Create Waivers for States with Legal Marijuana

Thirty-three states and the District of Columbia have legalized cannabis for medical use. Of those jurisdictions, 11 states and DC have legalized recreational supply and possession of cannabis for people aged 21 and older. This shift in public policy reflects public opinion: two in three Americans support legalizing cannabis for nonmedical purposes. But it’s not that simple. Legalization has consequences for health, public safety, financial markets, and social equity. Production, prices, taxation, and the enforcement of regulations are at stake. And the wave of action in the states has created a clash between state laws and the federal Controlled Substances Act: states are, in effect, licensing individuals and businesses to commit federal felonies. Legalization and decriminalization also have not eliminated illicit markets for marijuana. Despite the spread of cannabis legalization, 70 percent of Americans live in a place that does not allow recreational use. Local opt-outs also make it difficult for some to obtain legal cannabis, and possession for people under 21 is still prohibited. Illicit actors will continue to profit until coordinated state and federal polices exist to deter them.

Figure 1: Legal Cannabis in the States

The federal government must act to resolve this conflict and confusion, by creating an environment that respects sovereignty and by providing a responsible framework in which states can make policy choices. Without federal action, the cannabis industry will continue to operate without consistent guardrails and guidance for testing, labeling, and marketing—to minors and all consumers. The prevention of use by children and increased risks of substance use disorder are among the pressing public health concerns that must be addressed. And then there are the industry’s multiple troubles related to money, including lending, checking accounts, credit cards, and the public safety concerns that come with cash-based businesses. Against this backdrop, the debate over rescheduling and research—or the lack of it—rages on. Some consider rescheduling the answer. Cannabis is classified as a Schedule 1 drug, a substance the federal government considers to have no medical value and high potential for abuse. Congress or the Drug Enforcement Administration (DEA) can reschedule cannabis, but the DEA has declined, most recently in 2016. The Task Force concludes that neither a federal crackdown nor a hands-off approach is advisable. In the absence of cannabis rescheduling, or its legalization at the federal level, the Task Force recommends that Congress and the Administration develop a state waiver process or contractual framework. Without it, states and the industry will continue to exist under an illusion of sovereignty where circumstances can change at any moment. A balanced and thoughtful accommodation from the federal government would provide confidence to states, stabilize the market, and help address many of the myriad safety and health problems.


Congress should adopt legislation directing the U.S. Departments of Justice (DOJ) and Health and Human Services (HHS) to work with other federal agencies and state stakeholders to develop a federal waiver process or contractual framework for states that have legalized medical and/or recreational cannabis and for those states aiming to do the same.

Implementation Steps

  1. The legislation should create an interagency task force, comprised of key federal agencies, researchers, and state partners, to develop a waiver or contractual agreement process that creates a legal framework for states that have legalized cannabis. Task force participants should include DOJ, HHS, the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Drug Enforcement Administration, the U.S. Environmental Protection Agency, and the Food and Drug Administration.
  2. The legislation should require the task force to create policies and standards reflecting best public health practices with regard to product availability, testing, labeling, marketing, and child-resistant or aversive packaging requirements.
  3. The legislation should require the task force to establish clear guidelines for banks, other lending institutions, and their regulators and inspectors. Such guidelines should specify the normal operation of business lending and services to reduce over-reliance on the current cash-based industry model.
  4. The task force should provide guidance, grant funding, and assistance—through the DOJ’s Bureau of Justice Assistance—to help law enforcement agencies improve interdiction and crack down on illicit markets.
  5. The legislation should provide guidance and assurances to all stakeholders legally operating under the waiver and/or contractual agreement, shielding them from civil and/or criminal liability.
  6. Congress should direct the National Institute on Drug Abuse to support additional research on possible benefits or risks of cannabis and the health implications of various regulatory regimes for cannabis in the U.S. and abroad.

Annotated Citations

Kilmer, Beau. “Trump’s marijuana options.” The Hill, 17 Jan. 2017, In this article written on the eve of Donald Trump’s inauguration, the author outlines six different approaches that the Trump Administration could take concerning marijuana. Approach one (shut it down) reverses the strategy of taking a hands-off approach on state regulation and legalization. With this option, the U.S. Department of Justice (DOJ) would send out “cease and desist” letters to marijuana-involved businesses. The federal government gets more involved in approach two (shape the market), but uses more discretion than that outlined in approach one by focusing on specifics like high-potency products. Approach three (maintain the status quo) continues the hands-off approach. Approach four (reclassify marijuana) shifts the focus from federal-state dynamics to strictly federal regulations. In this approach, the Administration could support rescheduling marijuana to make it easier to research the health consequences. Approach five (address federal-state conflicts) supports the creation of a policy waiver system that would make it easier and less risky for states to legally experiment with alternatives to profit-maximization models. Also, in states with legalization, the inability to bank like other entities creates challenges for thousands of marijuana businesses. The final option provided by the author is the most aspirational. Approach six (legalize it) addresses the current federal/state conflict by supporting legislation to legalize and regulate marijuana at the federal level.

Kilmer, Beau and Mark. A. R. Kleiman. “Navigating Cannabis Legalization 2.0.” The RAND Blog, 4 Dec. 2018, With each passing year more and more states are either legalizing recreational marijuana or legalizing it for medical use. At the time of this article’s publication, nearly 25% of the U.S. population lived in states that allowed businesses to produce and sell cannabis. This article addresses the central debate of the next round of marijuana legalization – what state governments can do to control the wholesale prices of marijuana. The market price of cannabis plummets with legalization because inefficient barriers are removed from commerce and costs associated with additional risk due to illegality become non-existent. Moreover, open competition drives costs down. Studies from Washington and Colorado, the first states to legalize recreational use, show that the cost of getting intoxicated from cannabis is lower than alcohol. Low costs have direct effects on cannabis product consumers and the cannabis marketplace. Daily or near-daily users account for 80% of total cannabis consumption. The plummeting cost of marijuana has health risk factors for these individuals, according to the Substance Abuse and Mental Health Services Administration. They estimate that 4 million Americans met clinical criteria for a cannabis use disorder in 2017. The increased availability of low-cost, high potency cannabis poses a risk for this population. The authors provide a policy proposal that can alleviate the risks associated with low-cost marijuana. One solution mirrors existing minimum prices for tobacco and alcohol products. Minimum prices for cannabis products could be set according to THC content the same way spirit prices in some jurisdictions are set according to the level of alcohol. This THC tax counteracts the tendency of the cannabis market to move toward more potent products.

Schwartz, David S. “High Federalism: Marijuana Legalization and the Limits of Federal Power to Regulate States,” Cardozo Law Review, vol. 35, no. 567, 2013. Two oppositional theories of constitutional law leave unsettled the question of current federalism doctrine as applied to marijuana criminalization. On the one hand, the anti-commandeering doctrine under the Tenth Amendment suggests that the federal government cannot commandeer state officers to enforce criminal marijuana sanctions where state laws expressly permit possession and use of marijuana. On the other hand, federal preemption of state law under the Supremacy Clause suggests that federal marijuana prohibition supersedes any state effort at decriminalization or legalization. This article argues that the anti-commandeering doctrine ought to prevail, and that “federal preemption should be understood primarily as a choice of law rule directed at courts.” Since the federal government is ill-equipped to enforce its marijuana laws against states, ample support exists for the federal government to permit states to enact their respective regulatory regimes.

Lopez, German. “9 Questions About Marijuana Legalization You Were Too Embarrassed to Ask.” Vox, 30 Aug. 2018, The divide between states where marijuana use has been legalized and federal criminalization has created appreciable hurdles in state markets and regulatory practices. First, because marijuana is classified as a Schedule 1 drug, “there have been no large-scale clinical trials on marijuana,” which is the precise type of study necessary to provide evidence for the medical value of marijuana to the federal government. Many state businesses must function as “cash-only enterprises, since many banks are nervous about dealing with businesses that are … breaking federal law.” In addition, “[b]usinesses can’t file for several deductions, and, as a result, their effective income tax rates can soar to as high as 90 percent or more.” Despite these difficulties, the support for marijuana legalization continues to grow. As this article notes, “more than a quarter of the US population now lives in a state that allows for recreational marijuana use.” Prospective ballot measures and state legislation suggest that this number will continue to increase.

Wellington, Jordan. “Lessons From State Implementation of Marijuana Legalization.” The Regulatory Review. 14 Jan. 2019, “Federal cannabis prohibition laws create a variety of challenges for regulating cannabis markets.” These include the extreme difficulties that “businesses have accessing basic banking services and the resulting complexities of managing cash,” the lack of federally approved pesticides for use on cannabis plants, and the looming threat of federal prosecution of people who live in states where marijuana has been legalized or who have been deemed medically licensed users. The federal prohibition has forced state regulators, who lack essential institutional knowledge and are burdened with steep learning curves, to address matters typically handled by the federal government, including adopting standards for packaging, labeling, and testing products. While state regulation has flourished in the absence of federal assistance, critical complexities abound for consumers and businesses in the marijuana marketplace due to federal criminalization.

Kleiman, Mark A. R. “Cooperative Enforcement Agreements and Policy Waivers: New Options for Federal Accommodation to State-Level Cannabis Legalization.” Journal of Drug Policy Analysis, vol. 6, no. 1, June 2013. Given the fact that use and sale of marijuana is still illegal at the federal level, the use of federal accommodation to state-level experiments with cannabis legalization could be an effective way to fill the gap. These could take the form of administrative action or of legislation. Formalizing the exercise of administrative discretion through binding agreements with the states, as permitted by the Controlled Substances Act (CSA), and legislation to permit, but not command, the Executive to permit cannabis-legalization experiments under agreed conditions: what will be called here “cannabis policy waivers.” The author argues that a cooperative agreement binding the state and its localities to vigorous enforcement against exports in return for federal acquiescence in intra-state sales regulated and taxed under state law would plausibly advance the purposes of the CSA better than any alternative available to the Attorney General. Through legislation, Congress could amend the CSA to give unconditional or conditional deference to states’ legalization measures. “However, full deference to state law would put the enforceability of federal law, and of the laws of other states, very much at the mercy of the legislators (or voters) of any one state that chose to end marijuana prohibition.” Instead, federal deference to state marijuana legalization should be conditional on the willingness and ability of the legalizing state to keep the product within its borders. This alternative would amend the CSA to create administrative authority to grant state-level exemptions based on specified criteria. Exemptions through the policy waiver system could be time-limited and revocable if a state is no longer achieving criteria thresholds. The author outlines some policy hurdles that need to be crossed, including to what extent states should be held accountable for controlling intra-state/inter-state effects, what constitutes too much illicit marijuana activity, and bureaucratic considerations.

Demko, Paul, and Natalie Fertig. “Why the Most Pro-Marijuana Congress Ever Won’t Deal With Weed.” Politico, 9 Sept. 2019, Three bills are currently working their way through the United States House of Representatives and Senate. First, the Secure and Fair Enforcement (SAFE) Banking Act of 2019 (H.R. 1595), aims to limit federal regulators from taking enforcement action against banks that provide services to the cannabis industry under both state and tribal law. The legislation also extends protections to insurers and depository institutions. The second bill is the STATES Act, which protects persons and businesses complying with respective state marijuana laws from federal intervention. The third and most far-reaching piece of legislation, the MORE Act, “would end federal prohibition, expunge past marijuana convictions, and establish grant programs designed to make sure members of minority communities are able to share in the potential benefits of legal markets.” Each of these measures would bring considerable improvements in the currently disjointed federal and state marijuana contexts.

Yakowicz, Will. “Two Marijuana Legalization Models That Just Might Work,” Inc. Magazine, 22 Aug. 2016. Two drug policy experts, Mark Kleiman and John Hudak, have at least two different models of legalization that Congress might be able to get behind, "the case for empowering states" and "the case for all or nothing", respectively. Kleiman proposes that the federal prohibition on marijuana remain in place but that state experiments with regulated adult markets be formalized. The program could operate through state waivers, similar to welfare reform waivers, and could be adopted without requiring Congress to do much. “When states receive a waiver, they would have to agree to certain provisions such as no more than 5 percent of the crop can be exported to other legal states, that the price doesn't fall below a certain threshold, and that marketing of certain kinds of cannabis are not allowed.” On the other hand, John Hudak, a senior fellow at the Brookings Institution, says federal prohibition has caused a range of serious problems for society, especially as minorities continue to be disproportionately affected by arrest and prosecution. Hudak argues that state-level reforms are important, but the right legalization model would give states some freedom (a range in which they can operate), while also fixing certain issues that are federal in nature, like banking and taxes and criminal justice issues. These issues, Hudak argues, must be addressed in concert with state-level reforms.