The Green Wave: Cannabis Legalization Sweeps in 2020

Executive Summary

It was a Green Wave on election night, with every cannabis-related legalization measure on the ballot passing, some by surprisingly large margins of victory. As a result of the November 2020 election, the number of states that have legalized cannabis for adult use will increase from 11 to 15 and the number of states with legal cannabis for medical purposes will increase from 34 to 36. The passage of adult recreational cannabis in New Jersey in particular is likely to create circumstances favorable to the legalization of cannabis for adult recreational use in New York and Pennsylvania in 2021. The expansion of legalized cannabis at the state level is likely to increase pressure on Congress and the rest of the federal government to either decriminalize or legalize cannabis under federal law.

Here is a snapshot of the cannabis-related election results:

November 2020 Cannabis Referenda Results

NEW JERSEY

The New Jersey Marijuana Amendment passed by the overwhelming margin of 67.2 to 32.8. This amends the New Jersey Constitution to make access to cannabis legal for all purposes to persons at least 21 years of age. Under the new amendment, all persons 21 years or older will be able to legally purchase cannabis for personal use subject to the state’s 6.625% sales tax, one of the lowest tax rates for cannabis products in the country. Medical cannabis, currently taxed at 4% in New Jersey, will be reduced to 0% over the next two years. If authorized by the legislature, local municipalities will be able to pass ordinances to add their own local taxes. Under the Amendment, cultivating, processing and retail sales of cannabis would all be legal, though sale of cannabis from homegrown or illegal sources would still be prohibited.

As in other states that have legalized adult recreational cannabis, New Jersey previously legalized medical cannabis in 2010 and has had an operational medical cannabis marketplace for eight years.

The sale of cannabis in New Jersey will be regulated by the Cannabis Regulatory Commission (“CRC”), which was originally established to regulate medical cannabis. The CRC’s authority will be expanded to include regulation, processing and sale of recreational cannabis. Actual sales of recreational cannabis could begin before the end of the year, or very early next year. Just this past month, New Jersey lawmakers proposed a plan that would allow access to recreational cannabis to begin within a month after the passage of the Amendment. It is anticipated that an amended version of the October proposal will be submitted within the next week. Stay tuned.

As soon as adult recreational cannabis becomes available for purchase in New Jersey, users from nearby states and cities, such as New York City and Philadelphia, will be drawn to retailers in New Jersey. This will inevitably put pressure on New York and Pennsylvania, which currently allow medical use only, to legalize cannabis for adult recreational use. The question is not if, but when, this will happen.

ARIZONA 

On November 3, 2020, Arizona voted to pass Proposition 207, also known as the Smart and Safe Act, by a margin of 59.8% to 40.2%. Proposition 207 legalizes adults 21 and older to possess up to 1 ounce (28 g) of cannabis (with no more than 5 grams being cannabis concentrate), and to have up to 6 cannabis plants at their home (with up to 12 cannabis plants in households with two or more adult members). In addition to state and local sales taxes, an additional 16% excise tax on cannabis products. Additionally, the law permits people to petition for the expungement of certain cannabis-related convictions from their record. Arizona’s Department of Health Services, which regulates the state's existing medical cannabis program, is expected to set forth rules for retail cannabis sales by June 1, 2021. The new rules will set forth regulations governing cultivation, distribution and retail sales of cannabis products. Additionally, the new rules will implement a Social Equity Ownership Program, which shall promote the ownership and operation of cannabis establishments and cannabis testing facilities by individuals from communities disproportionately impacted by the enforcement of previous cannabis laws.

Arizona legalized medical cannabis in 2010 and has had a functioning medical cannabis marketplace since then. Existing medical cannabis license holders will be able to apply early for adult use licenses. Applicants looking to get licensed in counties with fewer than two existing medical cannabis dispensaries will also be able to apply early. Early license applications can be submitted starting on January 19, 2021.

MONTANA

Montana, a state that has maintained harsh recreational cannabis laws despite previously legalizing the medicinal use of marijuana in 2004, finally legalized adult recreational cannabis on November 3, 2020. Initiative No. 190 (I-190) legalizes the possession and use of recreational cannabis for adults 21 and older, and Constitutional Initiative No. 118 (CI-118) amends the Montana Constitution to allow the legislature or the people by initiative to set the legal age for purchasing, consuming, or possessing cannabis at 21. The ballot initiative establishes a 20% tax on non-medical cannabis, relatively high by national standards, with 10.5% of the tax revenue dedicated to the state general fund, and the rest reserved for conservation programs, substance abuse treatment, veterans’ services, healthcare costs, and localities where cannabis is sold. It is expected that taxes and fees from cannabis will generate approximately $48 million on an annual basis by 2025. Additionally, I-190 enables people who are currently serving a sentence for acts now permitted by I-190 to apply for resentencing or expungement. It is expected that the Montana Department of Revenue will issue regulations that will go into effect by January 1, 2022, but local authorities will also have jurisdiction to regulate cannabis establishments and facilities. 

MISSISSIPPI 

On November 3, 2020, the state of Mississippi resoundingly voted in favor of Initiative Measure No. 65, 74.1% to 25.9%. Initiative 65 will amend the state’s Constitution to legalize the cultivation and sale of medical cannabis. The Mississippi Department of Health will be responsible for creating the program’s rules and regulations and establishing the program by August 2021 in order to provide treatment to those suffering from 22 qualifying medical conditions, including cancer, epilepsy and multiple sclerosis, under the care of Mississippi licensed physicians and treatment centers.  Additionally, the initiative provides that possession of medical cannabis would be limited to 2.5 ounces in a 14 day period, smoking medical cannabis is prohibited in public places, and cannabis sales will be taxed at the state’s current tax rate of 7%. 

Prior to passage of Initiative 65, on Monday, October 26th, the city of Madison, Mississippi, filed a claim alleging the medical cannabis measure was put on the ballot improperly according to state law. The Mississippi Supreme Court ruled last Wednesday that the challenge would not be considered until after the election. Stay tuned.

SOUTH DAKOTA 

On November 3, 2020, South Dakota made history when voters, in one go, approved separate ballot questions — Measure 26 and Amendment A — legalizing the use of both medical and adult-use cannabis. The election caps a remarkable year for South Dakota and its relationship with cannabis.  Indeed, little more than six months ago, the state was one of only three that banned all forms of cannabis, including cannabis’s federally-legal cousin — hemp. But on March 27, 2020, that began to change when Governor Noem signed legislation legalizing hemp and hemp products, including CBD. Now, with the legalization of cannabis for recreational and medical purposes, South Dakota has quickly become one of the friendliest states in the union for cannabis. Measure 26 statutorily legalizes the use, delivery, manufacture and cultivation of cannabis for qualifying patients, while Amendment A (by amending the South Dakota constitution) broadly legalizes the use, manufacture, and cultivation of cannabis for people aged 21 and older. The state’s Department of Health and Department of Revenue will be responsible for implementing the programs, respectively. Amendment A also establishes a 15% tax on non-medical cannabis sales. The money generated will first go to the Department of Revenue to cover the costs of implementing the amendment, and the remaining revenue will be equally divided between public schools and the state’s general fund. Meanwhile, no taxes are currently contemplated for medical cannabis.
  
* Results at the time of publication, some ballots are still being counted.