On January 4, 2018, U.S. Attorney General Jeff Sessions issued a memorandum to U.S. attorneys, which rescinded all previous nationwide guidance specific to cannabis enforcement, including the so-called “Cole Memorandum” that listed specific cannabis-related activities that the Department of Justice intended to focus on with respect to the Controlled Substances Act. In effect, the Cole Memorandum created room for recreational cannabis industries to develop where there was, among other things, compliance with state regimes. With the Cole Memorandum rescinded, U.S. federal prosecutors can exercise their discretion in determining whether to prosecute cannabis-related violations of U.S. federal law.
While this announcement does not directly impact Canadian law, it will introduce additional uncertainty into the legality of state-level recreational cannabis. As a result, this announcement may have implications for Canadian investors or institutions providing financing to U.S. cannabis businesses, for Canadian suppliers supplying to U.S. cannabis businesses, and for Canadian cannabis businesses with U.S. operations or a U.S. nexus.
In our October 2017 Blakes Bulletin: CSA, TSX Address Treatment of Canadian Reporting Issuers with U.S. Cannabis-Related Business Activities, we noted that the Canadian Securities Administrators (CSA) might choose to revisit its guidance if the U.S. administrative enforcement guidance were altered or revoked. Accordingly, the announcement by Attorney General Sessions — and any subsequent change in the existing CSA guidance — will be particularly relevant for Canadian listed issuers with U.S. operations.