The Government Accountability Institute, founded by Steve Bannon and funded by billionaire Rebekah Mercer, recently published a report, "Cannabis Cronyism":
Cannabis legalization in the United States has come a long way. In 1996, California became the first state to legalize marijuana for medicinal use only. This past November, five more states legalized marijuana, and 47 of the 50 states now allow its recreational or medical use. While governments this Spring were imposing lockdowns and closures of most businesses, churches and schools to combat the COVID-19 epidemic, marijuana dispensaries joined pharmacies and liquor stores as “essential businesses” that must remain open in California.
While he was the first governor to issue a statewide shelter-in-place order, Governor Gavin Newsom of California kept marijuana available. Other states would soon follow: Thirty states in total that issued statewide stay-at-home orders would allow dispensaries of some kind, including recreational, to remain open.
While some claim that cannabis dispensaries were truly as important as pharmacies, which also remained open during statewide lockdowns, other factors may have contributed to this decision. Whatever its medicinal and recreational benefits, cannabis has evolved into a nearly $21 billion industry that lobbies, pressures, and rewards politicians who look out for it.
In August 2019, the FBI announced it was investigating public corruption in the cannabis industry through pay-to-play bribery schemes. This announcement came at a time when the debate in the United States over the pros and cons of legalizing pot had mostly concluded. Officials in many states have routinely ignored federal laws prohibiting the use of marijuana, effectively giving regulatory authority over marijuana to individual states.
There are now far more states where marijuana is fully legal than where it is illegal. Twelve states have decided through referendum, and two states through legislative action, to legalize recreational use of marijuana. Just three states – Nebraska, Kansas, and Idaho – still prohibit any use of marijuana, while the remaining forty-seven states have opted for legalization in some form.
With this new authority, state officials must now create specific regulations. Where states have approved legal marijuana, politicians must make licensing rules for detailing which businesses may distribute such products, and who may purchase them. As with any new market, laws and regulations inevitably will pick the winners and losers in this emerging industry, whose value may be as high as $35 billion by 2025.
As with any economic activity regulated by the government, affected businesses seek an advantage by hiring insiders who have access to those close to the regulatory process. They also make campaign contributions to well-positioned politicians.
And while most cannabis-related regulatory and legislative action is happening at the state level, some national level political figures have leveraged their positions to make money from cannabis legalization.
For example, in 2017, Paul Pelosi Jr., the son of House Speaker Nancy Pelosi, was named Chairman of the Board of Directors of Freedom Leaf, Inc., a consulting firm advising the budding marijuana industry. The following year, the company entered the CBD distribution business, while Pelosi purchased more than $100,000 in company stock.
Former Republican Speaker of the House John Boehner, who staunchly opposed legalizing marijuana in Congress, is now bullish on the industry. “This is one of the most exciting opportunities you’ll ever be part of,” he says in a video announcing his new National Institute for Cannabis Investors. “Frankly, we can help you make a potential fortune.”6 Boehner stands to earn an estimated $20 million if his group succeeds in persuading the federal government to legitimize marijuana.
Still, for now, the states are where most of the action on marijuana distribution is found, and where the greatest threat of political corruption exists. The Government Accountability Institute (GAI), whose mission is to expose cronyism, reviewed the process related to legalizing marijuana in seven states. For each state we reviewed, GAI focused on identifying the relationships between policy decisions that benefited advocates of marijuana legalization and the transfer of money and other benefits from marijuana-related businesses and lobbyists to elected officials.
While each state possessed a unique set of circumstances related to legalizing marijuana, our research found striking similarities in how cronyism in these states occurred. For example, in several states, elected officials and government employees made decisions that ultimately benefited them financially. Also, in several instances, campaign contributions were timed around important shifts in policy.