October 23, 2020
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Illustration by SK Designworks

In 1973, Oregon became the first state in the U.S. to decriminalize the use of marijuana. Nearly fifty years later, eleven other states—including Colorado, Alaska, California, Nevada, Massachusetts and Vermont—have all fully legalized recreational marijuana.

So, what is holding back the rest of the country from joining in the green rush? Kevin Fandl, associate professor of legal studies in the Fox School, investigates the complexities involved with lifting the federal ban, the burgeoning grey market (when a legitimate business operates “in partial or full non-compliance with regulations”) and its implications for the legal cannabis business. 

In his paper, “Up in Smoke- International Treaty Obligations and Marijuana Reform in the United States,” Fandl explains the historical context behind our modern attitudes towards cannabis. He details how racism and the immigration hysteria of the 1930s led to the criminalization and subsequent regulation of marijuana. Much of the anti-marijuana rhetoric, fueled by Harry Anslinger, the first Federal Bureau of Narcotics Commissioner, continues to grip the world today. 

International law also plays a large role in the current environment. “The U.S. was instrumental in the passage of the three principal treaties establishing the current international narcotics regime, starting in 1961,” Fandl says. These treaties placed cannabis in a regulatory environment that has guided countries’ policies for decades. 

Where does this leave the U.S. marijuana reform in 2020?  Far from the days of “Reefer Madness” and Woodstock, cannabis production has become a sophisticated industry. Since 2012, marijuana began to break through barriers with increasing statewide adoption, starting with Washington and Colorado. More lenient bipartisan federal enforcement followed. 

Yet, despite the changing of tides in the U.S., the conflict between federal and state legalization endures. The U.S. Supreme Court has upheld the federal authority to enforce the criminalization of marijuana. However, as more states accept the risk and enact legislation to decriminalize marijuana distribution and use, marijuana businesses become stuck in a web of conflicting regulations.

“Because it is federally illegal, marijuana vendors are not operating in a grey market but rather a black market,” says Fandl. “It is tricky because they are guided by state laws allowing the practice despite federal criminality.” 

Marijuana businesses operating in legalized states face significant barriers, says Fandl. “They are unable to use the banking system and legal services, as it is unethical for a lawyer to advise on criminal activity.” They also might be prevented from renting or purchasing property for their business. In addition to these business hurdles, Fandl explains there is still the risk of federal enforcement. “This could mean the seizure of assets and the prosecution of owners and employees alike.”

If marijuana businesses were legal, how would it impact the U.S. economy? “Within the first four years of legalization and taxation of marijuana in Colorado, the state brought in $1 billion in tax revenue,” says Fandl. “Canada, where marijuana is legal nationwide, generated more than $140 million in tax revenue in the first five months following legalization.” Now extrapolate that to the U.S. The tax revenue alone would be an economic boon, not to mention the ripple effect for the rest of the legal and financial services that these now-legal businesses would be using. 

That paints a compelling picture, right? However, those international regulations still exist. “Legalization in any form is still currently a violation of international narcotics treaties, meaning that Canada and the U.S., as well as Uruguay and Portugal, violate international law as we speak,” says Fandl. 

Those international treaties are hard to enforce, so there are few significant consequences for the domestic economy. “Still, it does show disregard for our commitment to international law,” says Fandl. “It could undermine our ability to push for the broader enforcement of other critical aspects of those treaties, including limitations on the production of narcotics such as opium, cocaine and heroin.”

Marijuana legalization is a profoundly complex issue. Despite the recent reforms in the U.S., the cannabis industry has a long way to go before the federal prohibition ends. Those bold enough to forge on with America’s new green dream should proceed with caution, recognizing the inherent risks (and opportunities) of complying with a state law while violating a federal one.

CannabisDepartment of Legal StudiesKevin FandlLegal StudiesLegal SystemMarijuana LegalizationMarijuana ReformReformTax Season