What Would “Greater Enforcement” Mean for Washington’s Cannabis Businesses?: Cannabis Business Blog

A New Direction for the Department of Justice

The August 29, 2013 DOJ Memorandum (the “Cole Memo”) is the closest factor the hashish business has to an official federal coverage assertion on DOJ’s enforcement of the Controlled Substances Act (“CSA”) in states which have legalized the possession, manufacturing, processing and sale of marijuana.

The Cole Memo is well-known all through the hashish business, however to recap, it’s primarily smooth steerage to federal prosecutors relating to DOJ’s view on the suitable allocation of federal assets relating to enforcement of the CSA.

The Cole Memo outlines eight basic federal enforcement priorities associated to marijuana in states by which it has been legalized, and notes that these enforcement priorities are much less more likely to be threatened in states with “strong and effective regulatory and enforcement systems to control the medical and commercial cultivation, distribution, sale, and possession of marijuana . . . .” In these conditions, the Cole Memo supplies steerage to federal prosecutors that “enforcement of state law by state and local law enforcement and regulatory bodies should remain the primary means of addressing marijuana-related activity.”

The Cole Memo is, nevertheless, non-binding, and expressly states that it’s “intended solely as a guide to the exercise of investigative and prosecutorial discretion” and doesn’t present “a legal defense to a violation of federal law, including any civil or criminal violation of the CSA.” This signifies that DOJ is free to reverse course and start enforcement actions associated to CSA violations in states which have legalized marijuana. The appointment and subsequent affirmation of Attorney General Jeff Sessions, who has been an outspoken critic of marijuana use, raised the potential for a change inside DOJ.

Spicer’s current statements point out that Attorney General Sessions can be free to pursue a coverage change with out interference from the White House.

Exactly what that change would seem like stays unsure, however understand that regardless of state-level legalization, marijuana stays a Schedule I managed substance beneath the CSA, and the federal authorities can seize, and search the civil forfeiture of, actual or private property used to facilitate the sale of marijuana, in addition to cash or different proceeds derived from such gross sales. In addition, there’s potential danger of felony investigation or prosecution for aiding and abetting violation of the CSA or for conspiring to violate the CSA.

DOJ’s greatest, and maybe more than likely for use, enforcement actions are felony prosecutions and civil forfeiture instances introduced towards people and companies instantly collaborating within the hashish business (producers, processors and retailers).  Those actions are easy to implement, as DOJ merely wants to permit Drug Enforcement Agency brokers to conduct investigations of and/or raids on producers, processors and retailers, then inform federal prosecutors that they’re free to hunt the indictment of those people and companies for violating federal regulation.

The Distinction Between Medical and Recreational Marijuana is Critical – For Now

Spicer’s statements additionally spotlight the “big difference” between how the Trump administration views medical and leisure marijuana. This view is mirrored in federal regulation, which presently grants restricted safety to medical marijuana customers and, by implication producers, processors and retailers. The “Rohrabacher-Farr Amendment”, which is a rider to the federal spending invoice presently in impact, prohibits DOJ from spending funds to stop states’ implementation of their medical marijuana legal guidelines.  In United States v. McIntosh, a 2016 case, the Ninth Circuit Court of Appeals held that this rider “prohibits DOJ from spending money on actions that prevent the [states listed in the rider from] giving practical effect to their state laws that authorize the use, distribution, possession or cultivation of medical marijuana.”

The Ninth Circuit rejected a broader argument that the rider prohibits DOJ from bringing federal fees towards anybody licensed or approved underneath a state medical marijuana regulation for actions occurring in that state, together with conditions the place these actions don’t absolutely adjust to state regulation. The courtroom decided the rider “prohibits the federal government only from preventing the implementation of those specific rules of state law that authorize the use, distribution, possession, or cultivation of medical marijuana,” and that DOJ doesn’t “prevent the implementation” of guidelines authorizing conduct when it prosecutes people who interact in conduct unauthorized beneath state medical marijuana legal guidelines.

Accordingly, prosecuting people who don’t strictly adjust to all state-law necessities relevant to medical marijuana stays permissible. For hashish companies engaged within the manufacturing, processing or sale of medical marijuana, having strong insurance policies and procedures in place to make sure compliance with state regulation is critically necessary.

Also notable is that the present federal spending invoice expires on April 28, 2017. If the present invoice just isn’t prolonged, or if this rider shouldn’t be included within the subsequent spending invoice, this safety might be misplaced and all marijuana business members will probably be once more uncovered to the danger of federal legal prosecution and civil forfeiture actions, along with different enforcement actions.

There can also be ambiguity in states, akin to Washington, with overlap between the medical and leisure legal guidelines. In July 2016, Washington’s beforehand unregulated medical marijuana market was built-in into the regulated leisure marijuana market, with new legal guidelines taking impact that targeted on making a affected person authorization database, a advisor certification program and a certification for “compliant products” for medical use.

Under Washington state regulation, participation in these medical marijuana packages is actually voluntary. Medical marijuana sufferers in Washington usually are not required to take part within the affected person database, and producers and processors are usually not required to acquire “compliant product” certifications from the Washington State Department of Health. Many producers and processors haven’t sought this certification because of the elevated product testing and compliance prices, and lots of medical marijuana sufferers have refused to register for the affected person authorization database resulting from privateness considerations. Given the present panorama, nevertheless, hashish companies might need to rethink their participation in state medical marijuana packages.

The Need for a Congressional Solution

Spicer’s feedback also needs to function a reminder that the established order – that’s, DOJ’s discretionary choice to not implement federal regulation towards state-sanctioned marijuana actions – isn’t viable as a long-term answer for the business.  Spicer’s statements are at odds with polling knowledge on legalization of marijuana, with an October 2016 Gallup ballot indicating that 60 % of Americans help legalization, and a February 23, 2017 Quinnipiac University ballot indicating that 71 % of Americans (together with majorities of each Democrats and Republican voters and in all ages group) consider that the federal authorities shouldn’t implement federal legal guidelines towards marijuana in states which have legalized leisure or medical marijuana.

A renewed give attention to federal enforcement can also be sure to set off resistance from states akin to Washington, Colorado and Oregon which have seen constructive financial advantages from marijuana regulation.  Since regulated gross sales started in Washington in 2014, the state has collected roughly $430M in further tax income.  Fiscal yr 2017 tax income in Washington alone is projected at $272M.  It is troublesome to ascertain states willingly giving up this tax income whereas disregarding the desire of their voters.

Indeed, earlier this month, amid uncertainty over the Trump administration’s strategy to hashish legal guidelines, Washington Attorney General Bob Ferguson and Governor Jay Inslee wrote to Attorney General Sessions asking that the steerage within the Cole Memo be maintained, and that any modifications to the coverage be coordinated intently with states which have established hashish markets.  Ferguson has already responded to Spicer’s statements, stating in an interview that he intends to withstand any efforts by the Trump administration to intrude with Washington’s regulated marijuana market.

Taking a “glass half-full” strategy, Spicer’s statements could possibly be what it takes to impress public help round re-scheduling or de-scheduling marijuana and to discovering a viable long-term answer to the business.  Industry individuals and different stakeholders have a chance to make use of this potential shake-up to the established order as an efficient lobbying technique in an effort to persuade Congress that a well-regulated business working within the mild with substantial state oversight is a greater consequence, each economically and socially, than pushing it again towards an unregulated black market.

For any questions, please be happy to contact me at aaley@gsblaw.com or at 206.816.1361.

Warning Regarding Federal Law: The possession, distribution, and manufacturing of marijuana is unlawful beneath federal regulation, no matter state regulation which can, in some jurisdictions, decriminalize such exercise beneath sure circumstances.  Penalties for violating federal drug legal guidelines are very critical.  For instance, a conviction on a cost of conspiracy to promote medicine carries a compulsory minimal jail time period of 5 years for a primary offense and, relying on the amount of marijuana concerned, the high-quality for such a conviction might be as excessive as $10 million.  In addition, the federal authorities might seize, and search the civil forfeiture of, the actual or private property used to facilitate the sale of marijuana in addition to the cash or different proceeds from the sale. Although the U.S. Department of Justice has famous that an efficient state regulatory system, and a marijuana operation’s compliance with such a system, ought to be thought-about within the train of investigative and prosecutorial discretion, its authority to prosecute violations of federal regulation just isn’t diminished by the passage of state legal guidelines which can decriminalize such exercise. Indeed, because of the federal authorities’s jurisdiction over interstate commerce, when companies present providers to marijuana producers, processors or distributors situated in a number of states, they probably face a better degree of scrutiny from federal authorities than do their clients with native operations.

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