Although 36 states and Washington State (15 for recreational use) have legalized marijuana in some form, it is still strictly illegal to cross state lines with these products. This all goes back to the federal ban. If you cross the state line with marijuana, you are violating federal law. Each state decides on the movement of marijuana within its borders, but intra-state trafficking is a federal responsibility.
That can change – it’s not so much a question of if, but when. On the one hand, we see the almost unprecedented possibility of federal legislation that will end prohibition and legalize drugs. Apart from that, however, there is a clause in the US Constitution that prohibits the unfair restriction of interstate commerce, known as the Dormant Commerce Clause. State laws restricting marijuana trade with other states are likely unconstitutional under this provision (although this has not been tested). For the time being, however, states are reluctant to change this situation because it strengthens the economy of their own citizens. So far, there have been no lawsuits to challenge this, likely because lawsuits are expensive, the effect on the cost of limited licenses in states where marijuana is legal is unknown, and the fierce competition for this emerging industry is still unknown.
How the interstate marijuana trade will affect the legal industry
In the many years we have been practicing marijuana law in Los Angeles, we have seen the industry undergo many major changes. Interstate trade would be another important aspect for almost all industries. More expensive boutique offerings can find a wider market. Large companies selling cheaper products will be in high demand. There will likely be an immediate demand for more efficient professionals in supply chain and logistics.
Retailers may not notice the impact immediately (unless they are located close to a state border). Even if the federal ban on marijuana is lifted, most retail sales will likely remain local. It is likely that federal lawmakers will want to restrict or even ban mail-order marijuana sales. (The same applies to tobacco products).
The cost of state-issued permits is less clear.
Work with a marijuana business attorney on atraining strategy.
While we don’t yet know much about what interstate marijuana trafficking will mean, we do know enough to say that it is wise to prepare for it with the help of your Los Angeles marijuana lawyer.
You should keep in mind that interstate commerce in cannabis may occur even before federal legalization. For example, Oregon has begun entering into trade agreements with neighboring states where the drug is legal. It is important for all marijuana companies to have a good idea of the size they want to achieve and their target market. There will be room in the interstate market for those who mass produce cheap products, but there will also be room for suppliers who have a niche and a high price.
The only thing to keep in mind is the stigma. You want to build strong brand recognition, but you also need to be careful not to accidentally violate trademark law. This problem may be exacerbated if California cannabis businesses suddenly have to compete with businesses in neighboring states. In the past, it may not have mattered if they used the same name or brand. More and more often.
Distribution is also something to consider now if you plan to trade across state lines. Depending on the size of your business, having multiple delivery drivers is probably not enough. For some companies, it may be advantageous to work with a company that specializes in third-party logistics (3PL).
Understand that with federal legalization, the market could see a very rapid influx of investors. The competition sees this quickly. Things can happen quickly, and you want to be prepared for all possible consequences. Our Los Angeles marijuana lawyers can help you.
The Los Angeles-based CANNABIS LAW group represents manufacturers, dispensaries, suppliers, patients, physicians and individuals facing marijuana-related charges. Call us at 714-937-2050.
Additional resources :
How interstate commerce can boost the marijuana industry, Feb. 3, 2021, Marijuana Business Daily.
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