HIGHLIGHTS:

  • The marijuana industry that was expected to generate roughly $40 billion in economic impact nationwide by 2021 is at a crossroads given a recent move by U.S. Attorney General Jeff Sessions to eliminate certain protections created for the industry by the Obama Administration.
  • Days after California began the New Year with the legalization of recreational marijuana use, the U.S. Department of Justice (DOJ) issued a memorandum rescinding Obama Era guidance on the prosecution of state legalized marijuana businesses.
  • As of publication, there have been no reported cases of federal crackdowns on dispensaries, cultivation facilities or manufacturers in states where such marijuana-related activities are lawful under state law. However, the DOJ has eliminated the guidance that discouraged prosecutions, door-to-door raids and seizures, thus throwing the cannabis industry into uncertainty.

The marijuana industry that was expected to generate roughly $40 billion in economic impact nationwide by 2021 is at a crossroads given a move on Jan. 4, 2018, by U.S. Attorney General Jeff Sessions to eliminate certain protections created for the industry by the Obama Administration. Within days of Californians ringing in the New Year with the legalization of recreational marijuana use, the U.S. Department of Justice (DOJ) issued a memorandum rescinding Obama Era guidance on the prosecution of state legalized marijuana businesses and threw the cannabis industry into uncertainty.

The so-called Cole Memoranda, named for James Cole, the Deputy Attorney General under President Obama, were a series of memoranda issued by the DOJ from 2009 through 2014 and articulated the federal government's desire to prioritize its investigative and prosecutorial resources in light of the enactment by several states of laws relating to the use of marijuana for medical purposes. Marijuana businesses in states that permitted some form of lawful marijuana use took comfort under the Cole Memoranda that if they operated in accordance with state law, they would generally be free from federal criminal prosecution. The decision by Sessions to rescind the Cole Memoranda has created significant uncertainty for these businesses.

The Cole Memorandum articulated eight specific priorities related to federal enforcement of marijuana-related conduct. It further articulated a position by the federal government that in states that had enacted laws authorizing marijuana-related conduct, the federal government intended to take a "hands-off" approach regarding the enforcement of such conduct, which, over the past several years, has led to very few prosecutions and a growing marijuana economy.

Essentially, the memoranda instructed federal prosecutors that in states that had legalized marijuana, prosecutors should use their prosecutorial discretion and focus not on businesses that comply with state regulations but instead focus on illicit enterprises and activities that create harm to the public such as selling marijuana to children, operating with criminal gangs, selling across state lines, and so on. In other words, prosecutors could still fight the drug trade, but if a state has legalized marijuana and put in place its own regulatory system, the prosecutors should leave those businesses operating within that system alone.

Change in Philosophy

However, last week's announcement by the DOJ directs federal prosecutors to make determinations whether to prosecute marijuana-related criminal offenses based upon the DOJ's guidelines that were in existence prior to the Cole Memorandum and reminds the marijuana community that marijuana remains a Schedule I Controlled Substance, illegal under federal law.

As of this writing, there are no publicly reported cases of federal crackdowns on dispensaries, cultivation facilities or manufacturers in states where such marijuana-related activities are lawful under state law, but the DOJ has now eliminated the guidance that discouraged the prosecutions, door-to-door raids and seizures most in the industry feared. However, U.S. attorney Bob Troyer, Colorado's top federal prosecutor, said his office won't alter its approach to enforcing marijuana crimes in the state that became the first to sell marijuana for recreational use after voters there approved it in 2012.

Considerations and Takeaways

The best protection that Congress had been able to provide to the marijuana business community was the Rohrabacher-Farr amendment, which was passed in 2014. The amendment was attached to an appropriations bill and barred the DOJ from spending funds to interfere with the implementation of medical marijuana laws. Rohrabacher-Farr (now known as Rohrabacher-Blumenauer, in honor of Rep. Earl Blumenauer, D-Ore., who co-sponsored the amendment) is set to expire on Jan. 19, 2018, if it is not renewed. Although this amendment provides some protection to the medical marijuana industry, it does nothing to help recreationally legal states. As such, there is renewed eagerness by both medicinal and recreational marijuana advocates to shore up the industry's legal standing and the shock caused by the DOJ's move last week.

With a total of 29 states and the District of Columbia now allowing for comprehensive public medical marijuana and cannabis programs, there will be significant attention on whether the DOJ follows through on the apparent aggressive stance signaled by the move to rescind the Cole Memoranda, whether Rohrabacher-Farr will be renewed and, whether Congress will pass laws that legalize, decriminalize or further restrict marijuana.