Federal COVID-19 aid to Currently ‘Essential but not Eligible’ Cannabis Businesses may be Forthcoming

While thousands of retail stores and other businesses have shuttered across the country under stay-at-home or shelter-in-place orders, in most states, cannabis businesses remain open to their customers. However, these businesses, both recreational and medicinal, have had to learn to adapt quickly in order to meet customer demands while abiding by safety protocols.

Many businesses saw sales spike throughout mid-March, but as the “new norms” of social distancing and isolating become the new reality, adult-use sales are suffering in the key states of California, Colorado and Washington, clearly indicating a national trend. Initially, San Francisco declined to include adult-use cannabis stores as essential businesses, but revised its position a day later – deeming cannabis “an essential medicine.” Similarly, Denver Mayor Michael Hancock reversed his decision to exclude cannabis retailers as essential businesses hours later. Now, all of the 33 states with legal medicinal or recreational markets have classified cannabis businesses as essential services, allowing them to remain open.

Given that cannabis businesses are deemed essential in most of the states that have enacted cannabis friendly laws, one would expect that cannabis businesses would be eligible for the stimulus packages such as the Coronavirus Aid Relief and Economic Security Act (CARES); but are they?

The unfortunate answer is probably not. The federal government has enacted one of the single most expansive relief packages since the New Deal. The coverage contemplated by the CARES Act is sweeping; yet, for an industry that contributed more than $1.9 billion in taxes in 2019 and employs approximately 240,000 workers nationwide, it appears that the cannabis market has been overlooked. With the exception of businesses that produce or sell hemp and hemp derived products – the crop was recently legalized federally by the 2018 farm bill – cannabis and cannabis-related businesses are not eligible for the recently enacted disaster relief.

The new law specifically prohibits businesses that are illegal at the federal level – and companies that derive revenue from such businesses – from accessing CARES Act money. Congress has thus barred state-legal cannabis businesses and most ancillary cannabis companies from receiving grants or low-interest loans. This comes at a time when many big cannabis companies are scaling back by laying off workers in order to cut costs.

The good news is that this week, in an attempt to remedy that situation, Democratic Reps. Earl Blumenauer of Oregon and Ed Perlmutter of Colorado introduced the Emergency Cannabis Small Business Health and Safety (ECSBHS) Act. Blumenauer, founder and co-chair of the Congressional Cannabis Caucus, has been leading a bipartisan coalition calling on House leadership to include state-legal cannabis businesses in future relief packages. The newly proposed act would enable state-legal marijuana companies to qualify for disaster relief aid programs. Stand-alone marijuana reform bills so far have run into obstacles, especially in the Republican-controlled Senate.

Under the proposed legislation, cannabis-related legitimate businesses are broadly defined as all companies that involve handling cannabis or cannabis products, including cultivators, manufacturers, and producers. Service providers are also generally defined as companies that sell goods or services to cannabis-related legitimate businesses, which specifically includes the sale or lease of real estate.

Finally, the proposed legislation protects employees of the Small Business Administration in their role in providing loans to cannabis-related legitimate businesses. The proposed ECSBHS Act would help legal medicinal and recreational cannabis companies and their service providers obtain crucial funding during the COVID-19 crisis.

Although there is a long way to go before the ECSBHS Act could become law, it is an encouraging sign that these efforts are being made at the federal level to help cannabis businesses which have been designated by state and local authorities as essential businesses during this pandemic.

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