Opinion | Common Ground: Political Unity Around Federal Cannabis Prohibition Relief

Opinion | Common Ground: Political Unity Around Federal Cannabis Prohibition Relief

Benzinga Cannabis , Benzinga Contributor (Originally published on Benzinga Here)

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By J Smoke Wallin

In 1925, five years into Prohibition, journalist H. L. Mencken wrote, 

“There is not less drunkenness in the Republic but more. Not less crime, but more. There is not less insanity, but more. The cost of government is not smaller, but vastly greater. Respect for law has not increased but diminished.” 

Prohibition turned law-abiding citizens into criminals and enabled and empowered organized crime. It would take another eight years for the repeal of Prohibition, with the enactment of the 21st Amendment, paving the way for a set of local option laws and regulations, state by state, known today as America’s beverage alcohol system. While imperfect, the state by state system has functioned well for over 85 years.

Around the time of Prohibition’s repeal, another Prohibition went into effect: cannabis. The Marijuana Tax Act of 1937 eventually made a plant used in medicine, and available recreationally for thousands of years, illegal. Again, this turned otherwise law-abiding citizens into criminals, enabled and empowered organized crime, and also denied countless patients suffering from a wide range of ailments, including cancer, access to a plant that could help them. 

Today, 33 states have some form of medical cannabis provision, with 10 implementing adult recreational use. More are drafting legislation regularly. The 2018 Farm Bill took the non-psychoactive form of cannabis “hemp” out of the hands of the DEA and into the Agriculture Department, paving the way for legal hemp and hemp-based CBD and other extracts for national production and consumption. This is progress—and it is only the beginning.

There is reason to believe the time is now to decriminalize cannabis federally and end the conflicted issues inherently present. While common ground seems impossible to find politically in 2019, there is a sensible center that has always existed and still exists today. Cannabis Prohibition repeal may be one of the few unifying issues one can hope for in Washington today. Here is why I believe it is possible with our current state of divided government.

States’ Rights: Conservatives can be against cannabis reform but still agree to it based on the strong principle of states’ rights. One of the core principles of modern-day conservatives has been a commitment to states’ rights. This goes back to the founding fathers’ expressed interest in limiting the size and scope of the Federal government. While the scope of the Federal government has increased dramatically over the years, there is still a strong expressed interest in decentralization on a whole host of issues, including education and healthcare. Anyone holding these beliefs ought to be persuadable that 33 states and counting were not wrong. They have expressed the will of their citizens. One only needs to listen to U.S. Senator Cory Gardner (R-Colorado) as he fights for his state’s right to regulate legal cannabis — when he originally voted against it. If the GOP intends to keep the Senate in 2020, their members will need the opportunity to support repeal.

Wellness: As Todd Harrison of CB1 Capital says, “Cannabis isn’t about getting high; it’s about getting well.” While US research has been stymied by Prohibition, anecdotally, the evidence is abundant. Whether it be a cancer patient coping with the effects of treatment or a child with epileptic seizures, one cannot argue there are benefits to this plant.

Cannabis clinical trials are underway in Israel and Canada. Large scale university-based research is in the early days (and due to the prohibition, have been disallowed in the U.S. thus far). However, since the 2018 Farm Bill was signed into law last year, cannabis without THC, legally known as hemp, is not under the purview of the Agriculture Department. Cannabinol or “CBD” is one of the components in the cannabis plant and is showing great promise in treating a variety of conditions. It is now in the FDA approved medicine for Epilepsy Epidiolex. Its number one characteristic is as an anti-inflammatory followed by pain relief.

I personally was able to give up Advil through the use of CBD for my minor aches and pains. Additional possible indications for CBD products include autism, psychiatric conditions, diabetic neuropath pain, fibromyalgia, chronic pain, and back pain. Clinical trials in these indications are underway; however, excluding THC from these studies makes zero scientific sense. The scientists committed should immediately be allowed to study the full cannabis plant in all its possible applications. Public demand is at an all-time high, and burying our heads in the sand scientifically is a disservice to the public.

Opioid Epidemic Overall And Loss Of Veterans: Over 50,000 citizens died in 2018 from some form of opioid incident. Cannabis has been shown to enable people to manage their chronic pain without the harmful side effects of opioids. The current approach is not working. We lose 22 veterans a day to suicide in this country as they cope with PTSD and the subsequent meds prescribed by the VA. I personally know veterans who were on the verge of suicide and were saved by the use of cannabis. Many VA doctors agree and would like the option. Veterans’ organizations stand universally in favor of legalized medical cannabis; so too should our nation’s leaders.

Economics: Since Colorado legalized adult use cannabis in 2014, the state generated over $6 billion in sales and $1 billion in tax revenue. CA generated $300 million in taxes in its first year of imperfect legislation and will amount to well over $3 billion once legal rollout is fully up and running. In fiscal year 2017-2018, Colorado Department of Revenue says it collected $250,968,890 in marijuana tax revenue. The constitution requires the first $40 million in excise tax money go to school construction. Anything over that from the excise tax goes toward public-school funds.

Overall, 47 percent of marijuana tax money went to schools for fiscal year 2017-2018, 41 percent went to other state services, and the remaining 12 percent went to the general fund. Denver alone collected $48 million in tax revenue on cannabis. In Denver, all marijuana tax money goes to the general fund. The city also needs to dedicate portions of that tax revenue to education, enforcement, and regulation. During the last five years, nearly $13 million of the revenue went toward youth prevention efforts. For 2018, the city also carved out money from marijuana revenue for certain projects, including $5 million for deferred capital maintenance, $4 million to fix aging parks and recreation centers and an estimated $8 million per year to help double Denver’s Affordable Housing Fund.

The states cannot afford not to go after this revenue source, not to mention the countless entrepreneurs rushing into the space to create value for their investors and stakeholders. It’s an economic windfall for the states that have moved forward and will be for the country at large if done right.

Social Justice Reform: Congress agreed, and the President signed some justice reform passed into law in 2018. Cannabis reform may further correct a legal system that disproportionately affected certain communities. 

Banking: The Federal Prohibition juxtaposed with state permission has created an untenable system whereby legitimate businesses are unable to access the federal banking system. This creates an unsafe environment with massive amounts of cash being handled. While some local state options exist, the Treasury department has publicly come out in favor of a solution for banking and legal taxation.

Elections And Public Opinion: Gallup has tracked the topic of cannabis legalization for years. 2018 marked the first time the majority of Americans in every segment favored some form of legalization. This applied to baby-boomers and millennials, to Democrats and Republicans. Almost every single presidential hopeful who has declared has come out publicly in favor of repealing the national cannabis ban in the form of the STATES Act, while some have gone much further with full legalization. This includes Amy Klobuchar, Bernie Sanders, Elizabeth Warren, Cory Booker, Julián Castro, Kamala Harris, Kirsten Gillibrand, Tulsi Gabbard and Pete Buttigieg. President Trump has publicly stated his support for the states to decide.

When functioning properly, politicians serve their constituents. To get reelected, these politicians need to find a set of issues that gives them sufficient votes to win. There are no issues today that unite the country quite like cannabis reform.

The toothpaste is out of the tube, and you can’t put it back in. Legal cannabis is coming to the United States, sooner rather than later. Get ready.

J Smoke Wallin is CEO of Vertical Wellness, the leading hemp-based CBD company, and President of multi-state cannabis operator Vertical Companies.

Channel Conflict II: Grocery Alcohol Fights Across the Land

Channel Conflict II: Grocery Alcohol Fights Across the Land

Last week I wrote about Channel Conflict in the 3 tier system of alcohol distribution between wholesalers and Anheuser-Busch Inbev and the craft community. I received quite a few interesting comments from my friends on both sides of the issue.   One highly respected industry member commented to me “Very nice job trying to ride the third rail of these issues and explain a complex issue in simple terms.”

Well here goes again with an issue that I get asked about frequently. Another interesting channel conflict is between and among the members of the retail tier. This channel conflict involves questions regarding who (what types of retailers) can sell which types of beverage alcohol and when alcohol can be sold (e.g. Grocery Sales of beer spirits and wine and Sunday Sales). These questions are raging across the country in different states. The conflict pits independent liquor stores (and specialty chain liquor stores depending on the state) against the corporate chains (Costco, Kroger, Publix, Target, Walmart etc). An example of this is the Sunday sales of alcohol at retail in Indiana. After passing out of committee with a “poison pill change” Sunday sales was killed in the Indiana legislature. Sunday Alcohol Sales Meet Familiar Fate.

liquor store sign liquor sales sunday closed

In a closely related question pertaining to which type of retailer can sell which products, in 2014 Tennessee passed a law allowing grocery stores to sell not only beer, which they already could sell, but also wine. Wine in grocery stores passes; what’s next?

In Florida, Walmart and others are pushing legislation for the right to sell spirits within the same store as groceries and not be required to have a separate stand-alone entrance. Publix, another grocer, does not support the change since they already have stand-alone entrances throughout the state. Beer and wine are treated differently in Florida and groceries are able to sell inside a grocery store. Publix opposes, Walmart backs Florida bill to let grocers sell liquor.  Update – More Here: Florida: Spirited Battle Ahead over Florida’s Liquor Separation Law

3/23 Update: Beer bill on tap in Florida House on Tuesday

 

kroger store outside kroger wine shop walmart store shot outside

In some cases, these fights are spilling over into the courts and not just the legislatures. Walmart lawsuit highlights Texas’ surprising alcohol laws. In the case of Texas and Walmart’s litigation, it is about their right to sell products that the specialty retailers currently have a lock on and have created work-arounds for ownership of large-scale chains.  UPDATE:

Costco joins coalition to broaden liquor sales laws in Texas

The reality is there are so many new brands, it is hard to keep up with them all, for people in the industry, let alone consumers. This proliferation of new brands is driven by today’s consumer thirst for new things, literally. Generally speaking, I believe more open markets are better for consumers, but taken to extreme can cause massive consolidation and the independent specialty liquor shops and specialty chains find themselves at a significant disadvantage to the corporate chains. Markets like California and Arizona are examples of wide-open sales of beer, spirits and wine. This has been the case for a long time. In these markets the corporate chains dominate the retail landscape. The independent sector is a much smaller portion of the total business. The large specialty chains have also been very successful in these markets (Bevmo! and Total Wine & More).

Bevmo store shot Bevmo logo

 

The relative advantage of full line retailers (grocery) is what is driving the fights over Sunday  sales. Liquor stores are not open on Sundays, but the grocery chains are. The groceries of course want to be able to sell alcohol, as they are open, fully staffed and have consumers in their stores who would like to purchase it. The liquor stores would have to man their stores with staff and the thinking among many is the incremental sales on Sunday will simply come out of sales during the week they would get anyway. Their worse fear is that the groceries will end up with a greater share of the incremental business with so many consumers already shopping in their stores on Sunday.  The package stores won the recent Indiana fight by taking a quite reasonable position – that all retailers should be under the same sets of laws.  In the end, the groceries could not support losing the significant freedoms they currently have just to get Sunday sales.

Sunday-alcohol-sales-prohibitdotcom

To people (consumers) who live in both more “open” or “closed” states, these fights seem strange indeed.   There has been a long-term trend to more liberalization of alcohol laws on a state-by-state basis. But this liberalization has been gradual and certainly not continuous. As the large grocery/mass retailers have shifted their attention to gaining share of the increasingly important beverage alcohol market and Total Wine continuing their massive expansion around the country, the independent sector will continue to be under pressure and where organized, able to continue to slow the pace of change through state legislatures and regulations. That said, the most strategic of the independents and specialty chains are innovating and investing

in their ability to serve their customers and compete effectively with the other retail sectors. Walmart and most other full service retailers will never have the specialized staff that a focused specialty retailer of alcohol can have (There are exceptions on a store level, but this is true overall). This high level of knowledge and service with customers is what will keep consumers coming back. I think the bigger fear is a large specialty retailer (Total Wine) that has it all – scale ($1.5 million in alcohol sales) and low pricing, product depth (10,000 skus typically) and highly knowledgeable employees. They are very strong.

Total wine logo total wine store shot

The wholesalers and most of the suppliers all try to stay out of these arguments, since both sets of retailers are their customers. DISCUS (Distilled Spirits Council Of The United States) though has a long-standing policy to fight against anything that disadvantages spirits to other types of alcohol. They have been quite effective on this front in many markets. The craft (beer, spirits and wine) producers definitely benefit from a thriving independent market as they get more opportunities for their smaller or new brands than in the corporate chains, but they also benefit by having a more open market with multiple channels for consumers to buy alcohol. It’s a tough balance to maintain with many competing interests, but in the end the market will drive it, albeit more slowly than many consumers want with the local legislation and regulations market by market.

I’d love to hear you thoughts on these issues and other examples in your state.

Cheers,
Smoke

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