Pot's Ballot Victories Bode Well For Reform's Future

Law360 (November 4, 2020, 8:46 PM EST) -- From deep red South Dakota to the Democratic stronghold of New Jersey, voters turned out in five states to deliver a decisive victory for cannabis legalization, perhaps the last bipartisan issue left in a deeply divided nation where the drug remains federally illegal.

By Wednesday, the number of states to legalize recreational cannabis had grown to 15, with Montana, Arizona and New Jersey voting to build on their existing medical marijuana programs. South Dakota made history as the first state to go from total prohibition to authorizing adult-use marijuana without taking the intermediate step of enacting a medical-only regime first. Voters in Mississippi backed a medical marijuana program.

Five states voted to expand legal cannabis

Voters in Arizona, New Jersey, South Dakota and Montana approved ballot initiatives to legalize recreational marijuana, while South Dakota and Mississippi both approved medical marijuana proposals.

"A few years ago, nobody would have predicted that South Dakota would legalize marijuana before New York," Matthew Schweich, deputy director of advocacy organization Marijuana Policy Project, said in a statement. "But that's the power of the ballot initiative process."

The number of states allowing medical marijuana programs swelled to 36 with the passage of Initiative 65 in Mississippi, a measure that triumphed over a thinner alternative amendment backed by the state's Republican-controlled legislature, which reformers alleged was added to the ballot to confuse voters.

"This was not a red state/blue state issue," said Greg Kaufman, co-lead of the cannabis practice at Eversheds Sutherland. "You had ballot measures in both red and blue states, and the support was pretty consistent. In most of those states, the cannabis measure was more popular than the winning presidential or senatorial candidate."

In South Dakota, a measure to create only a medical cannabis program passed with close to 70% of the vote, as of Wednesday afternoon, some 8 points higher than the percentage notched by President Donald Trump and 3 points above Republican incumbent Sen. Mike Rounds. The recreational bill passed by a slimmer majority, with 54% of the vote.

In Mississippi, 68% of voters supported some form of medical marijuana legalization, compared to the 59% who delivered the state's electoral votes to Trump.

"This is not a partisan issue for the electorate, as near as I can tell," Kaufman added.

The cannabis industry will be eyeing South Dakota as it seeks to build a recreational regime and medical program from scratch, something that has not been attempted in any state before.

"I think it will create challenges because they are having to essentially write the rules and regulations for the markets at the same time and not have one market essentially cannibalize the other," Kaufman said.

Arizona and New Jersey also took the step of legalizing recreational use of marijuana on Tuesday, but both states plan to assign oversight of the new markets to the government agencies that have been running their medical programs for the past few years.

"I do think there are potential challenges given what [South Dakota] faces and that they have no official program," said Jonathan Havens, co-chair of the cannabis practice at Saul Ewing Arnstein & Lehr LLP. "Building up two programs simultaneously is a tall order."

While both initiatives are set to take effect on July 1, the language of the medical bill gives it a slight boost on the schedule for enactment.

Amendment A, which legalized adult use of marijuana, directs the state's Department of Revenue to create rules governing the recreational program by April 2022. The medical question, Initiated Measure 26, requires the state's Department of Health to promulgate rules governing the program in October 2021 and begin issuing cards allowing the purchase of cannabis some three weeks later.

Schweich of the Marijuana Policy Project, who co-led the legalization campaign in South Dakota, is optimistic that the parallel development of adult-use and medical regulatory regimes will help the state avoid problems encountered by other states that tried to develop a recreational market on top of a preexisting medical one.

"So many of the issues that have come up in other states have arisen because of those transitions," he told Law360. "Medical operators who have the business and want to keep it — those are the complicating factors that create those tensions."

One factor potentially paving the way for a smooth rollout is that there is nothing in either amendment that prohibits the creation of cannabis businesses that are co-located, that is, servicing both the adult-use and medical markets.

"I think the lack of a time period between medical and adult use will work in our favor and minimize the risk of conflict we've seen in other states," he added.

Schweich said that from a public policy perspective, he would like to see the 14 states where marijuana is illegal, which include neighboring Wyoming, Nebraska and Iowa, take an approach similar to South Dakota. He conceded that it's a big ask politically to get voters to greenlight going from illegality to legal adult use overnight.

But the success in South Dakota is a sign that advocates can use the ballot initiative process in states where it's available to take major steps forward, he said.

As for the East Coast, advocates and cannabis attorneys agree that the legalization of recreational cannabis in New Jersey is all but certain to push neighboring Pennsylvania and New York and nearby Connecticut to accelerate their plans to enact similar reforms.

"Everyone was waiting to see who in the mid-Atlantic would go first," said Anita Sabine, leader of the cannabis practice at Manatt Phelps & Phillips LLP. "This is going to put huge pressure on that area to legalize on a broader basis."

New York's Democratic Gov. Andrew Cuomo has signaled his intention to legalize and tax recreational cannabis via his executive budget, and he previously sought to develop a regional plan with the governors of Connecticut, New Jersey and Pennsylvania. Neither effort has delivered legal recreational cannabis to the Empire State.

Cuomo said as recently as October that he still hoped to pass recreational marijuana reform, saying in a video made public by USA Today that the state needed the tax dollars. The governor's office did not respond to a request for comment Wednesday.

"Unlike the other states, you are absolutely going to see a regional tipping here," said Havens of Saul Ewing. "New York is going to have to legalize in short order. I think this is a pure revenue issue. These states can't afford to have residents crossing the border to purchase cannabis."

And although it was still uncertain which party would control the U.S. Senate and White House by Wednesday evening, experts said the decisive wins for cannabis are enough of a mandate that even if the federal government dodges reforms for yet another term, it may, at least, stay out of the states' way.

"I don't think the federal government is going to be able to put the genie back in the bottle," said Joshua Horn, co-chair of the cannabis practice at Fox Rothschild LLP. "It's a reflection of the majority view in this country, that there should be some form of legal cannabis, and it's not going away."

--Editing by Jill Coffey.

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