A recent letter from the California attorney general to state cannabis regulators has pretty much killed any hope of developing the interstate cannabis trade. Attorney General Rob Bonta sent a letter to the California Department of Cannabis Control (DCC) stating that businesses between licensed cannabis businesses in California and out-of-state entities could lead to “significant legal risk to the State of California,” as per the nation’s federal Controlled Substances Act.
Although the controversial plant is legal in dozens of states for either recreational or medical consumption, federal law still classifies the substance as a Schedule I drug with no medical uses and a high potential for abuse. This has put significant barriers to cannabis trade in states with legal markets and has essentially made interstate cannabis trade illegal.
However, with 24 states now allowing recreational cannabis and several more poised to legalize adult use over the decade, interest in interstate cannabis trade has been on the rise. Interstate trade could be beneficial for the industry as businesses could focus on cultivating cannabis in states with suitable climates and sell their products to a much wider market.
Bonta’s letter stopped any hopes of interstate cannabis trade developing in the next couple of years and informed officials that such trade could put the state at significant risk of facing legal federal action. The letter comes months after the attorney general received a request from the state Department of Cannabis Control asking for its assessment of the potential liability of allowing interstate cannabis trade under a 2022 California law passed by Governor Gavin Newsom.
DCC officials asked the California AG for his professional opinion on the measure shortly after it went into effect on Jan. 1, 2023. Although the DCC believes that enacting interstate cannabis trade would not put the state at legal risk, the attorney general’s office says that it can’t rule out the possibility of facing federal action as the Controlled Substances Act expressly prohibits cannabis trade and would supersede Governor Newsom’s law.
Enacted in September 2022, Senate Bill 1326 increased hopes for interstate cannabis trade among cannabis stakeholders in California, but it would have needed several prerequisites to kick in. The measure stated that the governor had the authority to enter into interstate cannabis commerce trade agreements with other states if federal law or guidance was amended or if the state attorney general said there was minimal to little risk of facing “significant legal risk.”
While many states and companies such as Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) could be interested in interstate cannabis commerce, it appears that until policy changes are made at the federal level, marijuana businesses will be restricted to operating within state borders.
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