Authored By by Ryan Holz | Nov 6, 2019
In September, many in the marijuana industry were buoyed by New York Governor Andrew Cuomo’s efforts to coordinate with his counterparts in New Jersey (Phil Murphy) and Connecticut (Ned Lamont) on recreational marijuana legalization. We were among them (as we wrote about here). Last month, Rhode Island (Gina Raimondo) and Pennsylvania (Tom Wolf) joined the group, and the five Democratic governors announced a compact to legalize recreational marijuana throughout the region. The compact addressed broad principals, with the governors agreeing (1) to establish similar tax rates; (2) limit the number of licenses made available; (3) design programs to lower the barrier to entry to small businesses; (4) adopt criminal justice reforms; and (5) set uniform policing and public health standards.
Our initial optimism has now waned, and we are not alone. According to a recent article by PoliticoPro (subscription required), there are growing concerns about whether the compact might in fact stymie progress. Despite the governors’ agreement on broad principles, the individual legislatures are all considering different bills, and would need to reach consensus with their counterparts in other states. Given that these states were unable to reach agreements internally over the past year (as we wrote about here), adding that new layer does not sound particularly promising. Making that even more complicated, the states are very different politically. New York, New Jersey, Connecticut, and Rhode Island are all deep blue states, with Democratic governors and legislatures. Pennsylvania, in contrast, is a purple state, with a Democratic governor and State Senate, but a Republican House of Representatives. Politically, it is going to be difficult for legislation to generate the needed support to pass in all five states. And without consensus amongst the states, there is a risk that the individual state leaders simply throw up their hands and quit the effort altogether.
Instead of trying to reach agreement internally and with four other states, we would rather see each state proceed on its individual path. Because of the geographic proximity amongst the states, once one state legalizes recreational marijuana, there will be intense pressure on the other states to follow suit or watch their citizens simply cross the borders and purchase in the legal state. No state leader is going to want to see dollars that could be spent (and taxed) in his or her state being diverted to a neighbor. We imagine that if one of New York, New Jersey, Connecticut, or Rhode Island make the first move, the other states will quickly follow suit (Pennsylvania will move at its own, and likely slower, pace).
Nearly 50 million people live in the five “compact” states, so we will be watching developments in the region closely and reporting on our blog.