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New Administration Could Provide Ideal Backdrop for Tribes Entering Cannabis Industry
Thursday, December 17, 2020

With the current legal and financial restrictions on the sale of cannabis, and confusion regarding the legal framework that governs this multi-billion dollar medical and recreational trade, many Tribes may have been hesitant or unable to enter the cannabis industry. The upcoming change in administration, along with legislative developments on both the federal and state level, suggest that the legal landscape for the cannabis industry may move further towards rationalization. Tribes considering entering the industry—as well as those that have been in the cannabis business for some time—should be aware of several key legal developments that will influence the future of this industry.

As sovereign nations, Tribes have the inherent authority to protect and promote the health and welfare of their citizens using methods most beneficial for their communities. This authority is plenary and provides a tribe with exclusive power over its members and territory.

However, the authority is subject to limitations imposed by federal law. In other words, as long as cannabis is illegal under federal law, Tribes enter the industry with the risk of potential federal censure and prosecution.

As more and more states have legalized medicinal and/or recreational marijuana use, an increasing number of Tribes have become involved in the cannabis industry. Many Tribes, particularly those in California, have been involved in the medical marijuana industry for over a decade. This involvement is not without its legal limitations. For example, California Tribes are subject to state licensing regulations in order to participate in the recreational market, which requires cessation of sovereignty.

Other Tribes, such as the Bay Mills Indian Community in Michigan, are just entering the cannabis industry. Michigan legalized marijuana for recreational use in 2019, and Bay Mills opened the first Tribally-owned dispensary in Michigan last month. As reported by Native Business Magazine, Bay Mills Tribal Chairman Bryan Newland stated that the Tribe is “excited about what this means for economic development and job opportunities in Bay Mills,” and highlighted that “[c]ommunity-owned and community-grown will be the focus of our operation.” Muscogee (Creek) Nation in Oklahoma, recently updated its laws to decriminalize medicinal marijuana within its Reservation boundaries, and the Tribe plans to explore economic opportunities for medical marijuana.

Regardless of whether a tribe has been in the cannabis business for over a decade or only a few weeks, a new administration could mean significant changes to the industry. For example, through administrative processes, there will likely be a shift in the scheduling of cannabis from a Schedule I to a Schedule II drug under the Controlled Substances Act (21 U.S.C. 802), which would allow for cannabis to be used—as a matter of federal law—for limited medical purposes. Indeed, the Biden campaign signaled that it hopes to allow states to set their own laws regarding recreational use of cannabis.

Some cannabis-related issues for tribes to keep in mind as the new administration takes over include:

  • If cannabis is eventually legalized for medicinal use under federal law, then the remaining states that criminalize cannabis would be required to allow the cannabis industry to enter their state. States that currently criminalize marijuana use and possession entirely include Alabama, Idaho, Kansas, South Carolina, Tennessee, and Wyoming. Tribes that are located within these state borders could potentially be at the forefront of the industry in these states.

  • Federal legalization of medicinal cannabis would likely mean that financial institutions and insurance companies would be able to legally do business with the medical cannabis industry.

  • There are several pieces of legislation pending before Congress that could have a significant impact on the cannabis industry, and we expect to see these bills reintroduced in the 117th Congress:

    • The SAFE Banking Act, H.R. 1595 and S. 1200, would allow financial institutions and insurers to legally do business with the cannabis industry without fear of legal action by the federal government.

    • The STATES Act, H.R. 2093 and S. 1028, would allow states to legalize cannabis without risking federal intervention.

    • The MORE Act, introduced by Senator Kamala Harris as S. 2227 and by Congressman Jerrold Nadler as S. 3884, would fully remove cannabis from the Controlled Substances Act. The Act also provides pathways for ownership opportunities in the cannabis industry and establishes funding sources to reinvest in communities disproportionately affected by the war on drugs. On December 4, 2020, the House passed the MORE Act; it is now pending in the Senate. Republican leadership in the Senate may be unwilling to allow this legislation to move forward in the 117th Congress, making the upcoming Senate runoff election in Georgia of particular interest to the cannabis industry.

  • Tribes can seek Treatment as a State (TAS) under several environmental statutes, allowing greater autonomy and resilience related to environmental laws on tribal lands.

    For example, the Federal Insecticide, Fungicide, Rodenticide Act (FIFRA) requires all pesticides to be registered before they may be sold or distributed. Since cannabis is illegal federally, this means no pesticide has been registered for use on cannabis. (Earlier this year, however, the Environmental Protection Agency (EPA) approved the use of 10 pesticide products for hemp ahead the 2020 growing season after Congress removed hempderived products from Schedule I). If cannabis becomes legal federally, then the EPA could delegate implementation of the FIFRA program to tribes that have met the requirements for TAS.

Aside from the upcoming shift in administration, tribes should also keep the following cannabis related issues in mind with respect to state regulation:

  • As more states move to legalize cannabis for recreational use, individual tribes may wish to consider becoming more involved in the states’ legislative and regulatory processes.

Tribes can advocate for provisions within state law that will benefit tribal industry participants, including grant programs for minority and/or tribally owned cannabis businesses. Tribes also can advocate for Tribal-State marijuana compacts like those implemented in Washington state, which allow for collaboration between a tribe and the state for regulating the sale of marijuana on tribal lands.

  • Tribes may wish to consider developing their own Tribal licensing and inspection processes for cannabis that follow the processes of the state(s) in which they are located, if such processes exist. This may help avoid the issues faced by Tribes in California where, due to an oversight in the legislative process, Tribes were unable to participate in the recreational cannabis industry without allowing the state to regulate their facilities. By establishing this regulatory process, Tribes could potentially participate in the recreational market without state involvement.

The expected changes within the cannabis industry offer unique opportunities for tribes seeking to leverage their status and exercise their inherent right to provide economic development, taxable revenue, and job opportunities for tribal members. 

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