Over the last few months, we have been exploring the development of cannabis markets worldwide. So far, we have addressed the major developments that have occurred in Asia and Europe in recent years. In this article, we will be taking a closer look at one of the most diverse cannabis markets in the world – the United States of America.
While the cannabis industry has had a lot of wins in recent years, fewer markets have seen more progression (short of outright federal legalisation) than the United States. In many ways, the US has been a huge player in cannabis for decades, being the home to some of the first jurisdictions in the world to allow both the medicinal and recreational use of the plant. This progress has only accelerated over the last few years, with around half of Americans now living in a state that allows both the medical and recreational sale, cultivation and use of cannabis.
The perceived liberal state of California became the first in the US to legalise any form of cannabis in 1996 with the passage of the Compassionate Use Act (Proposition 215). This legislation granted legal access to medical cannabis products for the treatment of a number of health conditions. Over the next 20 years, a large number of other states passed similar legislation, meaning that many Americans had access to medical cannabis for the first time since the introduction of the ‘Marihuana Tax Act’ of 1937.
While medical cannabis reform spread across the nation relatively quickly, it took significantly longer for recreational legalisation to catch on. Only 10 years ago in 2012, Washington and Colorado became the first states to legalise cannabis for recreational use. Since then, the liberation of cannabis has snowballed all over the country. In fact, medical cannabis is now legal in 38 states, while recreational use is permitted in 19 states plus Washington D.C..
A Shift in Public Opinion
Much of the US’s progression in cannabis legislation has come as a result of shifts in public opinion. The majority of motions to legalise cannabis – particularly recreational cannabis – across the country were approved by a public vote as opposed to the state legislature. Around half of the states in the USA have an Initiative & Referendum (I&R) system that allows citizens to bring about a public vote on policy and law changes.
This is done through ballot initiatives which require a minimum number of signatures in order to progress. To date, the vast majority of cannabis reforms in the US have been brought about through the I&R system and ballot initiatives. Reforms initiated by the state legislature have historically been more likely to relate to medical cannabis. Only a handful of states have introduced the legalisation of recreational cannabis directly through the state legislature – Vermont became the first in 2018, followed by Illinois on New Year’s Day 2020. After a long process, New York’s state government finally introduced The Marijuana Regulation & Taxation Act (MRTA) in 2021.
The change in public opinion in relation to cannabis is consistently demonstrated in national polls. For example, a 2021 poll by Pew Research found that a staggering 91% of Americans believed that medical cannabis should legalised at the federal level. Two-thirds of this group (60%) also believed that recreational cannabis should be legal – compared to just 8% of respondents who said no form of cannabis should be legal.
The 2018 Farm Bill and Hemp Legalisation
The legalisation of medical and recreational cannabis is not the only major development of the US’s cannabis sector in recent years. Every five years, the so-called ‘Farm Bill’ provides important agricultural and nutritional policy extensions; however, the 2018 legislation also introduced the federal legalisation of hemp cultivation, allowing farmers across the country to start growing the ancient crop. Hemp had previously been prohibited due to the crop’s association with recreational cannabis. In the US, cannabis plants must contain no more than 0.3% THC in order to be classed as hemp (in the UK and the EU, the limit varies from 0.2% to 1%).
It is important to note that the cultivation of hemp is still heavily regulated, meaning that individuals cannot easily add the crop to their domestic allotment of tomatoes and green beans. However, the Farm Bill didn’t simply liberate the cultivation of hemp, it also permits the transport of hemp-derived products across state lines for commercial or other purposes. This has led to a further boom in the country’s CBD industry.
The US CBD Market
While the Farm Bill doesn’t explicitly legalise CBD at the federal level, it does create exceptions to its classification as a Schedule I substance under the Controlled Substances Act. Specifically, CBD – and other products derived from the hemp plant – will be legal if that hemp plant is produced in compliance with the Farm Bill. The most notable consequence of this development is that compliant CBD products can now be freely transported from state to state across the country. This arrangement is similar to the Novel Foods regulation that has been established in the UK and the EU to ensure the safety and quality of over-the-counter CBD products.
But while all this seems like good news for hemp farmers and CBD businesses in the US, it hasn’t been smooth sailing over the last four years. Following an initial boom in hemp cultivation (acreage rose from 25,713 in 2017 to 511,442 in 2019), cultivation has begun to fall drastically. Early hemp-producing states Colorado and Oregon have even seen reductions in hemp yield of 83% and 89%, respectively between 2020 and 2022. Campaigners and cultivators blame a lack of guidance through current regulations for the confusion and the subsequent decline in cultivation.
Furthermore, the 2018 Farm Bill legislation also created several grey areas – the most notable being the issue of Delta-8 THC. Similar in structure to the more common Delta-9-THC, Delta-8 is a psychoactive cannabinoid that is also produced naturally by the cannabis plant but is not found in significant amounts. Concentrated amounts of delta-8 THC are typically manufactured from hemp-derived CBD and in recent years, this compound has been used as a kind of loophole to – somewhat controversially – develop intoxicating over-the-counter hemp-derived cannabis products.
The fast pace of reforms at the state level has led to significant contradictions with federal law. Perhaps the most notable is the ongoing banking issues for state-legal cannabis companies. Despite being legal at the state level, federal prohibition means that national banks could face penalties for serving cannabis businesses. As a result, many cannabis companies – including cultivators, manufacturers, and dispensaries – have been forced to deal exclusively in cash, leaving them vulnerable to theft and other complications. Over the last eight years, the SAFE Banking Act, which would effectively address this problem, has passed the House of Representatives five times but is yet to be signed into law.
Despite the ongoing hurdles, the US – or at least states within the US – is continuing to lead the way in cannabis reforms. President Biden recently announced the most substantial changes to federal cannabis policy for decades. In a series of Tweets, the President revealed that his administration would trigger pardons for thousands of people who had received federal convictions for simple cannabis possession. He also encouraged individual states to follow suit by expunging state-enforced convictions for cannabis possession.
“Just as no one should be in a federal prison solely due to the possession of marijuana, no one should be in a local jail or state prison for that reason, either,” Biden said in a statement.
While this move will be seen as a positive step by many, cannabis campaigners and advocates are still waiting for President Joe Biden to honour his campaign promise to federally decriminalise cannabis. The ongoing support for the Marijuana Opportunity Reinvestment and Expungement (MORE) Act which would remove cannabis from the list of scheduled Controlled Substances could eventually see this come to fruition. For the time being, though, it seems that that could still be a long way off. Furthermore, the question of federal legalisation has been put to bed – at least for now – despite obvious support from the public.