California Might Legalize Interstate Cannabis Sales

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A few weeks ago, California lawmakers quietly introduced SB-1326, a bill that would amend the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to legalize interstate cannabis sales, notwithstanding the status of federal law.

Specifically, SB-1326 would authorize the Governor to enter into an agreement with other states authorizing medicinal or adult-use commercial cannabis activity, or both, between entities licensed under the laws of the other states and California entities operating with a state license.

If enacted in its current version, the bill would also:

  1. Limit interstate commercial cannabis activities to out-of-state operators that secure a state license, or a local license, permit, or other authorization issued by the local jurisdiction.
  2. Require that the other states impose requirements, including product safety, labeling, and testing requirements, on their cannabis licensees that meet or exceed the requirements applicable to MAUCRSA licensees.
  3. Mandate that the agreement include provisions for collection of applicable taxes.

Among these three additional provisions, the second may be the most interesting. Imposing burdensome requirements on out-of-state cannabis licensees could run afoul of the Dormant Commerce Clause (DCC). That clause prohibits states from enacting legislation that discriminates against or excessively burdens interstate commerce, and regulates conduct occurring beyond their borders without some adequate localized justification. If this topic is of interest, you can read more about it here.

SB-1326 would, in part, help California deal with its oversupply problem by enabling the exportation of cannabis product. It would also position the State as one of the first states to export cannabis and cannabis products the moment federal cannabis prohibition is lifted. Indeed, once marijuana becomes lawful under federal law, the DCC should guarantee unrestricted access to every legal adult use and medical market in the country. This, in turn, should increase state revenues, spur investment, expansion, business formation, and jobs.

The language of SB-1326 closely aligns with the provisions of an Oregon bill enacted in June 2019 that grants the Governor of Oregon the authority to make agreements with neighboring states where marijuana is lawful, provided such activities become lawful under federal law or if the Department of Justice implements an administrative policy allowing for such commerce. It’s worth pointing out that in its current form SB-1326 does not expressly tie the Governor’s authority to federal legality.

The success of these types of interstate agreements will obviously depend on the specifics and whether the terms of the agreements benefit local cannabis businesses, particularly small companies that are already struggling to compete with “Big Marijuana.”

Cannabis groups, such as the California Cannabis Industry Association and the Alliance for Sensible Markets, which have been promoting the idea of interstate compacts for a few years now, will most certainly influence the passage of this new California bill and help shape the terms of the agreement – See Dreaming of an Oregon-California Cannabis Exchange.

There is no doubt that if enacted, SB-1326 would further legitimize the idea of cannabis interstate commerce and would likely influence other states to follow the footsteps of the Golden and Beaver States, which have been and continue to be marijuana mavericks.

Needless to say we’ll keep closely monitoring this issue and report on any legislative development.



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