Federal Weed Legalization: Less Is More

Key Points

• Cannabis containing more than 0.3 percent tetrahydrocannabinol (THC), which the US government still calls “marijuana” but here we call “weed,” has been legalized by many state governments but is still illegal at the federal level.
• If a major goal of federal legalization is to help legal weed replace illegal weed, the best step forward for federal policy is simply to step out of the way. This would involve removing weed from the schedule of illegal narcotics, permitting states to implement cannabis policy as they see fit, and allowing cannabis to move among jurisdictions where it is legal.
• Forms of federal legalization that include more regulations and taxes on cannabis—including House and Senate bills that have been recently publicized—would almost surely do more harm than good, given the state and local policies already in place.

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As we document in our recent book and a companion report,¹ cannabis containing tetrahydrocannabinol (THC), which we refer to as “weed,” despite being designated as a Schedule I narcotic federally, is legal to produce, process, market, and use in most US states and all of Canada. Further, as a practical matter, weed has long been readily available from illegal sources almost everywhere for half a century or more and has been widely used for many decades by millions of people across a wide swath of society.

Gradually reduced de facto US enforcement efforts, along with official memoranda and other public statements from the US Department of Justice, have helped “legal” weed take root in states that, beginning in 1996, authorized its use for medical or recreational use (or both). Now, finally, the US Congress seems willing to accept that prohibiting cannabis cultivation, processing, marketing, and consumption is counterproductive.²

This report does not address state and local policy options or implications of weed policies in state and local jurisdictions. We take the current situation and trends for state legalization as given and address the federal policy options.

We see four broad possibilities for federal weed policy:

1. Return to aggressive enforcement of the federal weed prohibition even in states where a legal industry is fully established, shutting down those industries and prosecuting people by the thousands or millions.
2. Continue the current situation of policy contradictions and uncertainty that allows for capricious federal enforcement and imposes legal conflicts that nobody favors.
3. Enact federal weed legalization with an elaborate program of federal licensing, regulation, and taxation and an expanded federal bureaucracy to go with it.
4. Remove weed from the schedule of illegal drugs and make a handful of other edits to federal law consistent with this de-scheduling.

There seems to be no significant support for the first option, so we discuss that no further. Option two, no federal action, may be the likely outcome politically for the near future. But in this report, we compare the economic implications of the third and fourth options.

Below, we first describe current federal law, regulation, and practice. Then we discuss and evaluate options currently being considered for federal policy change.

Read the full report.

Notes

1. Robin S. Goldstein and Daniel A. Sumner, Can Legal Weed Win? The Blunt Realities of Cannabis Economics (Oakland, CA: University of California Press, 2022); and Robin S. Goldstein and Daniel A. Sumner, “Blunt Realities of Weed Economics: The National Patchwork of Legalization,” American Enterprise Institute, August 4, 2022, https://www.aei.org/research-products/report/blunt-realities-of-weed-economics-the-national-patchwork-of-legalization.
2. Hemp, a tetrahydrocannabinol-free version of a similar cannabis plant, is not considered a restricted drug, and we do not consider hemp policy here.