Although 36 states and Washington D.C. have some form of legalized marijuana (15 of those for recreational use), it’s still strictly illegal to cross state lines with these products. It all comes back to federal prohibition. Crossing state lines with marijuana will cause you to run afoul of federal law. Each state dictates the movement of marijuana in its own borders, but intrastate commerce is federal jurisdiction.
More than likely though, this will change – not so much a matter of if, but when. For one thing, we’re looking at a brighter than ever possibility of federal legislation that would end prohibition and legalize the drug. Beyond that, however, there’s a clause in the U.S. Constitution that bars states from unfairly restricting commerce between states under something known as the dormant commerce clause. State laws that restrict marijuana commerce with other states are probably unconstitutional under this clause (though it hasn’t been tested). As of right now, though, states don’t have any significant incentive to change it because it’s bolstering the economy of their own citizens. There haven’t been any lawsuits to challenge it either (yet) probably because litigation is expensive, it’s unknown how the value of limited licensing in marijuana-legal states would be impacted and fiercer competition is still an unknown for these burgeoning industries.
How Marijuana Trade Between States Would Impact the Legal Industry
As longtime Los Angeles marijuana business lawyers, we’ve seen the industry ushered through many major changes. Interstate commerce would be another significant one for nearly every sector. High-quality boutique offerings could find a bigger market. Larger firms that commoditize cheaper products would be in high demand. We’d likely see an immediate demand in more efficient supply chain and logistics experts.
Retailers might not see an impact right away (unless they are close to a state border). Even if/when marijuana prohibition ends at the federal level, most retail is likely to stay local. It’s probable that federal lawmakers would want to impose limitations or an outright ban on shipping marijuana via mail. (The same is done for tobacco products.)
What is less clear is how the value of state-issued permits would become.
Working With a Marijuana Business Lawyer on Strategy to Prepare
Although there is much we still don’t know about what interstate marijuana commerce will mean, we know enough to say that preparing for it with the help of your Los Angeles marijuana business lawyer is wise.
Some things you may want to think about include the fact that we could see interstate trade of cannabis even prior to legalization at the federal level. For example, Oregon has begun the process of entering trade agreements with neighboring states where the drug is legal. It will be important for all marijuana companies to have a good sense of how big they want to get and what their target market is. In an interstate market, there will be room for those mass-producing cheap products, but there will also be space for suppliers who are highly niche and pricier.
One thing you won’t want to overlook is branding. You want to establish strong brand awareness, but also be careful not to inadvertently run afoul of trademark laws. This could become an even sharper concern if cannabis companies in California are suddenly in competition with those in neighboring states. Before, them sharing the same name or trademark may not have mattered. Increasingly, it will.
Distribution is also something to start looking into now if you plan on interstate trade. Having a few delivery drivers likely isn’t going to cut it, depending on the size of your operation. Some companies may benefit of working with a dedicated third-party logistics (3PL) firm.
Understand that with federal legalization, the market could see a very quick rush of investors. Competition may rapidly consolidate. Things may happen fast, and you want to be ready for all of the potential implications. Our dedicated Los Angeles marijuana business lawyers can help.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.
How interstate commerce could upend the marijuana industry, Feb. 3, 2021, Marijuana Business Daily