March 2, 2017

Enforcement Update: The New Administration’s Views on Marijuana Enforcement

Holland & Knight Healthcare Blog
William F. Gould | Michael J. Werner

When admonished by his mother to "Stop running in the house!", six year old Calvin, from the wonderful Bill Watterson comic strip Calvin and Hobbes, after a pause responded, "The rule's on the books, but it would take all of their resources to enforce it." And on he ran. Calvin captured the federal government's long term and tenuous relationship with marijuana legalization and enforcement. Unbeknownst to many, federal prosecutors already have the "rules on the books"—significant extant legal tools could allow them to charge all types of marijuana crimes, from simple possession of the drug, to enforcing the Nation’s sophisticated conspiracy and racketeering laws. However, none of the 93 U.S. Attorneys' Offices throughout the country have ever prosecuted all charged marijuana offenses federally—nor could they. Thus, even before today's highly fascinating and politicalized marijuana legal environment, there existed a clear prosecutorial decision and an exercise of discretion regarding which crimes would be adopted for federal prosecution. Historically, these decisions were driven by local policy and the perceived impact on crime by the use and sale of marijuana.

It is an interesting case of both federalism and behavioral politics. To be clear, under federal law, all manufacture, distribution, and possession of marijuana is illegal in the US. However, many states – over half of them as of this writing – have themselves legalized marijuana for medical or recreational purposes. In fact, a staggering 65 million Americans now live in 8 states with legalized recreational marijuana, and 28 states that allow use of medical marijuana.

Nevertheless, the US federal government has thus far been unwavering in its opposition to legalizing marijuana. As of now, the FDA has not approved marijuana as a safe and effective drug for any indication. (The agency has, however, approved two drugs containing a synthetic version of a substance that is present in the marijuana plant and one other drug containing a synthetic substance that acts similar to compounds contained in marijuana but is not actually present in marijuana). As a whole, the federal government also spends minimal amounts of money researching the potential health benefits of marijuana—and it has never systematically made long-term research of marijuana a priority or public health goal Moreover, and critically, the government continues to include marijuana on the list of Schedule I controlled substances. Collectively, this means that, in the federal government’s view, marijuana has or will not have a legitimate purpose or use. The list of Schedule I drugs also includes heroin, LSD, and ecstasy, amongst others. Likely prompted by the wave of state legalization efforts, on August 29, 2013, the U.S. Department of Justice (DOJ) issued a press release and guidance regarding when DOJ would exercise its authority in this area. (DOJ memo included under "Related Materials" at the bottom of the PR). This was a big step. In sum, DOJ said that in states that had legalized marijuana and set up appropriate regulatory structures, the federal government would decline to prosecute people or businesses under applicable federal laws. The DOJ memo listed a number of exceptions where it would step in and investigate, including distribution to minors, distribution involving other drugs or firearms, use or distribution on federal lands or properties, and other enforcement priorities. On February 14, 2014, the U.S. Treasury Department (DOT) followed suit with similar guidance. This was considered important because most banks and financial institutions would not, and still do not, take money from marijuana businesses, even those that are in "lawful" states, because of the exorbitant compliance risk. In sum, President Obama’s DOJ and DOT stayed largely out of the arena in states where marijuana was "legal" for either medical or recreational use, as long as the states had appropriate regulations and protections surrounding the new state legality of marijuana and its byproducts. That said, those who operated in this space did so under the benevolence of a federal government that could prosecute all such conduct if it changed its mind and chose to do so.

The next question is obvious: What does a new President and a new Attorney General portend for those who operate in this area within the borders of "legal" states? Similarly, how can states implement ballot initiatives or state laws given the federal view? These are not immaterial questions, and their answers pose serious business challenges for a myriad of stakeholders By some estimates, in one recent month in Colorado, "legal" marijuana sales topped $125 million. Marijuana distributors operate from fancy, almost Apple-like, store fronts and have websites. Make no mistake, the tax revenues from these businesses are significant and important to state budgets. The new White House Press Secretary Sean Spicer very recently indicated that the rules may change, and, as a result, the enforcement posture may become more aggressive, stating that there would be "greater enforcement." On another occasion, Spicer said that states can expect more enforcement regarding recreational use of marijuana. Although on that occasion, he also directed the reporter asking the question to reach out to DOJ, as it would be making these decisions. President Trump himself said that he does not view medical use of marijuana as a priority enforcement area for his administration. The new head of DOJ, Attorney General (AG) Jeff Sessions, was critical of the loosening of marijuana enforcement during the Obama administration. That said, during AG Sessions’ confirmation hearing, he indicated that he did not see marijuana use as a top priority for DOJ under his leadership. However, in contrast, just this week AG Sessions previewed the possibility of expanded enforcement in this area. He indicated that:

"Most of you probably know I don’t think America is going to be a better place when more people of all ages and particularly young people start smoking pot," Sessions said during an exchange with reporters at the Justice Department. "I believe it's an unhealthy practice and current levels of THC in marijuana are very high compared to what they were a few years ago."

"We're seeing real violence around that," Sessions said. "Experts are telling me there's more violence around marijuana than one would think and there's big money involved."

He went on to say:

"I'm definitely not a fan of expanded use of marijuana. States they can pass the laws they choose. I would just say it does remain a violation of federal law to distribute marijuana throughout any place in the United States, whether a state legalizes it or not."

Thus, this entire fascinating area is now characterized by increased tension between federal and many state governments and even less clarity now than two months ago. The DOJ memo referenced above has not been revised or withdrawn, but there are clear signals from the current administration that those in the marijuana trade are standing on shifting and uncertain ground. A few guesses are possible. First, if there is increased enforcement, it is likely to be first in the recreational space before the medical space. Second, the itemized exceptions from the Obama era DOJ memo are likely to receive even more attention from this DOJ than was the case during the Obama administration. Third, any DOJ investigation of a marijuana business is likely to look closely into the target business’s compliance record with state regulations. Such compliance, or lack thereof, could seriously impact whether charges are brought against the business and the structure of any settlement.

Businesses and individuals in the marijuana trade should, therefore, operate with care and vigilantly observe what Washington is saying and doing. They clearly should not be doing anything unusual or aggressive to draw the attention of federal prosecutors. No running through the kitchen with scissors.

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