SACRAMENTO, Calif. (Sept. 12, 2023) – Yesterday, the California Assembly gave final approval to a bill to legalize cannabis cafes, authorizing cannabis businesses to also sell non-marijuana foods and drinks despite ongoing federal prohibition on the entire industry.
Asm. Matt Haney introduced Assembly Bill 374 (AB374) in February. Under current law, licensed businesses can allow marijuana use on their premises, but they are prohibited from selling food or beverages. Under the proposed law, local jurisdictions could allow for the preparation and sale of non-cannabis food or beverage products by a licensed cannabis retailer or microbusiness in an area where the consumption of cannabis is allowed. AB374 would also allow such businesses to sell tickets for live music and other performances in areas where the consumption of cannabis is allowed.
“To be clear, we’re not saying that coffee shops should be allowed to sell cannabis,” said Haney. “We’re saying that cannabis shops should be allowed to sell coffee. It shouldn’t be illegal for an existing cannabis business to move away from only selling marijuana and instead have the opportunity to grow, and create jobs by offering coffee or live jazz.”
The enactment of AB374 would further expand the marijuana marketplace in California despite continued federal prohibition efforts.
One such business operated for a time in southern California despite the lack of state permission. According to Marijuana Moment, West Hollywood approved a local ordinance in 2017 that allowed a first-of-its-kind retailer to open that serves both marijuana and non-infused foods. The business operated in a grey area under emergency regulations.
According to the cafe’s website, the business closed during the COVID-19 pandemic and has yet to reopen.
In November 2016, voters in California approved a ballot measure legalizing marijuana for general use by adults and the law went into effect on Jan. 1, 2018. Since then, the California legislature has passed numerous laws intended to expand the state’s marijuana market despite federal prohibition. For instance, in 2019, Gov. Gavin Newsom signed a bill that severed a link between state and federal tax law, allowing individuals to deduct expenses from legal marijuana businesses. More recently, the state relaxed baking rules for marijuana businesses and allowed terminally ill patients to use medical marijuana in healthcare facilities. The enactment of AB374 would knock down yet another barrier to growing the state’s cannabis market. It would further mainstream marijuana, incentivize the market, and allow it to expand despite continued federal prohibition efforts.
EFFECT ON FEDERAL PROHIBITION
Under the federal Controlled Substances Act (CSA) passed in 1970, the federal government maintains complete prohibition of marijuana. Of course, the federal government lacks any constitutional authority to ban or regulate cannabis within the borders of a state, despite the opinion of the politically connected lawyers on the Supreme Court. If you doubt this, ask yourself why it took a constitutional amendment to institute federal alcohol prohibition.
The legalization of medical and recreational cannabis in California removed a huge layer of laws prohibiting the possession and use of marijuana. This is significant because FBI statistics show that law enforcement makes approximately 99 of 100 marijuana arrests under state, not federal law. When states stop enforcing marijuana laws, they sweep away most of the basis for 99 percent of marijuana arrests.
Furthermore, figures indicate it would take 40 percent of the DEA’s yearly budget just to investigate and raid all of the dispensaries in Los Angeles – a single city in a single state. That doesn’t include the cost of prosecution. The lesson? The feds lack the resources to enforce marijuana prohibition without state assistance.
Allowing marijuana businesses to sell food and beverages would help further expand the market and make it that much more difficult for the feds to enforce cannabis prohibition.
A GROWING MOVEMENT
Colorado, Washington state, Oregon and Alaska were the first states to legalize recreational cannabis, and California, Nevada, Maine and Massachusetts joined them after ballot initiatives in favor of legalization passed in November 2016. Michigan followed suit when voters legalized cannabis for general use in 2018. Vermont became the first state to legalize marijuana through a legislative act in 2018. Illinois followed suit in 2019. New Jersey, Montana and Arizona all legalized recreational marijuana through ballot measures in the 2020 election. In 2021, New York, New Mexico, Virginia and Connecticut legalized marijuana through legislative action, and Rhode Island legalized cannabis for adult use in 2022. With Missouri and Maryland legalizing marijuana in November 2022, and Delaware joining in 2023, there are now 38 states allowing cannabis for medical use, and 23 legalizing it for adult recreational use.
The lesson here is pretty straightforward. As Tenth Amendment Center Executive Director Michael Boldin noted, “When enough people say, ‘No!’ to the federal government, and enough states pass laws backing those people up, there’s not much the feds can do to shove their so-called laws, regulations, or mandates down our throats.”
The proposal to provide tax relief to marijuana businesses demonstrates an important strategic point. Passing bills that take a step forward sets the stage, even if they are limited in scope. Opening the door clears the way for additional steps. You can’t take the second step before you take the first.
Gov. Newsom will have until Oct. 14 to sign or veto AB374. If he takes no action, it will become law without his signature.
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