreement on anything ahead of the midterm elections. So, whether that’s at the end of July or some point in September, we’ll hit that next year. The good news though, is that because it’s an election year, it means that we get a lame duck session of Congress. The lame duck is the period after election, but before the new Congress convenes, at the very beginning of January. [00:12:00] So, it’s usually about an eight-week period and a lot can get done in those lame ducks, particularly when there is sort of broader agreement, as there may very well be on an expanded Safe Banking Act.

Vivien Azer:                        So, it sounds to me like we got 163 pages of ideas and it’s probably going to be pretty quiet for the coming months, and we could very well be waiting towards the end of 2022. Is that about right?

Jaret Seiberg:                     [00:12:30] Yeah. The only thing that I might quibble with is that it’s going to be quiet from a substantive standpoint, but never underestimate the ability of Chuck Schumer to get headlines. So, I do think that the market is going to have to dodge the headlines, and try not to overreact positively or negatively to anything that comes from the Majority Leader or from Senator Mitch McConnell or anyone else [00:13:00] on the Hill. Nobody loves to be in the spotlight more than Chuck Schumer, and I suspect he’s going to try to stay in that cannabis spotlight over the next several months.

Vivien Azer:                        Well, then we will stay tuned for headlines. Jaret, thank you so much for your time and your insights.

Jaret Seiberg:                     It was a pleasure. I think we’re going to have a lot of more great conversations on cannabis in the coming months, so everyone just stay tuned.

Speaker 1:                           Thanks for joining [00:13:30] us. Stay tuned for the next episode of Cowen Insights.

Get the Full Report

If you’re already a member of our Research portal, log in.

Log In