On November 3rd and 4th, 2020 four states passed new initiatives legalizing recreational cannabis and another state, Mississippi, passed an initiative that legalized cannabis for medicinal purposes. The four states that legalized cannabis for recreational purposes were Arizona, Montana, New Jersey, and South Dakota.
This round of states marks the latest surge in the trend towards nationwide cannabis legalization that began in 2012 when Colorado and Washington became the first states to legalize cannabis for recreational use. In 2014 Alaska, Oregon and Washington D.C. legalized cannabis’ recreational use. Finally, from 2016-2018 six more states legalized cannabis: California, Nevada, Massachusetts, Maine, Vermont, and Illinois. To date, the total number of states legalizing the use of recreational and medical cannabis is up to fifteen (plus Washington D.C.)
As a leader in Cannabis Law, representing a number of businesses involved in the cannabis industry here in the U.S. and internationally, McCathern closely monitors the latest legislative developments so we can best assist our business partners with intellectual property, risk management, insurance, litigation, transactional and international licensing matters that affect this rapidly growing industry.
The following update briefly summarizes the most recent legislation adopted in the 2020 election:
Arizona
Arizona voters passed Proposition 207, which legalizes the recreational possession and use of cannabis for those 21 years of age or older. This proposition places a 16% excise tax on cannabis under the Smart and Safe Arizona Act, which is estimated to add $255 million in new revenue when combined with sales tax annually.
Further, the Arizona Department of Health Services is responsible for adopting the rules to regulate cannabis, including the licensing of cannabis retail stores, cultivation facilities and production facilities.
Proposition 207 also allows anyone convicted of possession, consumption, cultivation, and transportation-related cannabis crimes to petition for the expungement of their criminal record starting on July 12, 2021.
Montana
Montana voters approved two legalization initiatives during this year’s elections:
Constitutional Initiative 118 amends the Montana Constitution to authorize the state to set 21 years of age as the minimum legal age for cannabis consumption.
Constitutional Initiative 190 legalizes the possession, use, and cultivation of limited amounts of cannabis for adults 21 and older. It also directs the Montana Department of Revenue to license and regulate the cultivation, transportation, and sale of cannabis and cannabis-infused products and to inspect premises where cannabis is cultivated and sold; requires licensed laboratories to test cannabis and cannabis-infused products for potency and contaminants; and establishes a 20% tax on non-medical cannabis. According to the state’s official fiscal statement, the measure will generate about $48 million annually by 2025.
The initiatives also prohibit advertising of cannabis and related products. They strictly regulate the packaging and labeling of cannabis products to prevent accidental ingestion and access by children. They require that cannabis provider licenses only be issued to Montana residents and they permit localities to regulate, ban, or restrict cannabis businesses within their jurisdiction.
Montana Constitutional Initiatives
New Jersey
Public Question 1 passed which adds an amendment to the state constitution that legalizes the recreational use of cannabis for persons 21 years of age and older. Further, it legalizes the cultivation, processing, and sale of retail cannabis.
The Cannabis Regulatory Commission will oversee this new adult recreational market. Cannabis products will be subject to the 6.625% state sales tax and the state legislature authorized local governments to enact an additional 2% sales tax on recreational cannabis.
South Dakota
South Dakota voters approved two initiatives:
Measure 26 establishes a medical cannabis program in South Dakota with a registration system for individuals with a qualifying medical condition.
Constitutional Amendment A legalizes recreational cannabis in South Dakota for individuals 21 years of age or older. Individuals who live in a jurisdiction with no licensed retail stores can grow up to three cannabis plants in a private residence in a locked space, though not more than six cannabis plants could be kept in one residence at a time. Under the amendment, cannabis sales were set to be taxed at 15%. After the tax revenue is used by the Revenue Department to cover costs associated with implementing the amendment, 50% of the remaining revenue was set to be appropriated to fund state public schools and 50% would be deposited in the state’s general fund. The passage of Amendment A is estimated to generate more than $10 million in net revenues for the 2022 fiscal year, and potentially doubling that by 2023.
South Dakota Constitutional Amendment
Mississippi
Mississippi voters approved Initiative 65, which proposed to amend the Mississippi Constitution to allow qualified patients with debilitating medical conditions, as certified by Mississippi licensed physicians, to use medical cannabis. Currently there are 22 “debilitating medical conditions” listed. This amendment will allow medical cannabis to be provided only by licensed treatment centers and the Mississippi State Department of Health will regulate and enforce the provisions of this amendment.
Further, this initiative will allow the state of Mississippi to tax cannabis sales at the current state sales tax rate of 7%.
Conclusion:
While the latest legislation passed continues the trend of more and more states legalizing recreational cannabis and increasing medical use, the passage of these initiatives is just the beginning of the lengthy regulatory processes in each state to determine the specific policies and rules. For more information on each state’s specific legal implications please consult with McCathern Managing Partner Arnold Shokouhi at our Dallas office or Partner Christopher Barkley of our Los Angeles office.