Marijuana Legalization and the 2016 Election

By: Richard M. Blau, Shareholder and Chair of GrayRobinson’s Food Law, Alcohol Law and Medical Marijuana practice groups

November 8, 2016 is now history. No matter where on the electoral spectrum you reside, it is undeniable that the results are genuinely historic. This is as true for marijuana legalization as it is for presidential politics.

THE ELECTION RESULTS:

Four more states -- California, Maine, Massachusetts and Nevada -- voted on November 8th to legalize the recreational use of marijuana, doubling the number of states that now have legalized cannabis fully and adding significant impetus to the campaign for nationwide legalization.  Six more states also voted on marijuana measures, including Florida -- which passed Amendment 2 by a wide margin with 6,467,202 Floridians voting YES to deliver 71% of the total vote.  

In all, five states considered whether to legalize the recreational use of marijuana this election cycle. Arizona was the only full-legalization ballot state where voters rejected marijuana. 

Voters in Arkansas, Florida and North Dakota approved measures allowing marijuana use for medical purposes. Montanans voted to ease restrictions on the existing medical marijuana industry that were imposed by the state legislature; providers of medical marijuana will no longer be limited to the number of patients they can serve (the previous legislative restriction imposed a limit of three, which was sharply opposed by patients and providers in the program).  

In sum, eight states plus Washington, D.C. now have completely legalized cannabis for recreational purposes. 28 states have accepted some form of cannabis legalization,  primarily in the context of medical marijuana: 

In nine states, over 16,040,000 voters turned out to support marijuana legalization.  In states such as Florida and Montana – more voters supported marijuana than either Donald Trump or Hillary Clinton.

Also noteworthy was the legalization effort’s breakthrough into the politically- and socially-conservative South. Florida and Arkansas became the first states in the South with full-scale medical marijuana programs.

HOW?

How to explain this metamorphosis in the nation’s view of cannabis? Several factor warrant consideration.

Changing Public Perceptions. First, there is the debunking of Reefer Madness. A manifestation of the belief that marijuana was addictive, immoral and socially degenerative, the 1936 movie Reefer Madness is widely credited  as being a key propaganda tool that helped shape America’s perception of cannabis as a dangerous narcotic that would drastically and profoundly affect its victims. 

Yet, several years of seeing other states legalize marijuana – both for medical purposes, and even for recreational use – have had an undeniable effect.  Voters in states without legalized marijuana could look to 25 jurisdictions across America for medical marijuana, and Colorado and Washington State for the full monty of recreational marijuana, and find a reasonable basis for concluding that legalization of cannabis would not cause the sky to fall. 

Irresistible Economic Benefits. Perhaps more importantly, 2016 was an election year influenced by pocketbook issues such as wealth disparity and suppressed wage growth for lower and middle-class workers.  Economic benefits are largely viewed as major motivators behind vote totals that appear to cross partisan and demographic lines.  In this context, the promise of a cannabis industry producing jobs and tax revenues was touted relentlessly by legalization advocates. For example, an industry-funded study released in October of 2016 by the Marijuana Policy Group analyzed Colorado’s experience with legalization of recreational marijuana projects that:

[L]egal marijuana activities generated $2.39 billion in state output, and created 18,005 new FullTime-Equivalent (FTE) positions in 2015. Because the industry is wholly confined within Colorado, spending on marijuana creates more output and employment per dollar spent than 90 percent of Colorado industries. 1

Similarly, New Frontier Data, an information and analytics group focused on the evolving cannabis industry, collaborated with Arcview Market Research to release an Election Day update to official growth projections based on the successful results from last night's marijuana ballot initiatives. The legalization of cannabis in California, Massachusetts, Maine, Nevada, Florida, Arkansas and North Dakota will result in new markets that account for $7.1 billion in sales by 2020.  Industry watchers project the overall U.S. cannabis market will exceed $21 billion by 2020.

"Recent polls have shown 60 percent of the public supports adult use legalization. Nine in ten support the legalization of medical use. The ten initiatives on the ballot reflect the accelerating public debate on legal cannabis access. The passage of California's adult use measure and Florida's medical initiative expand legal access into two of the country's most populous states. Additionally, the passage of the measure in Massachusetts opens the first adult use market in the Northeast extending the reach of legal adult use access from coast to coast," said Giadha DeCarcer, Founder and CEO of New Frontier.

"The passage of the measures in Arkansas and North Dakota, shows that public support on this issue is not solely confined to urban, liberal markets but extends into conservative rural states as well. This truly has become a national issue," added DeCarcer.

The following 2020 economic projections account only for cannabis sales, and assume that these new markets are operational by 2018:

  • California: Medical - $3.3B, Adult Use - $4.3B, Total Market = $7.6B
  • Maine: Total Market -- $200M
  • Massachusetts: Medical - $301M, Adult Use - $771M, Total Market = $1.1B
  • Nevada: Medical - $193M, Adult Use - $429M, Total Market = $622M
  • Arkansas: Total Medical Market = $6.4M
  • Florida: Total Medical Market = $1.6B 
  • North Dakota: Total Medical Market -- $2.3M

 

These economic projections proved attractive not only to promoters of the nascent industry, but also to the voters who turned out in force to support their respective cannabis ballot initiatives.  

QUO VADIS?

Still, now that the election is over, the alluring promise of economic benefits faces significant hurdles before becoming reality.  It’s one thing to amend a constitution or approve a referendum; it’s quite another to convert the will of the People into a functional, governable infrastructure for an industry trading in a previously prohibited product.

Creating Something from Nothing.  Florida presents a clear example of the challenges associated with building a previously-unlawful industry from the ground up.  Amendment 2 provides the outline for a tightly-regulated system for producing, processing and dispensing medical marijuana.  However, it relies on the executive branch, and specifically the Office of Compassionate Use in the Florida Department of Health to create a regulatory framework for actually implementing the voters’ mandate.  Florida administrative officials have six months from the Amendment’s effective date to pass regulations governing the newly-legalized product. Within nine months of the effective date, state regulators must start registering marijuana growers, dispensaries and other industry-related facilities, and start issuing identification cards for authorized caregivers and patients approved to use medical  marijuana.

Administrative rulemaking will be required to provide the level of regulatory oversight and detailed functionality to make such a system viable.  To accomplish this, Amendment 2 provides a scant six months!

State Legislative Input.  While Amendment 2 expressly states that the Office of Compassionate Use must move forward to produce appropriate regulations and governance structures, the ballot language also expressly stated that "[n]othing in this section shall limit the legislature from enacting laws consistent with this section."  It is clear that the Florida Legislature will be taking an active role in the legalization process when the elected representatives convene in Tallahassee next January.  Issues to be debated by our elected representatives likely will include:

  • Who can produce and sell marijuana legally? Only the six licensees currently approved under the Charlotte’s Web regime to handle everything from production to dispensing? Or a broader range of licensed producers, processors, wholesale distributors and retail dispensers?
  • How can the parameters of qualifying physicians and eligible patients be controlled so as to honestly and effectively restrict medical marijuana to those who genuinely need it consistent with Amendment 2’s intent? According to Amendment 2, medical marijuana is intended to be used only to treat a "Debilitating Medical Condition." The ballot initiative defined such conditions as meaning "cancer, epilepsy, glaucoma, positive status for human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), post-traumatic stress disorder (PTSD), amyotrophic lateral sclerosis (ALS), Crohn's disease, Parkinson's disease, multiple sclerosis, or other debilitating medical conditions of the same kind or class as or comparable to those enumerated, and for which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient." (Emphasis added). Opponents of Amendment 2 argued vigorously that the "or other debilitating medial conditions" was an oversized loophole that would lead to profligate cannabis abuse. Legislators will undoubtedly seek to clarify both the criteria for certifying physicians recommending medical marijuana, as well as  the criteria for determining which debilitating conditions qualify a patient to use medical marijuana.  
  • How will the medical marijuana products be taxed? Excise taxes? Ad valorem taxation? Sales taxes? Tax based on weight? The nationally recognized and respected Tax Foundation estimates that a mature marijuana industry could generate up to $28 billion in tax revenues for federal, state, and local governments, including $7 billion in federal revenue: $5.5 billion from business taxes and $1.5 billion from income and payroll taxes.  How that product is taxed, and at what rates, can make a big difference on both revenue generation and consumption patterns.
  • How will law enforcement deal with DWI and DUI situations that result from cannabis rather than alcohol?  Blood alcohol content (BAC) levels can be readily and precisely measured.  Moreover, there are substantial scientific data detailing the effects of alcohol on human perception, motor skills and related behavior. Because of marijuana’s illegal status, there is little peer-reviewed research currently available for understanding. Much less measuring, the negative effects of cannabis ingestion on an individual’s capacity to drive an automobile responsibly.   

 

Federal Prohibition. Perhaps the greatest hurdle facing legalization of marijuana is the fact that federal law  still treats cannabis as an illegal Schedule 1 substance. While the Obama Administration took a largely passive role towards federal enforcement over the past eight years, a Trump administration could swiftly undo the progress marijuana regulation has made in an instant. As one reform advocate reportedly told the Washington Post: "The prospect of Rudy Giuliani or Chris Christie as attorney general does not bode well." 

In so many ways, November 8, 2016, will be long remembered as a change election. That certainly is true for marijuana legalization. Whether that continues to be the case will depend greatly on the events of 2017.

Interesting times ahead!

Richard Blau
GrayRobinson, P.A.
401 East Jackson Street
Suite 2700
Tampa, Florida 33602
Phone: 813.273.5000
Direct: 813-273-5128
Fax: 813.273.5145

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1 Light, M., Adams, O., Rowberry, J., Saloga, C., The Economic Impact of Marijuana Legalization in Colorado, Marijuana Policy Group (Denver, CO.)(Oct. 2016); a copy of this analysis is accessible online at: http://www.mjpolicygroup.com/pubs/MPG%20Impact%20of%20Marijuana%20on%20Colorado-Final.pdf (last accessed November 9, 2016).

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