How Interstate Commerce Laws can Tear the Cannabis Industry Apart

How Interstate Commerce Laws can Tear the Cannabis Industry Apart

The cannabis industry has been making headlines since the bookend of last year. In November of 2020, the five states made advancements toward recreational or medical access to cannabis. States such as New Jersey, Montana, and South Dakota are joining the smoke session. Last week, the Virginia House of Delegates decided to toke with other states; the state passed a bill supporting recreational cannabis. Cannabis is even making headway on a federal level. The MORE Act, which can lift the federal restrictions on cannabis, was passed by the United States House of Representatives in January of this year. The US Senate plans to use the simple majority of the Democrats to pass the MORE Act. This means that we could see weed become federally legal this year. However, there are still some laws that could unravel the cannabis industry completely. The biggest threat to the political livelihood of cannabis is undoubtedly the Interstate Commerce Act.

Interstate Commerce Act of 1887

In 1887, the United States Congress passed the Interstate Commerce Act. This bill made the railroads the first industry subject to regulation by the federal government. Congress passed the legislation mainly in response to public demand that railroad procedures be regulated. The Interstate Commerce Act of 1887 also established an enforcement board known as the Interstate Commerce Commission. This board consisted of five individuals tasked with policing railroad operations from state to state. Following the Civil War ending in 1865, railroads were privately owned and completely unregulated. The railroad companies maintained a natural monopoly in the areas that only they sustained.

Marijuana Tax Act of 1937

I know what you’re thinking: “What does this have to do with weed?” The answer is everything. Despite the origins of Interstate Commerce, the act concerns itself with virtually taxable goods that are likely to be transported state to state. Although weed is still listed as a Schedule I controlled substance, it is still taxable by law. We are not referring to the dispensary laws set by your state, but the federal tax on cannabis. Since 1937, cannabis has been federally taxable. Thanks to the (cleverly named) Marijuana Tax Act of 1937 in conjunction with Interstate Commerce laws, harsh penalties still exist for cannabis companies even remotely involved with transporting cannabis state to state.

The problem with the MORE Act

The MORE Act has been trying to get enough drive in Congress to be heard on the house floor for a few years. Also known as H.R. 3884, the MORE Act was originally drafted and sponsored by Rep. Jerrold Nadler of New York. The MORE Act would eventually find bipartisan support of a whopping 120 cosponsors. Readily, the MORE Act can decriminalize cannabis on a federal level once and for all. Additionally, the act would finally remove cannabis from the list of scheduled I controlled substances. This would allow cannabis to be studied on a federal level. The MORE act will also force a tax on cannabis at a 5% rate federally. The tax rate is likely to increase to 9% if the bill can make it through the Senate.

Despite the political advancements associated with the MORE Act, the bill does not address the conflicts it shares with the Interstate Commerce Act of 1887 or the (Federal) Marijuana Tax Act of 1937. Even if the MORE Act is passed in its current forms, cannabis companies could still face penalties associated with the aforementioned acts. Many political theorists do not believe that Interstate Commerce will impede on the cannabis industry if the MORE Act is passed. The cannabis industry is on pace to exceed $200 billion by the end of the decade. The Government knows it would be foolish to impede on the economical livelihood of cannabis in 2021.

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