Business

The case against interstate trade

By Alex Halperin
Aug 26, 2021

Not long ago, Vanderbilt University law professor Robert Mikos published an article arguing that despite current practices, there’s little legal support for the current lack interstate trade. If states agreed between themselves to allow it, Mikos doesn’t think the federal government could do much about it. 

This must be music to the ears of many cannabiz execs who would rather truck their products across state lines than build new factories or form partnerships in every state where they operate. 

Now Mikos is back with a new paper, co-written with University of Maine law professor Scott Bloomberg, arguing that interstate trade, if it’s not properly managed, could have serious negative consequences and that Congress should let states restrict it, at least temporarily.

  • Mikos previously argued the U.S. Constitution’s Dormant Commerce Clause, likely rendered restrictions on interstate cannabis sales unconstitutional. 
  • However, the new paper says that if interstate commerce happened suddenly it would likely lead to a “race to the bottom,” where big companies would seek out the most permissive states to situate their businesses. This would, the authors believe, undermine equity efforts, state tax collection and the investments many companies have made into the current framework. 

In order to achieve “legalization without disruption” the paper says Congress could temporarily suspend the Dormant Commerce Clause, giving everyone time to prepare for interstate trade.

  • Commenting on the paper, Reed Smith attorney Marc Hauser notes in his Cannabis Musings newsletter that, “While the current regulatory scheme has created artificial market distortions, the alternative is likely going to be just as interesting.”

If Sen. Majority Leader Chuck Schumer’s (D-N.Y.) legalization bill heats up, we’re going to hear a lot more about this. 

Read the whole paper.