One of my favorite slides in my investor deck is titled “The Pace of Social Change” which features a great graphic from Bloomberg, that is pictured above in edited form.
While it’s common knowledge that government policy follows public opinion, it’s also often the case that federal laws don’t change until the states themselves respond to shifts in popular opinion. It’s a pattern that has been repeated throughout the history of American social movements, from the fight for women’s suffrage to securing marriage equality for same-sex couples. Popular support reaches a point where state governments have no choice but to address them, eventually spurring the federal government to engage with the issue as well. Now it seems that pattern is repeating once again, this time regarding the legalization of cannabis.
The cannabis industry is undeniably growing and growing fast. In North America, the cannabis industry brought in $9.2 billion in 2017, a number which is expected to grow to $47.3 billion by 2027. That’s immense growth for any industry, let alone one that is held back by the fetters of prohibition in the large and wealthy American market.
The controversy of whether to legalize cannabis has worked its way into mainstream American politics and is now commonly put to a direct vote on state ballot referendums. Today, 34 states have legalized medical cannabis in some form, while 10 states including Washington, D.C. have legalized adult-use cannabis altogether.
When will the federal government do the same?
The states as drivers of federal policy changes
If history is to serve as any guide, federal action follows state action. Throughout our country’s history, there have been several landmark Supreme Court decisions, and congressional actions that started as social movements gained support among the states and then progressed into federal policy action. In fact, some of the most high-profile policy developments began as movements that garnered support at the state level, ultimately growing to change long-standing federal laws. These include Loving v. Virginia, in which the Supreme Court struck down laws banning interracial marriage; and the 19th Amendment, which Congress passed to grant all American women the right to vote.
Loving Vs. Virginia
When the series of events that would eventually overturn interracial marriage bans first began in 1958, 26 states already permitted interracial unions. Ohio was the first to repeal its interracial marriage ban as early as 1887. It took Oregon until 1951 to do the same, but that kicked off a series of repeals in Montana, North Dakota, Colorado, South Dakota, and California. However, it was the California Supreme Court’s decision in Perez v. Sharp, that first recognized interracial marriage bans as a violation of the 14th Amendment.
The Supreme Court of the United States would later follow suit in 1967, ruling that anti-miscegenation laws were unconstitutional and striking down the 16 remaining state laws that made interracial marriage illegal. Federal policy had officially followed the states that led the charge against bans on interracial marriage.
Women’s Suffrage and the 19th Amendment
The story is similar when it comes to the movement for women’s voting rights. In 1919, when Congress first acted on women’s suffrage, 15 states already legalized voting rights for women. The implementation of women’s suffrage began in 1870 with Utah, which was followed by Washington and Montana a decade later. In 1893, Colorado became the fourth state where women could legally cast a ballot, followed by Idaho three years later.
While these five states led the charge before the turn of the century, 1910 would prove to be the year when the women’s suffrage movement made its biggest stride forward. That year, ten states legalized women’s voting rights. Within the next decade, the U.S. Congress had voted to enshrine women’s suffrage not just as a law, but a constitutional amendment. That amendment was ratified by the states in 1920 and is today known as the 19th Amendment.
Obergefell vs. Hodges
A more recent example of state action eventually forcing the federal government’s hand is the legalization of same-sex marriage. What started as an isolated case in the Hawaiian Supreme Court in 1993 would grow into a high-profile decision that legalized same-sex marriage nationwide. Following Baehr v. Miike, Hawaii became the first state to rule that same-sex couples had the right to marry, drawing on Loving v. Virginia as precedent.
In 2015, the Supreme Court of the United States would decide in Obergefell v. Hodges that same-sex couples were entitled to marry on an equal basis as heterosexual couples and that all remaining same-sex marriage bans were unconstitutional. Prior to that decision, however, 37 states legalized same-sex marriage. The Supreme Court was merely finalizing a sea change that had already occurred in the years prior.
Cannabis is more popular – and widely legal – than ever before
If cannabis is following the same pattern as these historic moments, social change appears to be approaching a tipping point. Cannabis reform got its first legal push in the 1970s, when Oregon, Alaska, and Maine decriminalized the plant, establishing civil penalties for possession and use rather than criminal ones. The first legalization measure was adopted in 1996 when California voters approved Proposition 215, an initiated state statute that legalized the nation’s first medical cannabis program. Since then, 33 states along with Washington D.C. have adopted a medical cannabis program, and 10 states plus D.C. have legalized the cultivation, sale, possession, and consumption of cannabis for all adults 21 years of age and older.
The expansion of state-level legalization efforts, which are ongoing, have normalized cannabis use and established a lucrative industry transitioning from the black market that thrives as a result of prohibition. That normalization is evident in public opinion polls, which continuously show increased widespread acceptance of legal cannabis. More than 66 percent of Americans now support the legalization of cannabis, up from 31 percent in 2000. Similarly, prior to Obergefell v. Hodges, national public support for same-sex marriage eclipsed 60 percent in 2015. Moreover, a majority of voters in both major political parties support cannabis legalization, making it both a political and economic boon.
Will Congress legalize cannabis federally?
Could the rash of state legalizations (and more are on the way), in combination with rising public support and massive economic potential, finally spell the end of federal cannabis prohibition? Inevitably so. Not only does legalization drive economic activity and tax revenue, but federal regulation provides a safer environment for both businesses and consumers. Now that cannabis legalization is more popular than ever, elected officials have the cover they need to make it happen.
In fact, at the very start of the 116th Congress, Rep. Earl Blumenauer (D-OR) introduced the aptly named bill H.R. 420, or the Regulate Marijuana Like Alcohol Act, which would remove cannabis from the Controlled Substances Act if passed, effectively ending the federal prohibition on cannabis. At the end of last year, President Donald Trump signed the 2018 Farm Bill, which included a clause that did the very same thing for cannabis’s cousin, industrial hemp. Hemp now falls under the purview of the FDA. This is the subject of a prior blog post. Additionally, the STATES Act, introduced by Sen. Elizabeth Warren (D-MA), would exempt state-compliant cannabis products from the Controlled Substances Act, empowering each state to legalize and regulate it as they see fit. Similarly, the CARERS Act would protect patients using cannabis for medicinal purposes from federal intervention, as well as eliminate federal barriers to conducting more research on cannabis plants.
These and similar bills are no doubt the result of normalization of cannabis on Capitol Hill, which led to the creation of the first-ever Congressional Cannabis Caucus in 2016. If the tide is already turning in the halls of Congress, there’s really only one question left: how soon will cannabis legalization occur?
What do you think? Will federal legalization occur in 2019, 2020 or beyond? Will it depend on who occupies the White House? Fink about it.
Special thanks to my Harvard University-bound intern Caroline Yun, for her excellent research for this post.