With the stroke of a pen—and a keystroke—Attorney General Jeff Sessions has eliminated longstanding guidance regarding federal law enforcement priorities specific to the state-legal marijuana sector. This move throws even more uncertainty into a sector that already had plenty of uncertainty to spare. Even as more and more states act to legalize medical and/or recreational use, federal law remains unambiguous: marijuana activity violates federal law—potentially multiple federal laws. Now, Sessions’ action raises the question of whether federal authorities will more aggressively pursue investigations and prosecutions of state-legal marijuana activity.
Cole Memoranda Replaced by January 4 Sessions Memorandum on Marijuana Enforcement
On January 4, Attorney General Jeff Sessions issued a new memorandum, “Marijuana Enforcement,” rescinding a series of U.S. Department of Justice (DOJ) issuances that, collectively, recommended that U.S. Attorneys’ Offices focus prosecutorial priorities away from state-legal marijuana activity except where certain heightened risk factors were present. This series of memoranda, referred to in this post collectively as the Cole Memoranda, included, among other issuances, memoranda issued by then-Deputy Attorney General James Cole, and “Policy Statement Regarding Marijuana Issues in Indian Country,” issued by then-Director of the Executive Office for U.S. Attorneys Monty Wilkinson. Now, U.S. Attorneys are to be guided only by the more general “well-established principles that govern all federal prosecutions” in evaluating whether to prosecute any marijuana-related activity.
The withdrawal of the Cole Memoranda does not come as a complete surprise. In December, Attorney General Sessions had officially rescinded 25 other guidance documents issued by previous DOJ leadership that Sessions described as “unnecessary, inconsistent with existing law, or otherwise improper.” That list did not include any of the Cole Memoranda. But Sessions, an outspoken critic of marijuana, had previously stated that the DOJ was evaluating the future of its outlook regarding marijuana enforcement, and a March 2017 executive order from President Trump (Executive Order 13777) directed the DOJ and other federal agencies to take steps to alleviate regulatory burden, including identifying existing regulations “for repeal, replacement, or modification.” Sessions had stated that as part of the DOJ’s implementation of that order and his November 2017 action to curtail issuance of guidance documents, “[w]e will continue to look for other examples to rescind, and we will uphold the rule of law.”
Now that the Cole Memoranda are no longer in effect, how much will that change the state-legal marijuana landscape?
First, it is important to keep in mind that the Cole Memoranda had never set any substantive limits on the ability of the U.S. Attorney’s Offices, or the DOJ in Washington, to take any prosecutorial action regarding marijuana (nor did they provide any safe harbor or defense for a defendant of such an action). Rather, the memoranda advised federal prosecutors on ways to best prioritize use of their limited resources. So even while the Cole Memoranda remained outstanding, federal prosecutions of state-legal marijuana activity could—and did—occur.
And even with the Cole Memoranda rescinded, prosecutors still can use their discretion to choose not to initiate or pursue a given marijuana-related case, even where the activity violates the letter of federal law.
Still, the existence (or lack) of marijuana-specific guidance from the DOJ in Washington is significant. As Sessions states in the January 4 memo, “the well-established principles that govern all federal prosecutions” require prosecutors to “weigh all relevant considerations” in deciding which cases to prosecute, “including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of federal prosecutions, and the cumulative impact of particular crimes on the community.” The Cole Memoranda provided detailed guidance on “federal law enforcement priorities,” particularly that state-legal marijuana activity should not be a federal law enforcement priority unless any of the stated risk factors were present. Now, while there is no guidance stating that such activity is a federal law enforcement priority, there is also no guidance stating that it is not.
It remains to be seen whether Sessions will provide further insights on what “federal law enforcement priorities set by the Attorney General” regarding marijuana now are (and if so, in what format, since he specifically criticized “the longstanding abuse of issuing rules by simply publishing a letter or posting a web page”). Absent any such further detail, the future of federal marijuana enforcement now rests largely in the hands of the U.S. Attorneys themselves.
This turns the focus to the U.S. Attorneys: who are they, and what will their views and priorities be? Just prior to the January 4 rescission announcement, Sessions also announced the appointment of 17 interim U.S. Attorneys to serve in posts that still lack permanent appointees, and President Trump (as is true of any President) has the authority to nominate a new permanent U.S. Attorney in each office nationwide. These U.S. Attorneys, whether temporary or permanent, could take a new approach to marijuana enforcement and begin to aggressively prosecute this activity. Shortly after the Sessions announcement, Bob Troyer, Acting U.S. Attorney for the District of Colorado, stated that the announcement would not change his office’s enforcement approach. But the approach each U.S. Attorney will actually take in practice remains to be seen.
The Rohrabacher-Blumenauer Amendment
Again, the Cole Memoranda never set any legal limits on the ability of federal prosecutors to pursue marijuana cases. By contrast, there is one—and only one—substantive restriction on federal prosecution of marijuana cases: the Rohrabacher-Blumenauer Amendment, a Congressional amendment to the federal budget that limits the ability of the DOJ to use federally-appropriated funds to prosecute state-legal medical marijuana activity. That amendment remains in effect today; it has most recently been extended through January 19, after a previous extension to December 22.
It remains to be seen whether the amendment will be extended after that date. Its fate is intertwined with the larger issue of whether Congress will be able to pass a long-term spending bill by then and avoid a federal government shutdown. The Congressional efforts to pass a long-term budget remain mired in debates over numerous items in that budget; notably, along the spectrum of controversial aspects of the budget, Rohrabacher-Blumenauer has received relatively little attention to date. That could change in light of the widespread coverage given to the Sessions announcement. But whether or not it receives more focus, only time will tell if it will live to see another federal budget.
What Will Cole Repeal Mean for Marijuana Banking?
The withdrawal of the Cole Memoranda is likely to further hinder the ability of marijuana-related businesses to access banking services.
Data gathered and released by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) indicates that only about 400 of the country’s approximately 12,000 banks and credit unions are “actively” providing banking services to the marijuana sector.
Financial institutions that want to serve the state-legal marijuana sector have been hampered in doing so both by the federal illegality of marijuana and by the lack of guidance from the DOJ or federal banking regulators regarding what might (or might not) be permissible regarding providing banking services to the sector. The sole federal guidance directed to financial institutions on this issue is the guidance issued by FinCEN in 2014 at the same time as one of the Cole Memoranda. The FinCEN guidance is singularly focused on ways to meet Bank Secrecy Act/anti-money-laundering (BSA/AML) obligations while serving the state-legal marijuana sector. It does not authorize financial institutions to serve that sector; rather, it provides a roadmap for BSA/AML compliance for institutions that choose to do so or that otherwise encounter transactions involving marijuana.
The FinCEN guidance is directly and explicitly linked to the Cole Memoranda—it states that financial institutions should take certain actions where any of the heightened risk factors articulated by Cole are present. At this writing, the FinCEN guidance remains in effect, but so much of it is based on the Cole Memoranda that it seems likely that it will be amended, replaced, or withdrawn.