Regulation
Federal Legalization Goals, Barriers, & Solutions: New Frontier Data Report
New Frontier Data working in collaboration with Verde Compliance Partners has just released a report that identifies the primary objectives of federal legalization and the challenges that come with it. This report paints a clear picture of the four primary goals of legalizing cannabis, and potential policy solutions to address the challenges that are derailing the process of achieving these goals. The report which was titled “Federal Cannabis Policy: Facilitating Successful Regulation” was released in the last week of August and will serve as a useful tool to direct policymakers who are involved in formulating laws for the regulated market.
The report identifies the following four primary goals of federal legalization:
- Diminishing the illicit market
- Improving public health safety
- Lifting the burden of inequitable cannabis prohibition enforcement
- Creating jobs and boosting tax revenues
In as much as these goals have been partly realized in states that have legalized, the process has been adversely affected by both weak policies and federal prohibition. Here are the major highlights that can be gleaned from the timely report.
Diminishing the illicit market
Consumers will not abandon the illicit market just because there's an existing regulated market. There are a number of incentives that would make consumers want to remain with their old dealer. This includes the friendship and trust built over time, convenience, discretion, and cheaper prices. In addition, it's not as easy to transition legacy operators to the legal market which has several barriers. The report made the following recommendations.
Potential Policy Solutions:
- Offering technical and vocational skills training
- Reducing barriers to entry such as the many conditions and costs related to licensing and expunging marijuana-related criminal records
- Offering non-discriminatory SBA loans
- Repealing section 280E and instituting reasonable tax rates
The illicit cannabis market is entrenched in many states where cannabis has been legalized. For example, Texas has an illicit market that's worth about $6 billion. The four policy recommendations cited above are a starting point for diminishing the size of the illicit market
Improving public health & safety
The illicit market poses a significant threat to the health and safety of consumers. The 2020 vaping incident which resulted in 68 EVALI-relate deaths and a lot more hospitalizations was traced back to cartridges from the illicit market. A major goal of legalization is to regulate the quality and safety of products in the market so as to guarantee consumer safety through stringent third-party product testing. With the illicit market, regulation is very difficult.
From the report, consumers cited safety concerns among the top reasons for choosing a product. However, consumers were also drawn to products with cheaper prices. This partly explains why consumers are not moving away from the illicit market in spite of the contamination concerns.
The report cited the following potential causes of the prevalence of untested or contaminated products in the market:
- Commercial bans limiting access to regulated products
- Policies that are based more on fear than facts
- A thriving illicit market
- Poor tracking of products
Potential Policy Solutions
- Diminishing the illicit market
- Reducing local product bans
- Developing a consistent national framework for product testing and monitoring
- Creating DUI standards that are based on science
Consumer safety should be a top priority for cannabis legalization. This is very critical if cannabis as an industry is to gain mainstream acceptance and meet the acceptable safety threshold.
Lifting the Burden of Cannabis Prohibition
Cannabis prohibition was more punitive to blacks than whites. Despite similar use rates, blacks have been four times more likely to be arrested and incarcerated for marijuana use. The punishment does not end once the sentence has been served but the victim will continue to bear consequences because they now have a criminal record. This will diminish their housing options, scholarship opportunities, and even employment prospects.
Potential Policy Solutions
- Scrutiny of marijuana-related criminal records and expunging the ones that need to be expunged
- Removing collateral sanctions relating to marijuana offenses
Creating Jobs and Increasing Tax Revenues
The cannabis industry employs close to half a million people. The illicit market employs a significant number as well. By 2025, the legal industry will have created about 1 million jobs. But this can only happen if marijuana businesses are supported by the right policies to create a conducive business environment. It is one of the goals of legalization to boost the U.S employment rate and increase the household incomes of communities that were unfairly targeted by the war on drugs.
The value of the legal cannabis market has been growing steadily and is projected to be worth $72 billion by 2030. The industry is already overtaxed. Unfortunately, a lot of tax dollars are lost to the illicit market. This makes the taxation measure counterproductive.
Potential Policy Solutions
- Increase funding for cannabis research
- Create policies to allow those with previous marijuana-related criminal records to work in the legal industry
- Offer technical and financial support to help small cannabis businesses to scale
- Eliminate onerous banking reporting requirements to enable cannabis businesses to access competitive funding from mainstream financial institutions.
- Eliminate section 280E of the tax code for marijuana businesses and create reasonable federal tax rates
New Frontier Data (NFD), the leading data analytics firm in the cannabis industry is committed to providing data-driven and actionable solutions for all stakeholders in the industry. This latest report is important not just for policymakers but for businesses and consumers as well.
