Clear and Present Danger: Federalism and Cannabis Reform

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We are quickly approaching an era of rapid change and development within the global cannabis space. As of this writing there are two primary pieces of comprehensive marijuana reform legislation being talked about on capitol hill. The Republican version, States Reform Act ends prohibition by removing cannabis from schedule one and places an emphasis on states rights to determine their own cannabis policies and laws to include prohibition. The Democrats are behind the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act, which also removes the schedule one label and focusses more on social justice or equity aspects through certain corrective measures. Both bills have elements of social equity in the form of expungement imperatives, and the MORE Act is seemingly more interested in this aspect of reform than the SRA. There are other pieces of legislation out there, including the oft discussed Safe Banking Act that address other related issues, but the two aforementioned initiatives are most conceptually important.

The Road to Now and Where it Leads

What’s interesting about where we are right now is that are have arrived at a clearly visible and meaningful mile marker telling us where we are in time. We are well past DARE and the public enemy drug war days of yore, but we are not quite at the milk and honey and cannabis as far as the eye can see days of the future. We are squarely on the road with some ability to see a horizon forming and some decisions to make relating to which path we navigate. Beyond federal law making, we have seen an incredible and rapid growth of the cannabis industry for both the industrial hemp and traditional marijuana programs. Projections of market caps for legal cannabis is somewhere in the $30-40 billion ball park and only expected to rise. More and more states are coming on line with their medicinal and even adult use markets inviting willing citizens to participate in the emerging regulated market. Not without hiccups for sure, but certainly true to the founders vision of the states as the incubators of democracy, states are benefitting from increased tax revenues from the sale of cannabis. Within these markets sub-markets of ancillary businesses all clamoring to get their piece, including legal services, accounting, marketing and branding, etc.. The bottom line, millions of Americans are already benefiting from, supporting, participating in a cannabis market of some kind.

Issues in Federalism: The Elephant in the Room

I think it is important to acknowledge some realities that may get overlooked in this new and rapidly changing environment. These points I think are particularly important for operators and anyone looking to operate in a regulated market.

  1. Licensed medicinal operators who fall out or are perceived to fall out of compliance with their states program are at risk of federal intervention. The backstop preventing the intervention is the compliance program, and the federal law that makes this so is known as Rohrabacher-Farr. Without Rohrabacher, there would be nothing preventing the DOJ from investigating, searching, seizing, disrupting, charging, trying, and convicting licensed medical cannabis operators, or doctors, or even patients. Yet, the law itself is hardly ever discussed outside a few small criminal litigation based circles.
  2. Rohrabacher-Farr does not protect adult use recreational markets. This really means that the states as an active participant in the adult use market themselves should be on the hook for defending the program on its face. Again, this assumes compliance with state law so as to justify the state’s defense.
  3. DOJ methods of investigating under Rohrabacher’s heightened scrutiny are still being refined through case law. However, it should be obvious to serious observers that there are clear lines differentiating clearly non-compliant business with something that requires a little more analysis because it is not so clearly out of bounds. It is these close-call cases that often come down to DOJ interpretation of state law. If the DOJ interprets the law one way, you’re out of compliance, if the interpretation goes the other way, you’re in compliance. The analysis is heavily fact based in many instances. It also begs the question as to the state’s role in clearing up any disagreement between the state licensed business and the federal government. After all, tie goes to the state under the tenth amendment.

What this Means

As long as cannabis remains schedule one and federally illegal, regardless of what the state’s attempt to build, cannabis businesses are at the mercy of the political climate in DC with regards to how the DOJ enforces federal cannabis law. This presents a clear and present danger because it demonstrates a lack of clarity on policy, mixed messaging from the federal government to the states and on to the licensed operators. More importantly, because of the clear conflict between the states and the federal government in terms of enforcement, we have a system of justice that is no way balanced or equitable. It seems foolish to continue a policy of inviting participants into state sanctioned cannabis markets while at the same time targeting those same businesses on the federal level.

The truth is, we simply cannot go back in time. States cannot turn off their cannabis markets at this point. We’ve opened Pandora’s box and it cannot be closed again. States are going to continue inviting people to participate under the banner of protection that the state has created when it chose to legalize the market. The DOJ is going to continue to intervene wherever it sees fit under the guise of enforcing federal law. Federal law will continue to be enforced unevenly and therefore unfairly and people who are caught in the web will continue to be greatly harmed. If the law is enforced unfairly then what we really have is a civil rights issue.

What needs to happen? il meglio è nemico del bene -Voltaire

The political process at the federal level needs to play itself out. We must get to a place where we have comprehensive legislation that can pass the house and senate and be signed into law by the President. Anything short of that will only prolong what is already occurring and more people will be harmed until we reach that point.

If we continue to treat cannabis reform as if it’s any other partisan issue we will only continue to push this can down the road. A comprehensive law will have to be a bi-partisan led initiative and will have to be the product of compromise. The good news is, most American’s already agree, regardless of party.

A Note to Licensed Cannabis Businesses 

Until the day comes when we have new laws on the books at the federal level we should expect to see more federal intervention, more prosecutions, more incarcerations, and more lives disrupted. It behooves licensed cannabis operators to therefore invest appropriately into their compliance management program. Failure to pay attention to compliance first, second, and third only invites the watchful eyes of the DOJ into your company. The better you understand your state’s regulations and can clearly demonstrate how you are complying, the further away you keep the monster.

A Brighter Tomorrow

I personally feel that we are getting closer to federal legalization. I am hopeful that common sense will eventually show itself and help end the war on cannabis. I believe strongly that attorneys should actively participate in their state’s cannabis market by supplying the necessary competent legal counsel to help businesses establish and maintain their critical compliance status. If we are to get to a brighter tomorrow, we have to do things the right way along the way as a holistic community. Industry advocates, operators and ancillary businesses all need to all make their voices heard that enough is enough and we are ready for reform.

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