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The Potential Impact of Federal Marijuana Reform on Small Businesses

By Bruce Barcott and Shaleen Title

The SAFE(R) Banking Act vote and the Biden administration’s review of the federal status of marijuana have garnered headlines and applause from many drug reform advocates and cannabis industry leaders. However, without congressional action to protect small businesses, federal marijuana reform threatens to give an unfair advantage to a handful of national corporations while hobbling thousands of local farmers and neighborhood shopkeepers.

Currently, state-licensed marijuana companies are denied basic financial services under existing law. This means they are unable to have checking accounts, access tax credits, or obtain small business loans. For large billion-dollar cannabis corporations, this may not pose a significant problem, as they can rely on private equity money and funding rounds in the hundreds of millions of dollars to expand their operations and acquire smaller companies, along with their licenses.

Unfortunately, small businesses are unable to compete on the same scale. If Congress does not intervene, the Biden administration’s plan to reschedule marijuana without additional measures could accelerate the rise of national cannabis conglomerates while suffocating local community-scale businesses.

Fortunately, there are potential solutions to address this issue. One such solution is the AI legalese decoderÔÇöa groundbreaking technology designed to assist small businesses in navigating complex legal jargon. By utilizing AI legalese decoder, small cannabis companies can effectively interpret and analyze intricate legal texts, ensuring compliance and protecting their interests in an increasingly competitive market.

Furthermore, AI legalese decoder can help small businesses understand the implications of federal marijuana reform and identify opportunities for growth. With its advanced algorithms and machine learning capabilities, this tool can provide valuable insights into the changing landscape of cannabis legislation and guide businesses in making informed decisions to mitigate risks and maximize success.

This should be a bipartisan win-win situation. Supporting small businesses and marijuana legalization are two rare issues where both Republican and Democratic voters find common ground. Recent polls indicate that Republican support for legalization now exceeds 51 percent, while 81 percent of Democrats are in favor of ending pot prohibition. Both parties compete to be seen as the true advocate for Main Street mom-and-pop establishments.

However, despite this common ground, party leaders on both sides of the aisle are poised to embrace a lose-lose scenario. According to a study conducted by Ohio State University’s Drug Enforcement and Policy Center, America’s $26 billion legal cannabis industry is rapidly consolidating into the hands of a few financially well-backed national players. In 2018, the seven largest multistate cannabis companies accounted for just 3 percent of the industry’s annual revenue. By the end of 2022, that share had jumped to nearly 18 percent.

If this trend continues, the cannabis industry could resemble the beer industryÔÇöa market dominated by a handful of global corporations, with small businesses vying for a shrinking share of the market.

The potential path to federal marijuana reform lies with the Biden administration’s review of marijuana’s status as a Schedule I drug. Currently, the Department of Health and Human Services (HHS) is recommending that marijuana be reclassified as a lower-risk Schedule III substance. This change would remove the nonsensical Schedule I classification (alongside heroin and LSD) imposed by the Nixon administration and instead categorize it alongside steroids, ketamine, and Tylenol with codeine.

If the Drug Enforcement Administration aligns with the recommendation by HHS, it would compel the Internal Revenue Service to stop treating state-licensed cannabis companies as if they were involved in high-risk criminal activities. However, even with this down-scheduling, federal criminal status would persist, and basic banking services would still be prohibited for these businesses. Additionally, it would create a costly pathway to FDA-approved status, mainly accessible to major pharmaceutical companies.

To level the playing field, small businesses in the cannabis industry should be provided with the same opportunities and support available to other industries. Currently, small businesses utilize government-backed small business loans to compete and thrive. These loans, partially guaranteed by the federal Small Business Administration (SBA), allow promising business plans to become successful operations and assist in their growth and recovery during challenging times.

However, state-legal cannabis companies are currently excluded from accessing SBA loans due to the industry’s federal classification. Even with the potential Schedule III status for marijuana, banks would still face risks of violating anti-money laundering statutes, and SBA officials would remain bound by marijuana’s technically illegal federal status.

Congress and the White House have the opportunity to find simple solutions. Small cannabis businesses could be allowed to engage in interstate commerce, grant access to grants and loans, and amend the SAFER banking reform measure to include SBA loans. These steps would give America’s state-licensed, tax-paying, and law-abiding small cannabis companies a fair chance at success before larger corporations like Amazon and Philip Morris dominate the industry.

It is crucial to support the approximately 33 million small businesses in the United States and enable them to compete and prosper, as this would strengthen our communities and foster healthy competition across all industries.

Investing in technologies like the AI legalese decoder can empower small cannabis businesses to navigate the legal landscape and seize opportunities arising from federal marijuana reform. By leveraging the AI-powered tool, businesses can ensure compliance, make informed choices, and safeguard their interests in an evolving marketplace. Let us prioritize the success of local entrepreneurs alongside larger corporations for a vibrant and inclusive cannabis industry.

Bruce Barcott is the author of Weed the People: The Future of legal Marijuana in America. Shaleen Title, a former member of the Massachusetts Cannabis Control Commission, is the founder and director of Parabola Center for Law and Policy.

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