The Great Divide: Preparing for Federal Legalization or Facing Closure?
- May 9, 2024
- Jen Lamboy
- Cannabis Industry
Recent legislation suggests that federal cannabis legalization is closer than ever before, but only those with a solid plan stand to benefit.
Key Takeaways:
- Colorado’s legalization of cannabis laid the groundwork for a burgeoning industry by navigating the complexities of a fragmented legal landscape due to federal prohibition.
- The PREPARE Act would establish a regulatory framework akin to alcohol, the SAFER Banking Act intends to provide financial services to cannabis businesses without federal penalties, and the Marijuana 1-to-3 Act proposes reclassifying cannabis to a lower schedule to acknowledge its medical use and lower abuse potential.
- Post-federal legalization presents two paths: thriving success for businesses that adapt and innovate, and potential closure for those who aren’t prepared for increased competition and new market dynamics.
- It’s important to prepare for federal legalization by forming strategic partnerships, adapting to legal changes, enhancing operational capabilities, and crafting distinct marketing strategies.
- To strengthen market position, stay up-to-date with regulatory changes, scale operations to meet demand, differentiate brands in a crowded market, and foster partnerships to amplify brand reach.
It’s hard to believe that a decade has passed since Colorado officially legalized cannabis—and it’s been even longer since voters initially approved Amendment 64, paving the way for us to join Washington state as the cannabis ice-breakers this country sorely needed.
When I think about how far the cannabis industry has come in those 10-plus years, I can’t help but be proud. But I must admit that I also feel trace amounts of disappointment and impatience. Sure, the time flashed by, but 10 years is a significant amount of time to watch state after state embrace legalization, while federal laws concerning cannabis progress at a snail’s pace.
Well, our patience and advocacy might actually pay off.
Federal legalization could be closer than ever before. That very real possibility made me realize something important: We need to be thoroughly prepared. And not just “cross your fingers” prepared, but equipped with insights and strategies to contend with the potential expansion of the market or the tight squeeze of competition that might push some to the sidelines.
So, let’s all get started.
The Current Landscape of Federal Legalization
Before we talk shop, I want to outline some specifics about exactly where we are with federal legalization today and why I believe a nation-wide pivot is on the horizon.
Currently, the federal government classifies cannabis as a Schedule I drug—the same as heroin and cocaine—with a high potential for abuse and little-to-no medical benefit.
Yes, that scheduling is embarrassingly outdated and completely infuriating for anyone with half a brain, but let’s try to stay on course. Below are some encouraging legislative actions that are making us anticipate federal legalization:
Preparing Regulators Effectively for a Post-prohibition Adult-use Regulated Environment (PREPARE) Act
First up, introduced in February 2023, there’s the PREPARE Act. This one lays down a comprehensive federal regulatory framework for cannabis, setting the stage for when federal legalization finally comes knocking. It proposes forming the Commission on the Federal Regulation of Cannabis, which would draw knowledge from states like Colorado that have amassed experience in rolling out laws in regulated cannabis markets.
According to details of the act, the commission would consist of a diverse group of 24, including voices from marginalized communities. Their main gig would be to propose how we can mitigate the harsh impacts of past cannabis criminalization and pave the way for equitable growth and research in the industry.
Secure and Fair Enforcement Regulation (SAFER) Banking Act
Introduced in April 2023, the SAFER Banking Act tackles banking for cannabis businesses. Right now, federal restrictions create obstacles for cannabis businesses and make it almost impossible for them to access banking services. It puts those fresh to the industry at an immediate disadvantage.
The SAFER Banking Act would protect financial institutions from being penalized by federal regulators for providing services to state-sanctioned cannabis businesses. This means no more worrying about losing your deposit or share insurance just for working with the cannabis industry. It also safeguards transactions involving state-sanctioned cannabis businesses, removing them from the umbrella of “unlawful activity.” This is huge for reducing the legal risks for banks and businesses alike.
Marijuana 1-to-3 Act and Deferring Executive Authority (DEA) Act
And then there’s the Marijuana 1-to-3 Act, introduced in January 2023. This one’s all about reclassifying cannabis from Schedule I to Schedule III on the Controlled Substances Act.
Moving to Schedule III recognizes that cannabis has a lower potential for abuse and acknowledges its medical uses. It’s a significant step toward loosening the federal grip, which would open up new avenues for research and medical application.
That’s not the only piece of rescheduling-related legislation introduced last year. The DEA Act would limit the DEA’s ability to reschedule cannabis without congressional approval. Essentially, the act defangs the DEA, and that historically misguided institution would no longer be able to unilaterally categorize cannabis without a congressional review.
But wait, there’s more….
Other Federal Cannabis Laws On the Table
When it comes to overarching federal legalization, we’re seeing significant strides. The MORE Act, for example, focuses on healing the scars left by past policies through equity provisions. It’s a long road ahead, but this bill’s progress is one to keep an eye on. Meanwhile, proposals like the States Reform Act and STATES 2.0 Act are suggesting a shift toward a state-centric approach, akin to alcohol regulation.
When it comes to equity, there’s legislation focused on addressing the injustices of the past. The HOPE Act and Clean Slate Act highlight the importance of expunging non-violent cannabis offenses. And for those eager to dive into the hemp industry, the Free to Grow Act ensures that past convictions don’t stand in the way.
Much of the legislation I’m talking about here has a long way to go in terms of passing through committee and reaching the floor for a vote. But the point is, these bills are out there and they are stirring the pot in all the right ways.
Potential Scenarios Post-Federal Legalization
The future of cannabis businesses in a post-federal legalization world boils down to preparation.
Those who are ready to adapt and innovate will survive, tapping into new markets and opportunities. Those who are caught off guard may find themselves struggling to compete in a rapidly evolving industry.
Those are the two possible endgames for cannabis businesses when federal legalization disrupts the industry. Which one will you be?
Booming Business for the Prepared
Imagine you own a cannabis business and have been doing your federal homework. You’ve followed every twist and turn in the law, you understand who buys your products and why, and you’ve built a brand that people trust. Now, when cannabis becomes legal nationwide, your business is like a well-oiled machine, ready to hit the ground running.
Yes, you’re (hopefully) selling more. But more impressively, you’re exploring new markets and maybe even introducing innovative products or services that set you apart from the competition.
Because you’ve built a solid foundation, your business grows, reaching more customers and becoming a name people recognize at dispensaries and turn to when their stash runs dry. This scenario is about those who’ve anticipated change and are ready to embrace it fully.
Closure for the Unprepared
On the other side, consider a cannabis business that’s been a bit more laid back. Maybe they’ve been so busy with day-to-day operations that they haven’t looked up to see the wind shifting. When federal legalization happens, it’s a wake-up call, but they hit the snooze button one too many times.
Suddenly, the market is flooded with new competitors, some of which are major players with deep pockets and aggressive marketing strategies. If your laid-back business hasn’t thought about how to differentiate itself, secure its finances, or comply with new federal regulations, it will struggle to keep up. You didn’t fail overnight—but you lacked the foresight, planning, and strategy to prepare your business for when the federal laws flipped.
Preparing for Federal Legalization: A Guide for Cannabis Businesses
Stepping into a future where cannabis is federally legal, I see a landscape ripe with opportunity and challenges. From my vantage point, it’s clear there are two divergent outcomes: a trajectory of growth for those ready to embrace the change, or a path of struggle for those caught off guard.
Now, let’s examine tangible steps and considerations that could spell the difference between flourishing and floundering in this new era. You’ll need to focus on several pivotal areas: legal compliance, scaling operations, marketing and branding, and the power of partnerships.
Compliance and Legal Strategy
First off, keeping a pulse on legal changes is non-negotiable. Immerse yourself in the latest regulations and prepare to pivot your strategies accordingly. This means every piece of marketing, every product label, and every business decision needs to be in line with the most current legal guidelines. You’ll avoid penalties and build a brand that’s respected and trusted for its commitment to compliance.
Business and Operational Scaling
We fully expect the market to balloon once federal legalization hits the streets. As such, you’ve got to be ready to scale up without missing a beat. As production increases, so goes your digital presence. Every square inch of your brand’s online existence must be able to handle an uptick in traffic. Then there’s your supply chain. Can it handle the demand of massive market expansion? What’s more, is your customer service apparatus equipped to handle an influx of queries from outside of your region?
Marketing and Branding in a New Era
With new players entering the field, it’s critical to carve out a unique space for your brand. This is where leveraging data to understand your audience and crafting stories that resonate with them comes into play. Connect with your audience on a level that turns them into brand advocates. Marketing campaigns built to showcase the quality of your products can be re-calibrated to tell the story of your brand’s journey and values. And that’s the kind of marketing that leaves a lasting impression and transforms you into a brand worthy of customer loyalty.
Partnerships and Collaborations
Finally, strategic partnerships add another layer of strength to your brand. Whether it’s collaborating with tech platforms to improve your product offerings or partnering with influencers who align with your brand values, these alliances can catapult brand reach and solidify market presence in the new federal paradigm. For example, a collaboration between a local dispensary and a popular lifestyle blogger can introduce your brand to a wider, engaged audience, significantly boosting visibility.
Toward a Greener Future: Embracing Federal Legalization
Cannabis is just starting to shake loose on the federal level, but we’re closer than ever before. And that’s had me thinking a lot about what’s next. So, where does that leave us, the folks with our hands in the soil, so to speak? It’s pretty straightforward: Gear up for growth or get left behind.
The federal cannabis legislation of the past year or so is the proverbial writing on the wall. Our cannabis world is about to get a whole lot bigger. So let’s get to work and make sure that when the dust settles, we’re standing strong, not just because we had to, but because we were prepared to make our mark on the industry.
Here’s to the future — bright, bold, and green. Let’s grab it with both hands.
Are you prepared for federal legalization? If you paused for even one second to think of an answer to this question, we should talk.
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Jen Lamboy
- Jen is Hybrid Marketing Co's Director of Strategy. She entered cannabis through seed genetics and has passionately worked to help grow the industry into a global game-changer ever since. As a strategist focused on business outcomes, Jen has worked in numerous highly-regulated industries with B2B and B2C organizations. She doesn't step lightly; she charges but with a collaborative spirit, intention, intelligence, humility, compassion, and grit.
