Last month, we wrote about draft legislation out of the U.S. Senate that aimed to end the tension between the Controlled Substances Act (CSA) and state laws legalizing cannabis. Today, Senators Elizabeth Warren (D-MA) and Cory Gardner (R-CO) introduced the excellently-named Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which amends the CSA to carve out an exception to the federal prohibition on trafficking marijuana for persons acting in compliance with the laws of their particular state.

As we noted previously, that draft of the Act showed promise to the extent that many of the most serious issues facing the cannabis industry (access to banking, disparate tax treatment, and your business plan involving federal crimes) are consequences of the CSA. Creating an exception to the CSA for state law-compliant marijuana business would significantly lessen the impact of banking, taxes, and prohibition.

The text of the Act introduced today tracks closely to the previous draft, and contains some exciting developments. In short, the Act:

  • Clarifies its applicability to federally-recognized Indian tribes operating within Indian Country,
  • Creates a specific exception for the distribution of medicinal marijuana to persons under the age of 21 (likely to account for the federal enforcement guidelines in the late Cole Memo), and
  • Specifies that proceeds from any transaction in compliance with the Act will not be deemed “the proceeds of an unlawful transaction,” which prevents the seizure of cannabis industry in a civil asset forfeiture action.

The Act also amends the CSA’s definition of “marihuana” to specifically exclude “industrial hemp.” At a glance, this might read like the legislative equivalent of a double negative (legalizing the trafficking of marijuana while also excluding industrial hemp from the CSA’s definition of marijuana), but it would actually provide some needed clarity regarding the applicability of the CSA to industrial hemp. Further, while the Act’s benefits apply only to states that have an existing marijuana regulatory regime, excluding industrial hemp from the CSA altogether means that even states that have not legalized marijuana can adopt industrial hemp programs with less uncertainty.