US House lawmakers just voted to decriminalize marijuana — here's what you need to know

  • On Friday, the House of Representatives voted for the first time on a bill to decriminalize cannabis.
  • The bill passed 228 to 164, with the majority of Democrats voting in favor and the majority of Republicans voting against.
  • The bill is expected to face a harder trial in the Senate, which has a Republican majority.
  • If the MORE Act does pass the Senate, it would gut criminal penalties for anyone who sells or uses cannabis products in accordance with state laws and allow states to chart their own course in establishing commercial marijuana sales. 
  • Cannabis execs say that while the House vote is encouraging, they're focused on state-level reforms. 
  • Visit Business Insider's homepage for more stories.

US lawmakers just voted for the first time to federally decriminalize cannabis.

The bill, called the Marijuana Opportunity Reinvestment and Expungement Act, or the "MORE Act, would end criminal penalties for anyone who sells cannabis in states where that's legal, decriminalize the use of cannabis throughout the US, and formally allow states to chart their own course in establishing commercial marijuana sales.

In a US House of Representatives vote on Friday, the MORE Act passed 228 to 164, mostly along party lines, with five Republicans voting with most Democrats. Six Democrats voted against the MORE Act.

While the legislation cleared the Democratic-controlled House before lawmakers go home for the winter break, it's unlikely to make it past the GOP-controlled Senate or to become law. It also faces an uphill battle during the next Congress, when Democrats will have a narrower majority in the House.

Over in the Senate, the two Democrats up for runoff elections in Georgia during a January 5 special election have voiced support for cannabis decriminalization, but it's not clear their buy-in would be enough to cinch the 50 votes that would be needed in the next Congress to clear the MORE Act in the upper chamber. 

The vote on the MORE Act is historic and indicates a trend in the way that politicians see cannabis

Still, supporters see Friday's House vote as a major shift in the way politicians view the drug — and believe that formal federal decriminalization isn't far off.

Read more: The ultimate guide to marijuana legalization: Here are all the states that passed cannabis reform, the key dates to know, and which stocks could benefit the most.

Cannabis policy has undergone major changes in recent weeks. The United Nations on Wednesday voted to acknowledge the plant has therapeutic value and is not "liable to produce ill-effects." In the US's November elections, five states voted to legalize cannabis in some form, meaning that every single cannabis initiative up for a vote passed. 

President-elect Joe Biden has supported decriminalizing cannabis and Vice President-elect Kamala Harris introduced the Senate version of the MORE Act, though cannabis reform wasn't on the Biden transition website's list of priorities.

Analysts at the investment bank Cowen said in a Wednesday note that while they expected the House to pass the MORE Act, it wouldn't become law.

"This would be historic as it would be the first time the House has voted to legalize cannabis," they wrote. "Despite that, the bill is dead in the Senate." 

Progressive Democrats support the MORE Act. Some centrists and Republicans don't.

While progressive Democrats have thrown their support behind the MORE Act — including Minnesota Rep. Ilhan Omar, who called it a "long overdue step" on Twitter — centrist Democrats and Republicans have questioned why the House would vote on marijuana decriminalization while it has not yet passed much-needed stimulus for Americans suffering from the coronavirus pandemic.

"Decriminalizing marijuana is an important issue that should be taken seriously & done the right way. This isn't the right way," Rep. Conor Lamb, a Pennsylvania Democrat, said on Twitter before the vote.

Louisiana Rep. Steve Scalise, the minority whip, attacked House Speaker Nancy Pelosi for putting the MORE Act to a floor vote ahead of the stimulus.

Read more: Meet the top 11 power players shaping Arizona's new market for recreational marijuana, including executives, advocates, and regulators

"Nancy Pelosi is blocking a bill to deliver unused Paycheck Protection Program funds to workers and small businesses," Scalise tweeted. "But she managed to find time for a vote on pot legislation this week."

Democrats supporting the MORE Act have framed it as a measure to address criminal-justice reform that cannot wait.

"When people ask me what is systemic racism, I point to our drug laws in this country," Rep. Jim McGovern, the House Rules Committee chairman, said during a hearing on Wednesday, adding that the MORE Act was a step in the right direction. 

Others, like Texas Democratic Rep. Sheila Jackson Lee, said the MORE Act would free up researchers to further understand the health and cognitive effects of marijuana use.

And Democratic Rep. Ed Perlmutter said he was "pretty frustrated" because "America is so far ahead of Congress on this subject," adding that voters overwhelmingly support cannabis reform whenever it is on the ballot.

Read more: The world's largest cannabis company is angling to jump into the US marijuana market after Biden's win

Cannabis execs and CEOs say the MORE Act is a step in the right direction

David Klein, the CEO of the Canadian cannabis heavyweight Canopy Growth, told Business Insider in a November interview that "some variant" of the MORE Act was most likely to pass Congress as opposed to other competing pieces of cannabis legislation.

He said Canopy's lobbying efforts were focused on the MORE Act, while acknowledging the uphill battle the legislation would face in a Republican-controlled Senate.

Charlie Bachtell, the CEO of the Chicago cannabis firm Cresco Labs, says he isn't holding his breath for the MORE Act to become law.

"There's a lot of work to be done before something like the MORE Act becomes law," he said in a recent interview with Business Insider.

Joseph Bayern, the incoming CEO of Curaleaf, told Business Insider that while the House vote on the MORE Act was encouraging, he was keeping his business focused on the state level.

"Our perspective is that total federal decriminalization is probably a little further off," he said.  

Read more: Meet the 13 power players shaping the future of New Jersey's potentially $1 billion market for recreational marijuana

What the MORE Act would do if it became law: 

Legalization advocates are pushing to have cannabis de-scheduled but still regulated, meaning it would be treated similarly to alcohol and tobacco.

Within a year of the bill's passage, the MORE Act would require the Department of Health and Human Services and the Food and Drug Administration to have public meetings on "regulation, safety, manufacturing, product quality, marketing, labeling, and sale of products." 

That's a far cry from the current landscape. For the past 50 years, cannabis has been a Schedule 1 drug under federal law, meaning that the government believes it's likely to be misused and it doesn't hold any medical value. The scheduling puts it in the same category as drugs like LSD, heroin, and ecstasy.

At the same time, cannabis faces a patchwork of regulations. Though it's federally illegal, it is set to be legal in 15 states for people over 21 and legal for medical use in 36 states.

The MORE Act would make cannabis laws more uniform, giving federal guidelines to replace many state-level laws. Individual states could still keep cannabis illegal locally.

For cannabis companies, de-scheduling would mean they'd no longer be bound by tax code 280E, a rule which prohibits companies that sell illegal drugs — like marijuana — from deducting regular business expenses, such as office supplies or health-insurance premiums. 

A 5% tax on marijuana products

The MORE Act would impose a 5% tax on cannabis products for the first two years of decriminalization and then the tax would increase by 1% every year until it reaches 8%. Five years later, cannabis would be taxed according to its weight rather than its price. 

Read more: Here's why a Biden administration will be good for the US cannabis industry, even though it's unlikely he'll legalize marijuana federally

The revenue would go toward funding programs such as job training, youth mentorship, and literacy programs. States could levy their own taxes on marijuana products on top of the federal taxes. 

Retroactive expungement of criminal records 

The bill would set up a process for people previously convicted of marijuana-related crimes to have their records expunged, something that has come in conjunction with legalization in several states that have created recreational programs in the past few years.

The government also wouldn't be allowed to deny citizenship to immigrants on the basis of past cannabis use. Still, federal agencies could continue to make workers take drug tests. 

Democrats are messaging the bill as a measure targeting racial injustice. Marijuana convictions disproportionately hit people of color. Despite similar marijuana usage by race, Black Americans are 3.6 times more likely than white Americans to be arrested on charges of marijuana possession, according to the American Civil Liberties Union.

Loans for small businesses 

The legislation allows the government to provide loans for small businesses that sell marijuana. The act would create a federal agency called the Cannabis Justice Office to provide loans to people who've been adversely affected by the war on drugs.

Some in the industry say that the high barriers to entry right now — including steep licensing fees and the lack of access to traditional bank loans — have made it difficult for applicants with fewer resources to start businesses and enter the industry, though some states tried to address this issue when they legalized recreational cannabis.

Read more: 'I want to be ready to pounce': The CEO of a major Canadian cannabis firm lays out why he just spent $300 million to gain a foothold in the US

Cannabis and veterans

Under the bill, doctors who work for the Department of Veterans Affairs would be allowed to recommend medical marijuana to patients. 

An amendment to the bill added on Wednesday would direct the federal government to research cannabis' effectiveness in treating PTSD, chronic pain, and other ailments facing veterans.

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