Alert November 08, 2018

The March Toward Full Legalization Continues: Marijuana Election Results in the 2018 Midterms

Summary

During this week’s midterm elections, binding marijuana-related referenda appeared on the ballot in four states. Three of the referenda passed, and one was defeated. Specifically, Tuesday’s election added Michigan to the list of nine states (Washington, Colorado, Alaska, Oregon, California, Massachusetts, Nevada, Maine, and Vermont) and the District of Columbia that permit the sale of marijuana for recreational use (to adults age 21 and over). In addition, the election added Utah and Missouri to the group of 31 states and the District of Columbia that have legalized the medical use of marijuana. A referendum in North Dakota that would have expanded the state-authorized use of marijuana in that state from medical to recreational was defeated. Tuesday’s results mark the first time a midwestern state (Michigan) has legalized adult recreational use of marijuana. And the passage of the referendum legalizing the medical use of marijuana in Utah, a state steeped in religion and conservatism, is notable as a potential harbinger of legalization in many other states.

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

November 2018 Marijuana Referenda Results
States Recreational/Medical Ballot Measure Pass/Fail (Vote)
Michigan Recreational Proposal 1 Pass (55.9% - 44.1%)
Utah Medical Proposition 2 Pass (53.2% - 46.8%)
Missouri Medical Amendment 2 Pass (65.5% - 34.5%)
North Dakota Recreational Measure 3 Fail (59.5% - 40.5%)

In addition to the binding referenda in these four states, Wisconsin had advisory referenda on the ballot in 16 counties within the state. Each of these referenda – which ranged from approving marijuana for medical use only to full, unfettered legalization of marijuana for recreational use by adults – passed with overwhelming support, with approval percentages in the 70 and 80% range, including one county in which legalization garnered 88% of the vote.

The results in Michigan, Utah and Missouri, and the 16 counties in Wisconsin, arrive in the wake of several significant moves toward the legalization of recreational and medicinal marijuana not just in the U.S. but around the world. Canada’s parliament recently passed the Cannabis Act, which paved the way for Canada to become the first industrialized country to legalize recreational marijuana. In Mexico, the Supreme Court recently ruled the country’s ban on marijuana unconstitutional, a ruling that is expected to pave the way for legalization. And, the United Kingdom began allowing prescriptions for medicinal marijuana this month, following the highly publicized cases of two young epileptic patients reliant on cannabis for treatment.

Notwithstanding the trend toward legalization around the globe, including in the majority of states in the U.S., the possession, manufacture, distribution, and use of marijuana for any purpose remain categorically illegal under federal law. This may, however, change and change soon. Indeed, there is little question that this week’s referenda results in Michigan, Missouri and Utah will add to the momentum that was already building for at least some form of legalization at the federal level. For instance, earlier this year, the bipartisan-sponsored Strengthening the Tenth Amendment Through Entrusting States Act (the STATES Act), which is supported by President Trump, was introduced by Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA). If passed, the STATES Act would exempt states that have legalized marijuana from the reach of the federal prohibition which would otherwise remain in place. In addition, Senate Majority Leader Mitch McConnell introduced the Hemp Farming Act of 2018, which would legalize the production of hemp (cannabis with less than 0.3% tetrahydrocannabinol (THC)) and make it an agricultural commodity.

If anything, Tuesday’s results will increase the chances of these initiatives passing, and doing so sooner than might have otherwise been expected. The forced resignation of Attorney General Jeff Sessions, and the defeat of Texas Congressman Pete Sessions, the Chair of the House Rules Committee, both of whom are ardent opponents of legalizing marijuana, will also improve the chance that federal law regarding marijuana will soon change. Regardless of what may happen at the federal level, Tuesday’s results leave no doubt that the state-legalized marijuana industry, estimated at about $8.5 billion this year, will continue to expand exponentially.

Michigan

The approval of Michigan’s “Proposal 1” makes Michigan the first state in the Midwest to legalize marijuana for recreational use. The Michigan Regulation and Taxation of Marihuana Act amends state law to allow individuals 21 and older to purchase, possess and use marijuana and marijuana edibles, and grow up to 12 plants for personal use. Additionally, whereas most other states limit possession to 1 ounce, Michigan’s new legislation allows for possession of up to 2.5 ounces, placing it alongside Maine as the only state to allow for this high of a personal possession limit. The Act imposes a 10% excise tax on all sales, making it the lowest marijuana excise tax in the nation. By comparison, Massachusetts imposes a 17% excise tax and California a 15% excise tax.

Utah

Despite being one of the most conservative states in the country, Utah voters passed Proposition 2 (The Utah Medical Cannabis Act), which will legalize marijuana for patients with qualifying medical conditions, such as HIV, autism, epilepsy and cancer. The Act, once implemented, will result in the strictest medical marijuana law in the nation. Among other things it will impose a 20% cap on the percentage of patients to whom any one physician may issue medical cannabis cards. Individuals with a medical card will be permitted to obtain, during any one 14-day period, up to 2 ounces of unprocessed marijuana, or other marijuana products containing no more than 10 grams THC or cannabidiol (CBD). Only edibles, vape pens, and other non-smoking means on consuming marijuana will be permissible.  Smoking marijuana will remain illegal, even for patients with medical cannabis cards. After January 1, 2021, individuals with medical cards, but without a dispensary within 100 miles, will be permitted to grow up to six plants. Utah exempts marijuana from state and local tax, although the state can impose a “business licensing fee” on marijuana businesses. Notably, the Act remains subject to change, and will not be implemented until the final details are approved by the Utah legislature and the state’s governor.

Missouri

Missouri, which had already legalized the use of CBD for medicinal purposes, had three further legalization initiatives – Amendment 2, Amendment 3, and Proposition C – on the ballot this year, each of which was intended to expand legalized medical marijuana use within the state by legalizing the possession, use, purchase, and sale of marijuana in all forms for medicinal purposes. The three initiatives differed from one another mainly in tax rates and allocation of tax revenue. Amendment 2 was the only ballot measure to pass. It will amend the Missouri Constitution to legalize and regulate medicinal marijuana, taxing it at 4% and using the revenue, in large part, to fund healthcare services for veterans.  Amendment 3 would have taxed medical cannabis at 15% and used tax revenue to establish and fund a state-run cancer research institute. Proposition C would have enacted a 2% sales tax on all sales of marijuana and used the revenue for veterans’ services, drug treatment, early childhood education, and public safety. In contrast to Amendments 2 and 3, Proposition C would not have altered the state’s constitution, meaning that the legislature would have been able to make changes to the cannabis law on its own without a public vote. With the adoption of Amendment 2, a public vote will be required to change the medical marijuana law.

North Dakota

In 2016, North Dakota voted to pass Measure 5, which legalized the medicinal use of marijuana. On Tuesday, just two years later, North Dakota voters rejected Measure 3, which would have created by far the most permissive recreational marijuana legalization law in the country. Measure 3 set no restrictions on possession, cultivation or paraphernalia, meaning there would have been no quantity limits on the amount an individual would have been allowed to possess or how many cannabis plants he or she would have been permitted to cultivate at home. Moreover, this measure would have extended beyond broad legalization of marijuana to address criminal justice reform. The proposed law included, for instance, a clause for the automatic expungement of all nonviolent convictions related to marijuana.  Notwithstanding North Dakota’s rejection of Measure 3, if past from other jurisdictions is precedent,  the setback in North Dakota will be short-lived. California, for instance, rejected the legalization of recreational marijuana in 2010 under Proposition 19, but then approved it by passing Proposition 64 in 2016. Likewise, Colorado’s first legalization initiative, Amendment 44, failed in 2006 before Amendment 64 made Colorado the first state to legalize the recreational use of marijuana in 2012.

*             *             *

If you are interested in learning more about this week’s marijuana-related ballot initiatives, the anticipated time-line for implementation, the continued and expanding disconnect between federal marijuana law and the law in the significant majority of states (both blue and red), and/or you have other questions regarding the legal issues related to potentially operating or investing in a state-legalized marijuana business, please contact us.

David Apfel and Brett Schuman, with substantial contributions from Jake Hays, Chris O’Brien, and Josh Eisenson.