The Great Depression and the need for tax revenue to fund the New Deal ended prohibition in 1933.[1] The economic fallout from the COVID crisis, according to some experts, could result in a “New New Deal,” and Senator Ed Markey (D-MA) recently said that 2021 would, like 1933, have an “FDR moment.”[2] Just as the first “FDR moment” included the (re) legalization of alcohol, there are indications that the next may include the legalization of marijuana.  

The COVID crisis has again highlighted fundamental tensions in marijuana law and policy in the United States.  Several states have declared marijuana businesses “essential” and therefore exempt from mandatory shutdown orders.  But at the same time, marijuana businesses are ineligible for CARES Act relief because of a Small Business Administration policy which prohibits assistance to all marijuana businesses, because they operate in violation of federal law.  This apparent incongruity has sparked renewed Congressional interest in marijuana reform.  On April 17, a bipartisan group of 34 members of the House of Representatives wrote to Speaker Nancy Pelosi (D-CA) and Minority Leader Kevin McCarthy (R-CA), urging that state-legal cannabis businesses and their employees be covered by the next COVID-19 relief bill.[3]  On April 22, ten Democratic Senators sent a similar letter to Majority Leader Mitch McConnell (R-KY) and Democratic Leader Charles Schumer (D-NY).[4]  On April 23, Representative Earl Blumenauer (D-OR) introduced the Emergency Cannabis Small Business Health and Safety Act, which would allow marijuana businesses to become eligible for CARES Act funding. The bill has attracted 16 bipartisan cosponsors.[5] 

The debate has also drawn attention to the industry’s role in the U.S. economy.  For example, the April 17  House  letter claimed that “[t]he state-legal cannabis industry is a major contributor to the U.S. economy and workforce, employing over 240,000 workers across 33 states and four territories, and generating $1.9 billion in state and local taxes in 2019.”[6]  Given the economic potential, some governors are already looking to marijuana legalization and the anticipated tax revenue to help their states recover.   New York Governor Andrew Cuomo, who has advocated for legalization of recreational marijuana to supplement the New York state budget, is the most prominent example.  Governor Albert Bryan of the U.S. Virgin Islands has taken a similar position, explaining that in light of “the economic disaster [resulting from COVID] it is our hope that we can have a greater sense of exigency in implementing all the things that can help us regain solvency.”[7]

Needless to say, whoever wins the White House in November will be under tremendous pressure to supplement the federal budget, and revenue from taxes on marijuana will be an obvious source.  While neither presidential candidate has been a consistently strong supporter of marijuana legalization, neither has been a consistent opponent either.  In April of last year, Senator Corey Gardner (R-CO) said that President Trump told him that he would support the STATES Act, which would provide state-legal businesses with de facto immunity from federal prosecution.  President Trump’s Attorney General, William Barr, has said that he does not believe that the Justice Department should prosecute state-legal businesses. During the debate season, former Vice President Biden expressed support for decriminalizing the use or possession of marijuana, as well as expungement of convictions for use or possession.  In addition, there is a good chance that Cuomo, Senator Cory Booker (D-NJ), Senator Kamala Harris (D-CA) and Senator Elizabeth Warren (D-MA), all strong advocates of legalization, could play key roles in a Biden administration.  Of course, Senate Republicans (in particular Majority Leader McConnell) have long been seen as a major obstacle to legalization.  However, economic pressures and legalization efforts in their home states could force Republican Senators to support legalization.   Moreover, McConnell (who is currently in a tight re-election race) pushed through the 2018 Farm Bill to help the local hemp industry.  And here too, the lessons of history are instructive.  As historian Daniel Okrent has written, many Republicans who originally supported Prohibition supported its repeal, in the hope that it would raise revenue and reduce the tax burden on corporations and businesses.[8]

While we do not have a crystal ball, we do have history.  And history teaches that crises often result in significant legislative reform, especially in the area of vice regulation.  The Great Depression led to the repeal of Prohibition. The AIDS crisis catalyzed the movement to legalize medical marijuana in California, resulting in Proposition 215 in 1996.  Severe economic decline in the early 1970’s led Atlantic City to legalize gambling in 1976.  Ironically, the COVID crisis may turn out to be the final push that advocates of marijuana legalization have sought for so long.


[1] See, e.g., Jesse Greenspan, How the Misery of the Great Depression Helped Vanquish Prohibition, available at https://www.history.com/news/great-depression-economy-prohibition. (“By arguing that the country needed the jobs and tax revenue that legalized alcohol would provide, anti-Prohibition activists succeeded in recruiting even noted teetotalers to their cause. As the economy crumbled and the Democratic Party gained power, the demise of Prohibition eventually became a fait accompli.”)

[2] Michelle Goldberg, The New Great Depression Is Coming. Will There Be a New New Deal? The New York Times, May 2, 2020, https://www.nytimes.com/2020/05/02/opinion/sunday/coronavirus-new-deal-ubi.html

[3] Letter to Speaker Nancy Pelosi and Minority Leader Kevin McCarthy available at https://www.marijuanamoment.net/lawmakers-push-congressional-leaders-to-include-marijuana-businesses-in-coronavirus-relief-bill/

[4] Letter to Majority Leader Mitch McConnnell and Democratic Leader Charles Schumer available at https://www.marijuanamoment.net/senators-want-marijuana-businesses-to-qualify-for-federal-coronavirus-relief-programs/

[5] https://www.govtrack.us/congress/bills/116/hr6602/summary

[6] See Letter to Speaker Nancy Pelosi and Minority Leader Kevin McCarthy available at https://www.marijuanamoment.net/lawmakers-push-congressional-leaders-to-include-marijuana-businesses-in-coronavirus-relief-bill/

[7] https://www.vi.gov/governor-bryan-updates-residents-on-covid-19-4/

[8] Daniel Okrent, Last Call: The Rise and Fall of Prohibition (2010)

Author

Tom Firestone is Co-Chair of the firm's North American Government Enforcement practice and is a member of the Firm's Global Compliance & Investigations Steering Committee. He represents clients in matters involving anti-corruption and the US Foreign Corrupt Practices Act (FCPA), internal investigations and transactional due diligence. He is also a member of the firm's Cannabis Review Committee and has advised clients on compliance issues related to cannabis.