On Friday, December 4, 2020, the US House of Representatives
took a historic step by passing legislation to remove cannabis
(marijuana) from the Controlled Substances Act of 1970. The
“Marijuana Opportunity, Reinvestment, and Expungement Act of
2020,” H.R. 3884 (the MORE Act), was approved by a
vote of 228 to 164. Libertarian Rep. Justin Amash of Michigan voted
in favor, along with five Republicans who crossed party lines to
support the bill, including Rep. Matt Gaetz (R-FL), who is a
cosponsor. Six Democrats voted against the legislation.

The House vote marked the first time in 50 years that a chamber
of Congress has revisited the classification of cannabis as a
federally controlled and prohibited substance. Since 1970, federal
law has classified cannabis as a Schedule I drug under the
Controlled Substances Act.¹ Schedule I substances,
such as the hallucinogen lysergic acid diethylamide (LSD) and
heroin, are substances that have “a high potential for
abuse” with “no currently accepted medical use in
treatment in the United States” and that cannot safely be
dispensed under a prescription.² Schedule I
substances may be used only for bona fide, federal
government-approved research studies.³ Described below
are the significant provisions of the MORE Act, as passed in the
House.

Violations of the CSA’s marijuana ban have given rise to
large fines and lengthy prison sentences that have been
particularly disproportionate for Black Americans, other
communities of color and low-income communities. A central aim of
the MORE Act is to begin correcting these historical injustices by
decriminalizing marijuana at the federal level, reassessing
marijuana convictions, and investing in local communities. Thus the
“de-scheduling” of marijuana, as well as
tetrahydrocannabinols (THC), the principal psychoactive constituent
of cannabis,⁴ would apply retroactively to prior and
pending convictions at the federal level.

As written, the MORE Act would leave in place the patchwork of
state laws governing cannabis, including prohibitions as strict as
those currently in place under the CSA, in some ways inverting the
current “marijuana policy gap” between state and federal
law. While every state once banned marijuana, since 1996, when
California became the first state to legalize medical cannabis,
states have been liberalizing their policies, creating a
challenging policy gap for law enforcement, financial firms,
patients, advocates, and entrepreneurs. To date, a total of 47
states have reformed their cannabis laws, with 36 states, the
District of Columbia, Puerto Rico, and Guam now permitting legal
access to cannabis for medical purposes; and 15 states, the
District of Columbia, and the Commonwealth of the Northern Mariana
Islands having adopted laws legalizing cannabis for adult use.
Legal cannabis (marijuana) sales are projected to reach $23 billion
by 2022.

Key provisions of the MORE Act include the establishment of a
process for expunging federal cannabis offense convictions
involving non-violent crimes for individuals convicted on or after
May 1, 1971 (the effective date of the CSA) and before the date of
enactment of the bill, and sealing of cannabis-related records. For
individuals currently serving a criminal justice sentence for a
federal cannabis offense, federal courts would consider motions for
review and reduction of the sentence and potential expungement, and
vacating and sealing of records. The Congressional Budget Office
(CBO) estimates that, over the 2021-2030 period, the
bill would reduce time served by 73,000 person-years, among
existing and future inmates. CBO’s analysis accounts for time
served by offenders convicted of cannabis-only crimes and by those
convicted of another crime in addition to a cannabis offense.

During consideration in the Rules Committee, prior to the floor
vote, tax provisions included in the bill were substantially
reworked, replacing a simple five percent ad valorem tax
with one that rises to eight percent during the first five years of
operation, and then is replaced by a tax by weight or by THC. In
addition, the bill establishes occupational taxes for cannabis
manufacturers and importers. These changes are similar to
provisions originally proposed during the 113th Congress and
re-introduced in this Congress by Congressman Blumenauer (D-OR) and
Senator Wyden (D-OR) as the Marijuana Revenue and Regulation
Act (H.R.1120/S. 420). It is also noteworthy that, by
removing cannabis from the CSA, the legislation would enable
cannabis businesses to use credits and deductions without regard to
Section 280E of the Internal Revenue Code.

The additional tax provisions also required, in language similar
to that found under 26 U.S.C. § 5723, that the cannabis
for sale be in such packages and bear such marks as the Treasury
Secretary prescribes. This indicates a regulatory approval process
under the Alcohol and Tobacco Tax and Trade Bureau would be
necessary for packaging and labeling.

The CBO, relying on the Joint Committee on Taxation, found that,
if enacted, the legislation would generate $13.7 billion for the
federal Treasury in the next decade, and that the excise taxes in
particular, would generate about $5.7 billion during that period.
The revenue from the excise taxes would go to an “Opportunity
Trust Fund,” which supports three grant programs:

1. A Community Reinvestment Grant Program, which would provide
   services to individuals most adversely impacted by the War on
   Drugs, including job training, re-entry services, legal aid,
   literacy programs, youth recreation, mentoring, and substance use
   treatment;
2. A Cannabis Opportunity Grant Program, which would provide funds
   for loans to assist small businesses in the marijuana industry that
   are owned and controlled by socially and economically disadvantaged
   individuals; and
3. An Equitable Licensing Grant Program, which would provide funds
   for programs that minimize barriers to marijuana licensing and
   employment for the individuals most adversely impacted by the War
   on Drugs.

The congressional drafters concluded these programs were
necessary for reasons made clear in the report accompanying the
legislation from the House Committee on the Judiciary:

The MORE Act would also open up Small Business Administration
funding for legitimate cannabis-related businesses and service
providers, making loan opportunities available to small businesses
owned and controlled by socially and economically disadvantaged
individuals, facilitate states’ implementation of equitable
cannabis licensing programs, and ensure that Veteran Business
Outreach Centers are able to provide services to otherwise eligible
small business concerns.

The legislation extends various protections for individuals
convicted of offenses for using or possessing marijuana.
Protections include prohibiting the denial of federal public
benefits (including housing) and impairment of any benefit or
protection under the immigration laws based on marijuana-conviction
grounds. It would also require the Bureau of Labor Statistics to
collect data on the demographics of the industry to ensure people
of color and those who are economically disadvantaged are
participating in the industry, and would direct the Government
Accountability Office to conduct a study and report to Congress
concerning the societal impacts of the legalization of adult-use
cannabis by states and concerning the uses of marijuana and its
byproducts for purposes relating to the health, including the
mental health, of veterans.

The MORE Act does not address other existing federal regulatory
regimes applicable to cannabis. For instance, the bill expressly
preserves the authority of the US Food and Drug Administration
(FDA) to regulate products containing cannabis or cannabis-derived
compounds under the Federal Food, Drug, and Cosmetic Act (FD&C
Act) and section 351 of the Public Health Service Act, 42 U.S.C. § 262, which give the FDA
authority to regulate products that contain cannabis and compounds
derived from it, including cannabidiol (CBD).

The FD&C Act applies to all prescription drugs and prohibits
the “introduction or delivery for introduction into interstate
commerce of any . . . drug . . . that is adulterated or
misbranded.”⁶ Because CBD is the active ingredient
in an FDA-approved prescription drug, FDA has taken the position
that cannabis and cannabis-derived compounds, including THC and
CBD, require FDA approval before they may be added to foods, sold
as dietary supplements, or marketed for therapeutic use. Given the
growing market and public demand for cannabis-derived products,
however, the MORE Act directs the FDA to hold “no less than
one public meeting” within a year of enactment to address
regulatory issues raised by these products. Bipartisan legislation
has been introduced in the House in the 116th Congress to amend the
FD&C Act to establish a framework for hemp-derived CBD and
other hemp-derived ingredients to be legally marketed as an
ingredient in dietary supplements.

The MORE Act also expressly preserves the ability of the federal
government to continue testing federal employees for marijuana use
as part of routine drug testing.

The bill also does not address the current barriers to research
on the health effects of cannabis and cannabinoids. After passage
of the MORE Act, House leadership announced a vote on the floor for
next week on legislation that would make medical marijuana research
easier. The bill, the “Medical Marijuana Research Act,”

H.R. 3797, led by Reps. Earl Blumenauer (D-OR) and Andy Harris
(R-MD), received strong support from both sides of the aisle when
it was approved by the House Energy and Commerce Committee last
September, and is likely to pass in the House. With a limited
number of legislative days remaining in the 116th Congress, it is
unlikely that this bill will pass the Senate before Congress
adjourns. However, given broad bipartisan support for opening up
marijuana research, it is highly possible that marijuana research
legislation could pass both chambers in the 117th Congress.

Additional provisions of the bill would ensure that the US
Department of Transportation and the Coast Guard may continue to
issue regulations and test for the unauthorized presence of or
illegal use of marijuana by certain transportation employees in
sensitive safety positions.

In order to become law, the legislation would need to be passed
by the Senate and signed by the President to become law. Given
opposition from Senate Republicans and limited time remaining in
the 116th Congress, this is highly unlikely. Indeed, many
Republican lawmakers used the vote to take political shots at the
House Democrats for, “picking weed over workers,” as
Minority Leader McCarthy asserted in a tweet. While political
opposition is generally to be expected, it was noticeable that few
of the negative comments from lawmakers were substantively about
cannabis reform. One of the few Republican lawmakers who voted to
support the bill pointed out, following the vote:

Other Republicans support federal reform, but object to the
manner in which the taxes are structured and provisions like the
Opportunity Trust Fund. For example, Rep. Dave Joyce (R-OH), who is
the co-chair of the Congressional Cannabis Caucus, voted no,
raising concerns about the tax provisions and potential unfairness
of the proposed federal grant programs for existing medical
marijuana operators.

Still, the bill enjoys prominent support in the Senate, as Vice
President-elect Kamala Harris (D-CA) introduced the companion bill
(S. 2227) and many observers argue that chances
for passage of reform measures continue to increase. As the leaders
of the Congressional Cannabis Caucus wrote to their colleagues
prior to the House vote on the MORE Act:

Merging the business interests of the tax and regulatory aspects
of the legislation with a social justice narrative should expand
support for the legislation in both parties. While this legislation
will not be enacted in the 116th Congress, the work done in this
bill lays substantial groundwork for the eventual legalization of
cannabis.

The MORE Act provides a key starting point for companies
participating in or watching the growing cannabis market, and
context for understanding the dynamics and nature of the future
federal legal framework. We will continue to monitor legislative
developments in this area and encourage readers to contact the
authors of this Advisory or their usual Arnold & Porter contact
for more information.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights
Reserved. This Advisory is intended to be a general summary of the
law and does not constitute legal advice. You should consult with
counsel to determine applicable legal requirements in a specific
fact situation.

Footnotes

1 See  21 U.S.C. §§
801, et. seq.

2 See 21 U.S.C. §
812(b).

3 See  21 U.S.C. § 823(f).

4 THC in hemp, as defined in section 297A of the
Agricultural Marketing Act of 1946 (also known as the “Farm
bill” of 2018), is expressly exempted in the bill.

5 See H. Rept. No. 116-604, 116th Cong., 2d Sess.,
p. 19, internal citations omitted.

6See 21 U.S.C. § 331.

7 Floor Remarks of Rep. Matt Gaetz (R-FL), Congressional
Record, December 4, 2020, at page H6831.

8 Rep. Earl Blumenauer, Rep. Barbara Lee, Dear Colleague letter re: the MORE Act,
November 10, 2020.

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