As the Pennsylvania legislature considers paths to an adult use cannabis program, the Pennsylvania Cannabis Coalition considered analyses regarding whether the state-run distribution and sales model could be preempted by federal law. In those analyses, the case law distinguishes legalization programs in which the state is not mandated to take action that creates a “positive conflict” with the Controlled Substances Act from those that courts have found to be preempted by the CSA. For example, in People v. Crouse, 388 P.3d 39 (Colo. 2017), the Colorado Supreme Court found that a state constitutional amendment requiring police officers to return seized cannabis to patients prescribed it who were acquitted of state charges was preempted by the CSA. Under the constitutional amendment, officers would be required to “distribute” cannabis, directly violating the CSA and creating a “positive conflict” between federal and state law.
This positive conflict caused by mandated state action is distinct from programs that merely permit regulation of the cannabis industry. For example, in City of Palm Springs v. Luna Crest Inc., 200 Cal.Rptr.3d 128 (Cal. App. 4th 2016), the California Court of Appeals allowed the City to regulate cannabis dispensaries because permitting regulation did not require any state actors to take a positive action prohibited by the CSA.
In contrast, the proposed policy adding recreational cannabis to the Pennsylvania Liquor Control Board’s purview would require a state agency and its employees to “distribute, or dispense, or possess with intent to … distribute or dispense” cannabis, directly and positively violating the CSA (21 U.S.C. § 841). Under the state-run retail model, the Commonwealth and its employees could be exposed to criminal liability and loss of federal grants. Additionally, the Liquor Control Board’s State Stores Fund could be tainted under federal regulations due to comingling of other funds with proceeds from the sale of cannabis. The fund includes Liquor Control Board employees’ retirement and disability accounts.
According to at least one poll, voters prefer a privatized sales program for adult use cannabis over the state-run retail model employed for alcohol sales in the Commonwealth. Initially, 51% of voters surveyed in a Change Research poll favored the privatized retail model, while 25% favored a state-run model. Upon being provided more information, support for a privatized retail model increased to 57% while support for the state-run model remained at 25% of voters surveyed. Voters of varied political backgrounds, including independents, Democrats, and Republicans, favored the privatized retail model, according to a memo published with the poll.
Finally, a memorandum penned by Representatives Rick Krajewski (D., Philadelphia) and Dan Frankel (D., Allegheny) proposing a state-run adult use retail model in Pennsylvania in December 2024 has yet to be submitted for introduction to the legislature.
Those in the industry would be impacted by the implementation of a state-run retail model for adult use cannabis; while the December proposal leaves space for private participation in the industry, businesses in Pennsylvania may be more limited in opportunities for advancement than those in other states were such a model adopted. Further, the legal risk to the Commonwealth under such a model could have negative implications for the industry at large.
We will continue to monitor Pennsylvania lawmakers’ stances and proposals on an adult use cannabis program leading up to the deadline for the legislature to agree on a budget at the end of June.
