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Cross-Border Agreements Open The Door For Interstate Cannabis Commerce

Despite promises from policymakers, recent hope for rescheduling, and initiatives by activists, cannabis remains a federally illegal Schedule I Drug that — along with all of the trappings of federal prohibition — there are specifics in federal law about transportation across state lines. Since the first states introduced regulated cannabis markets, the confinement of cannabis products and “ring fence regulations” that isolate each state to its borders for all forms of cannabis commerce have posed a significant obstacle for the industry. However, recent laws in a handful of West Coast states could signal the beginning of change to that aspect of the industry. 

My time as a leader in the cannabis industry has shown me that progress doesn’t always come through the expected avenues. Today, I want to share why these state-level legal developments are so exciting and how they have the potential to revolutionize cannabis commerce on a larger scale. 

Cannabis Commerce Along The West Coast

Washington State recently passed a bill allowing for cross-border agreements with other states that are home to regulated cannabis industries, allowing manufacturers to transport cannabis products across state lines. Oregon and California already have similar bills, opening the possibility of a unified cannabis industry along the West Coast. 

State-By-State Requirements For Interstate Commerce

Though each state is open to interstate commerce partnerships for cannabis products, each has different “triggers” that will allow this commerce to begin. 

  • Washington: Cannabis products must be tested, packaged, and labeled per both states’ regulations. 

  • Oregon: Cannabis products brought into the state must be tested to ensure compliance with Oregon’s health and safety standards regarding cannabis products. 

  • California: Cannabis products must unilaterally comply with or exceed California’s cannabis regulations. 

Cross-Border Agreements Could Lead To Interstate Compacts

The most exciting aspect of these new laws is that they point to a potential discussion about the creation of interstate compacts

When an interstate compact is approved by Congress, it can become a “law of the United States” and supersede federal law in situations where the two are in conflict. Here, an interstate compact concerning the regulation and transport of cannabis products between two or more states with regulated cannabis industries would directly contradict the federal law against transporting cannabis across state lines. However, if Congress approves these interstate compacts, member states could freely and legally transport cannabis from state to state, and more. 

Though this seems like a golden opportunity, we must remember that not all interstate compacts are approved by Congress. While some interstate compacts can proceed without Congressional approval, they do not supersede federal laws in these situations and would put member states in difficult legal positions. 

Cannabis Commerce Cross-Border Agreement Impacts

Though these interstate compacts aren’t guaranteed and are a long way off, they provide an exciting opportunity for elected officials, regulators,and ultimately cannabis consumers, producers, and the industry. 

What Does This Mean For The Cannabis Industry?

The ability to transport cannabis products across state lines would make it more manageable for the cannabis industry to grow and expand. Financial, technological, and legal growth are all made possible through connections with other players in the industry, and interstate compacts would allow for just that. 

Cross-border agreements and potential interstate compacts could also pave the way to federal legalization. More states will likely pass similar laws, especially if Oregon, Washington, and California can successfully expand their cannabis industries across state lines. If what we need to spur federal legalization forward is an example of the good that a larger-scale cannabis industry can do, interstate compacts would be invaluable to the ongoing push.

What Does This Mean For Cannabis Producers?

Interstate compacts would be hugely beneficial to individual cannabis producers as well. The ability to transport products across state lines would allow cannabis manufacturers, producers, and retailers to get their products in front of more customers, allowing them to expand into broader markets. 

Because all states with cross-border agreements require cannabis goods to comply with the regulations of the destination state, cannabis producers looking to expand across state lines might face new, more stringent regulations. Though this may pose an initial obstacle, high standards benefit the industry and are a small trade-off for the financial opportunities that interstate commerce can bring. 

Additionally, one very salient point to contemplate is if a Congressionally approved cannabis regulation interstate compact means that business operating in the interstate compact regulated markets are free of the IRS Code 280E taxation burden.

What Does This Mean For Cannabis Consumers?

With the passage of interstate compacts and the transport of cannabis products from state to state, cannabis consumers will have access to a wider variety of cannabis products than ever before. Because connectivity breeds quality and innovation, these products will also likely be of higher quality. 

Generally, a regulated, connected cannabis industry is better for everyone; regulation begins to address the harms of the War on Drugs and enable adult-use and medical cannabis consumers access to safer and higher-quality products. The growth of the cannabis industry positively impacts the economy, and there is hope that interstate compacts will open the doors for legalization on a broader scale. 

Steps Toward The Future Of A Federal Cannabis Industry

The benefits of federally legalizing cannabis would be immense. Though it does not directly impact federal legislation, cross-border agreements concerning the transport of cannabis across state lines and the potential for interstate compacts are a step in the right direction. Personally, I look forward to watching how Washington, California, Oregon, and other neighboring states can demonstrate how to embrace interstate cannabis commerce.

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