The Growing Presence of Native American Tribes in the U.S. Cannabis Industry: Advantages and Challenges
The cannabis industry in the United States has grown exponentially in recent years, with states legalizing marijuana for medicinal and recreational use at a steady pace. As of 2024, over 40 states have some form of legalized cannabis. This evolution has opened opportunities for various stakeholders, including Native American tribes, to engage in the cultivation, production, and sale of cannabis. As sovereign nations, Native American tribes have a unique position within the broader legal and regulatory landscape of the U.S. cannabis industry. However, this position comes with both distinct advantages and formidable challenges.
The key to understanding Native American involvement in the cannabis industry lies in their status as sovereign nations. Under U.S. law, Native American tribes have the right to self-governance, which gives them a significant degree of autonomy to develop and enforce their own laws within their territories. This means that tribes can create their own regulatory frameworks for industries such as cannabis, independent of the state laws that apply to non-Native businesses. Unlike non-tribal entities, which must follow state guidelines for cannabis cultivation, distribution, and sales, Native American tribes can establish their own legal structures. This allows them to bypass restrictions that may be present in states where cannabis is not fully legalized.
Many Native American communities have faced historical marginalization and economic challenges. Engaging in the cannabis industry provides tribes with a new avenue for revenue generation, potentially creating jobs, funding essential social services, and improving overall economic conditions. This is particularly significant in rural areas where economic opportunities are often limited.
Some of the advantages that come with Native American sovereignty and can be utilized are the following:
1. Legal Flexibility: Native American tribes are not bound by state laws in the same way that non-tribal businesses are. This allows tribes in states where cannabis is still illegal or partially illegal to pursue business opportunities without fear of prosecution under state law. This can be particularly advantageous in states where state regulations are restrictive or where local licensing caps limit the number of permits available. In states such as New Mexico, the two licensed tribes are allowed cultivate, extract, infuse, and dispense all on tribal lands under one license. This minimized framework provides for operational efficiencies that are not available to non-tribal businesses. With that said, these groups are still required to track their plants seed to sale (although do not have to use the state-mandated software) and they must have their product tested by a state licensed lab before they can sell it off tribal land.
2. Exemption from Certain Taxes: Tribes may have the ability to avoid certain state-level taxes on cannabis products, depending on how their businesses are structured. This can offer a significant competitive advantage, as taxes on cannabis products in non-tribal jurisdictions are often substantial. In some cases, this advantage can allow tribal-owned businesses to offer lower prices than their non-tribal competitors, boosting market share.
3. Economic Development Tools: In some cases, tribes have access to federal grants and programs designed to support economic development within Native American communities. These funds, combined with revenues generated by cannabis businesses, can provide a powerful engine for growth, enabling tribes to diversify their economic bases beyond industries like gaming and hospitality.
4. Cultural and Historical Connection to Plants: For some Native American tribes, cannabis cultivation ties into broader cultural and spiritual practices involving plants and nature. By incorporating cannabis into their agricultural activities, tribes can emphasize their historical relationship with the land and continue their cultural practices of herbal medicine and agriculture.
While sovereignty offers significant advantages, it also presents unique challenges. The legal landscape surrounding cannabis in the U.S. is complex, with state, federal, and tribal laws often intersecting in ways that can create uncertainty for tribes attempting to enter the industry. The following are some examples:
1. Federal Law and Tribal Lands: Cannabis remains a Schedule I controlled substance under federal law, meaning its cultivation, possession, and distribution are still illegal at the federal level. This poses a major challenge for Native American tribes, whose lands fall under federal jurisdiction in many respects. Although federal authorities have taken a generally hands-off approach to cannabis businesses in states where it is legalized, the risk of federal intervention is still present, particularly if federal enforcement priorities shift under different political administrations.
2. Banking Challenges: One of the most pressing issues for Native American cannabis businesses—and the cannabis industry at large—is the lack of access to traditional banking services. Because cannabis is illegal under federal law, most banks are reluctant to offer accounts or financial services to cannabis businesses, including those owned by tribes. This forces many tribal businesses to operate on a cash-only basis, which increases the risk of theft and complicates day-to-day operations. These days, there are banking options available if you know where to look. Kindling Advisors has experience setting up cannabis banking for Native American Tribes.
3. Regulatory Conflicts: Although Native American tribes have the ability to create their own legal frameworks for cannabis, they often face pressure from surrounding state governments. In some cases, states have attempted to impose their own regulations on tribal cannabis businesses, particularly when those businesses seek to engage in interstate commerce. These conflicts can result in costly legal battles, regulatory delays, and uncertainty for tribal businesses.
4. Social and Cultural Considerations: Not all tribal members may support the cannabis industry, particularly if it conflicts with the values or traditions of their community. Some tribes have faced internal divisions over whether to participate in the cannabis industry, with concerns about the potential social impacts of legalizing cannabis within their communities.
5. Federal Support and Policy Uncertainty: While federal attitudes towards cannabis have generally softened, there remains uncertainty about how future administrations will approach tribal cannabis businesses. Changes in federal policy, such as stricter enforcement of federal cannabis laws, could jeopardize tribal investments in the industry.
Despite these challenges, many Native American tribes have successfully navigated the complexities of the cannabis industry and are reaping the rewards. Tribes like the Menominee Nation in Wisconsin and the Iipay Nation of Santa Ysabel in California have made significant strides in developing cannabis enterprises. These ventures include not just cultivation and dispensary operations, but also ancillary services like, processing, and product development.
In some cases, tribal governments have partnered with private cannabis companies to leverage their expertise and access to capital. These partnerships allow tribes to benefit from the experience of established industry players while maintaining control over their operations and retaining the majority of profits within their communities.
The involvement of Native American tribes in the U.S. cannabis industry represents a significant and growing trend. Their unique status as sovereign nations provides them with both advantages and challenges that set them apart from non-tribal businesses. As more tribes enter the industry, their success will depend on how well they navigate the legal complexities of cannabis while maintaining the integrity of their cultural values and economic goals.
By Michael Thompson
Founder/ Senior Business Consultant