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Poison Pills: A Common Component In Lawmaking, M&A And Now Cannabis

May 27, 2020 10:46 am
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Poison Pills: A Common Component In Lawmaking, M&A And Now Cannabis

Legislative poison pills, or wrecking amendments, are a common component in American lawmaking, and they're beginning to appear in cannabis legislation more frequently.

A Common Political Practice

These amendments are a standard fixture in politics. In most cases, opposing lawmakers take an otherwise popular piece of legislation and upend it by introducing an amendment that alters the perception of the bill, otherwise known as agenda manipulation.

Some definitions of poison pill legislation require the opposing lawmaker to believe the amended bill will lose against the status quo. However, in many cases, the term refers to adding legislation meant to scale back a bill that would otherwise pass.

Poison pills are typically present in business deals whenever a company opposes a takeover.

Wrecking amendments are often used in American politics, but aren't the most successful tactic. As Jeffery Jenkins and Michael Munger noted in 2003: "while killer amendments might be introduced, the theoretical literature predicts that they should fail."

The duo highlighted rare exceptions in American history, including the 1846 Wilmot Proviso and the 1956 Powell Amendment.

Attorney Ryan Reiffert said the most notable example of a poison pill is one that backfired, creating one of the nation's most substantial pieces of legislation. 

"The Civil Rights Act of 1964 was amended at the last minute to broaden the definition of a protected class, on the theory that it would torpedo the bill's support," Reiffert said. "And the act nonetheless ended up passing."

Poison Pill Legislation Reaches Cannabis Reform
Two forms of poison pills exist in lawmaking, Karen O'Keefe, director of state policies at the Marijuana Policy Project, told Benzinga.

The most common is the restrictions put in place by the federal status of cannabis. In these instances, state lawmakers are thwarted from making desired changes due to federal prohibition.

"A lot of legislators would like to have marijuana be prescribed instead of recommended. That's not something you can do because the doctors would be running afoul of federal law, and most doctors wouldn't participate," O'Keefe said.

She also mentioned several states wanting to be in charge of cultivation and sales, but such efforts would run against federal laws concerning growing and selling.

The other example might not be a full-fledged wrecking amendment, but it can limit market potential. In these instances, provisions are added to make a state's market less competitive, O'Keefe said. 

The MPP director cited Iowa as one of several states to institute low-THC caps, limiting what businesses can sell.

"They have not been competitive, and they just had two of the five dispensaries in Iowa shut down because they weren't viable economically." 

Prohibition on whole plant sales is another point of concern occurring in several states, according to the MPP director.

The impact of such legislation can be immense, said Stuart Titus, CEO of Medical Marijuana Inc (OTC:MJNA). 

"We have such delays on positive and meaningful change in this country which can paralyze economic growth and the emergence of new industries," Titus said.

The MPP's O'Keefe said such efforts could be a result of opposing lawmakers wanting to limit the market — or satisfying law enforcement lobbying, said the MPP's O'Keefe. 

Combating Poison Pills In Cannabis Reform

Wrecking amendments are here to stay in the American system, according to most sources.

"We live in a messy democracy where, by constitutional design, changes are meant to be more difficult than stopping changes," Reiffert said. "Every time I hear someone complaining about how Congress does nothing, or the government does nothing, I always remind them that 'gridlock is a feature, not a bug,' and is a central part of our system of government."

While acknowledging the approach is common in lawmaking, some suggested opposing what can be considered a "dirty" tactic in many cases.

MPP's O'Keefe urged opposition to harmful rules in the nascent cannabis market.

"We need to advocate to make sure they're not included in [bills]," she said, "What we do is make sure all lawmakers are aware of the context of federal law and the need to tread carefully."

Related Links:

House Rules Committee To Consider Amendment To Keep Feds Out Of State Cannabis Policy

Ohio AG Calls Marijuana Amendment Incomplete, Asks Backers To Resubmit

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