The commercial cannabis industry may soon be operating in a less restrictive environment and have better access to insurance coverage as legislative and other federal and state efforts to lift constraints on the sector pick up pace, experts say.  

The Biden administration has signaled that its proposed criminal justice and racial equity reforms will include a review of drug laws.

In addition, a bill aimed at reconciling federal and state laws could make it easier for cannabis businesses to buy insurance, experts say.

The Biden administration has had other priorities, such as the economy and the COVID-19 pandemic, since taking office in January, but there have been “some encouraging signs” for the cannabis sector, said Andrew Kline, senior counsel for Perkins Coie LLP in Denver.

Mr. Kline, who worked for Mr. Biden when he was a U.S. senator and vice president, was speaking last week during the first of a series of webinars on the cannabis sector produced by Business Insurance. 

A statement issued by the federal Office of National Drug Control said the administration’s first-year agenda will focus on “the need to eradicate racial, gender, and economic inequities that currently exist in the criminal justice system,” as well as an emphasis on treatment rather than incarceration.

Other statements from Biden officials may also be encouraging for the cannabis industry, said Ian Stewart, chair of the national cannabis and hemp law practice at Wilson Elser in Los Angeles.

For example, Attorney General Merrick Garland said during his Senate confirmation hearing that the Department of Justice would prefer not to direct limited resources at prosecuting activities that are legal at the state level.

Michelle Rutter Friberg, deputy director of government relations at the National Cannabis Industry Association in Washington, said “it is a really big deal” that cannabis-related questions are being directed to and answered by senior administration officials.

Mr. Stewart noted a “domino effect” among states indicating that they will legalize or further legalize cannabis in various forms, including New York and Virginia, and a bill is moving ahead in Connecticut. He further forecast that states such as Minnesota and Wisconsin could also move further in the direction of legalization and that other states may soon follow.

“At the state level, things are not slowing down,” Mr. Stewart said.

On the financial services side, Ms. Rutter pointed to the reintroduction of the Secure and Fair Enforcement Banking Act last month. Although the measure passed the House in 2019 it did not win sufficient support in the Senate.

The SAFE Banking Act, which has more than 100 co-sponsors in the House, is “an important piece of legislation, and it does help minority small-business owners get access to capital,” Mr. Kline said.

Senators and representatives from states that have legalized cannabis could be more supportive of federal legislation such as the SAFE Banking Act, Mr. Stewart said.

“There is very much a ‘trickle up’ effect,” Ms. Rutter said, referring to the dovetailing of state and federal agendas. “Once members of Congress have a vested interest, this becomes a bit of a different issue,” she said.

In addition, the Clarifying Law Around Insurance of Marijuana Act of 2021, which was also introduced last month, is “very explicit in terms of what it allows for insurance companies specifically and insurance products,” Mr. Stewart said.

The bill would provide a federal safe harbor for insurers covering cannabis businesses where sale of the drug is legal. Many insurers have been reluctant to cover the cannabis industry because the drug is still illegal under federal law.

The CLAIM Act could help broaden insurance markets for cannabis operators, Mr. Stewart said. The markets for management liability coverage, including directors and officers and errors and omissions insurance, have been particularly difficult and could benefit from expansion, he said.

“Insurance groups are behind both SAFE and CLAIM. This is definitely something that’s on their radar,” Ms. Rutter said.

Removing cannabis from schedule 1 narcotic status with the Drug Enforcement Agency is part of the cannabis industry’s agenda but is seen as less achievable in the near term than the SAFE and CLAIM legislation, panelists agreed.

A recording of the webinar and information on other sessions in the series is available here.