A Washington State legislative committee last week approved a bill that would permit interstate cannabis commerce between companies in states that have legalized marijuana. The measure, House Bill 1159, was advanced by the House Regulated Substances and Gaming Committee with a 6-5 vote on February 14. Passage of the bill comes one month after a legislative committee voted to approve companion legislation in the Washington State senate.
The bill would permit state officials to reach agreements governing interstate cannabis commerce with other states that have legalized marijuana. To be enacted, the bill requires other states to adopt similar policies and for the federal government to approve a plan authorizing cannabis trade across state lines. Federal authorization could come in the form of legislation that allows interstate cannabis commerce or through a legal opinion from the US Department of Justice “allowing or tolerating” cannabis companies to do business with regulated entities in other states, according to the text of the measure. Democratic state Rep. Sharon Wylie, the lead sponsor of the legislation in the Washington House of Representatives, said that the bill continues the work in other states to lay the groundwork for such a policy change.
“This bill attempts to mirror the efforts that are taking place in other recreational legal cannabis states by preparing for interlocal agreements and interstate commerce should the federal government change the rules,” Wylie said before the vote by the House Regulated Substances and Gaming Committee on February 14.
Other States Already On Board
California and Oregon have already approved proposals to allow cannabis companies to engage in interstate trade, and a bill to permit such trade was introduced in the New Jersey state senate last summer. But even with multiple jurisdictions on board, transfers of marijuana products across state lines will not begin until the federal government approves such a plan.
A companion bill in the Washington state senate was approved by the Senate Labor and Commerce Committee with a voice vote last month. At a hearing for the bill, Sen. Karen Keiser, the chair of the committee, said that it was important to take “early action” on the legislation, especially given that it “seems to have pretty substantial support,” according to a report from Marijuana Moment. The companion bill is now being considered by the Senate Rules Committee.
Allowing cannabis interstate commerce would open new markets to independent operators in the industry. Jason C. Adelstone, an associate attorney with the cannabis and psychedelics law firm Vicente LLP, said that a plan would also benefit companies that are already doing business in more than one regulated market.
“Currently, to operate in multiple states, a business must establish operations in each state in which they desire to be licensed,” Adelstone said. “If the interstate transport of marijuana is federally legalized, then an operator could establish a large cultivation facility in, say, Arizona or Southern California that could supply demand throughout the country. This would increase the customer base of a state-legal marijuana business without substantially increasing the cost of satisfying that demand.”
Adelstone notes that the legislation would also benefit cannabis operators in other ways. The bill could help by stabilizing prices on cannabis, writing that “any oversupply of the local market could be sold to out-of-state retailers, which would increase revenue and decrease current costs variable associated with oversupply.”
“Another potential benefit to the federal government permitting interstate transport of marijuana is environmental. Indoor cultivation facilities, like those needed in the northern, colder states, have a huge environmental footprint,” he added. “By allowing interest commerce, these indoor facilities could theoretically be replaced by outdoor cultivation facilities located in places like Arizona and Southern California, which could help with the Biden administration’s goal of reducing carbon emissions.”
Federal Approval Required
While the movement to permit interstate cannabis commerce is making progress at the state level, enacting such a plan requires the approval of Congress or the Justice Department. Adelstone says, however, that such a proposal is unlikely to receive federal approval in the near future, noting that the political climate in Washington, DC would likely prevent a cannabis interstate commerce bill from being passed and signed into law during President Joseph Biden’s current term in office.
“The Democrats are focused on including social equity provisions into any federal marijuana bill, which, depending on how extensive such provisions are, would likely keep the necessary nine Republicans from supporting any such bill in the Senate,” Adelstone wrote. “Additionally, with a presidential election on the horizon, the Republicans are not likely to support giving President Biden a win on an issue that is very popular with voters. SAFE banking and addressing 280E are the primary focus of the industry right now, so I doubt many operators would spend much political capital on pushing an interstate commerce bill.”