Federal Cannabis Legislation: The CAOA is Back!


Yesterday, Senator Majority Leader Chuck Schumer and Senators Cory Booker and Ron Wyden presented the Cannabis Administration and Opportunity Act (CAOA) in the Senate. This version of the CAOA is a big deal, as it’s been over a year since the discussion draft of the bill was shown to the public. It’s also a big deal because we finally have a meaningful cannabis bill (with the input of many, many stakeholders) originating from the Senate, which is notorious for otherwise killing off House-generated cannabis legislation– including the SAFE Banking Act.

The CAOA now heads for Senate committee consideration. No one knows its chances of passing, either as written, modified, or combined with one or more of the House proposals.

What does this version of the CAOA do?

Senator Booker’s website states that the CAOA would:

“End federal cannabis prohibition by removing cannabis from the Controlled Substances Act; empower states to create their own cannabis laws; ensure federal regulation protects public health and safety; and prioritize restorative and economic justice.”

The details, among many others (including for research and employment and labor impacts), are that the CAOA:

  1. Completely removes cannabis from the Controlled Substances Act (CSA) but allows federal enforcement for trafficking in those states that choose to retain prohibition. Notably, interstate commerce is explicitly allowed. As with hemp under the 2018 Farm Bill, licensed operators will be able to transport cannabis through prohibition states, even though they can’t sell there.
  2. Allows states to maintain their own licensing programs with their own barriers to entry, just like we have now.
  3. Removes the Drug Enforcement Administration as the main enforcement agency in favor of the Food and Drug Administration (FDA) and the Alcohol and Tobacco Tax and Trade Bureau (which would be renamed the Alcohol, Tobacco, and Cannabis Tax and Trade Bureau (“TTB”)). Treats cannabis regulations similar to those for alcohol and tobacco (we saw some iteration of this in the fading States Reform Act).
  4. Implements an excise tax on cannabis products as follows:
    • For small and mid-sized producers, the excise tax would begin at 5 percent and gradually increase to a maximum of 12.5 percent.
      ○ For larger cannabis businesses, the excise tax would begin at 10 percent and gradually increase to a maximum rate of 25 percent.
  5. Institutes market competition rules to protect independent, smaller operators.
  6. Implements robust anti-diversion rules, including a track-and-trace system, and adopts limitations on the amount of retail purchases. TTB, in coordination with the Secretary of Health and Human Services, will develop additional regulations around these areas.
  7. Requires the Department of Transportation create a standard for cannabis-impaired driving within three years to be adopted by states. Incentivizes states to adopt cannabis open container prohibitions with best practices guidance to be issued no later than one year after the passage of the law. A national driving standard may even be implemented despite what individual states decide here.
  8. Establishes a Center for Cannabis Products within the FDA to regulate the production, labeling, distribution, sales and other manufacturing and retail elements of the cannabis industry for things like adulteration and misbranding.
  9. Instructs FDA to establish standards for labeling of cannabis products, including potency, doses, servings, place of manufacture and directions for use. Even cannabis-specific recalls are set out under the bill, and the Food Drug and Cosmetic Act will be amended to include cannabis.
  10. Establishes programs and funding to prevent youth cannabis use, including through media campaigns, to educate the public on the health and societal impacts of cannabis.
  11. Prohibits electronic cannabis product delivery systems from containing added flavors. Electronic cannabis product delivery system means an electronic device that delivers a cannabis product via an aerosolized solution to the user inhaling from the de24 vice, and any component, liquid, part, or accessory of such a device, whether or not sold separately.
What about social equity?

The CAOA may have the most comprehensive set of social equity directives we’ve seen in a piece of proposed federal legislation. If the bill passes, it will use federal tax revenue to reinvest in “communities and individuals most harmed by the failed War on Drugs”, by providing them with legal aid, reentry assistance, health education, and much more.

The CAOA also establishes the Equitable Licensing Grant Program. This program would provide states, tribes and localities funds to implement licensing programs that minimize barriers to cannabis licensing, and employment, for individuals adversely impacted by the War on Drugs.

There will also be opportunities under the CAOA for loans and technical assistance to those small businesses “owned and controlled by socially and economically disadvantaged individuals in cannabis-legal states”, including a ten year pilot program with loans from the Small Business Administration.

And just like certain states and cities, not just anyone can qualify it here– it basically comes down to “eligible entities” and individuals, which are defined in the bill.

What’s the long term outlook?

In all, the CAOA is well thought out (it certainly took a while!) and covers a lot of ground when it comes to cannabis industry issues. That said, Senate Democrats may never get this behemoth of a bill passed. It may be that portions of the CAOA are being floated to gauge what the Senate would support in a future, tighter reform bill. In that case, legalization would come in a series of “pieces” of law, rather than the omnibus CAOA effort.

In the coming weeks, we’ll be sure to analyze certain portions of the law we think are relevant to our readers, and we’ll certainly keep you updated on its progress through the Senate.