Federal Law

By Michael D. Cutler

Welcome to the website of Attorneys Evans and Cutler, and our observations on federal marijuana prohibition law and its impact on state cannabis reform laws in Massachusetts.

This article is NOT intended to be a comprehensive analysis of constitutional federalism, preemption and states’ rights. What follows is a summary – of the history of marijuana prohibition, state prohibition reform, and the federal response to state reforms – to understand where cannabis commerce is going, and how soon we may arrive at more consistency between the federal and state marijuana laws. Notwithstanding our analysis below, however: At this time and until we post a different conclusion at this website, federal marijuana prohibition remains in force; cannabis possession, use, distribution and commerce remain illegal under federal law (the Controlled Substances Act, 21 USCS 802 et seq.; the “CSA”) – and subject to federal criminal prosecution and federal civil asset forfeiture (including the federal confiscation of real estate without compensation to the owner) – regardless of Massachusetts cannabis reform laws.

History of Marijuana Prohibition

Marijuana’s criminal prohibition – arrest and imprisonment for possession, cultivation or distribution (even if without compensation, or only between adults) – is a Twentieth Century invention that began in Massachusetts in 1911, but metastasized throughout Southern and Western states until its federal adoption in 1937. Prohibition’s legislative enactment – based on contemporaneous legislative histories in the states and Congress – was explicitly racist, to “protect” Caucasians from marijuana-using African Americans and Hispanics. Hegemony in state and federal prohibition law enforcement – and the social stigmatization of use – continued for the duration of the Twentieth Century until a few states decriminalized adult use – fine and confiscation but no arrest for possession of personal use amounts – beginning in Oregon in 1973. The first state reform law legalizing medical use (approved by a doctor certifying a health condition benefitting from use) – California’s “Prop 216” in 1996 – protected medical use and cultivation from state cannabis prohibition.

Prohibition Reform Today

Gallup polling in October 2017 reports 64% of the nation supports ending marijuana prohibition, including 51% of Republicans; with 94% of American voters supporting the legalization of medical cannabis. Eight states including Massachusetts – Alaska, California, Oregon, Washington, Nevada, Colorado and Maine (Vermont just legalized adult-use and home-grows, while it studies commercial access) – allow adults commercial access to non-medical (“recreational”) marijuana, while 29 states permit some debilitated patients authorized by healthcare professionals to use cannabis medically. Several medical marijuana states, including New Jersey and Michigan, are considering nonmedical legalization in 2018. Prohibition’s obsolescence is irreversible as a historical trend, but its current persistence is a function of federal law that challenges planning for cannabis entrepreneurs.

The future of federal marijuana prohibition is tied to state prohibition enforcement. Just as Alcohol Prohibition withered in the early 1930s as states began repealing state prohibition laws, states now are ceding prohibition enforcement to federal agents with no state law enforcement cooperation. Before 1996, state law enforcement made more than 99% of all national marijuana arrests; federal law enforcement simply lacks the bodies or the funding to enforce prohibition without the cooperation state-funded law enforcement officers, prosecutors, courtrooms, judges and jails.

The Federal Risk

While we believe that the end of federal prohibition is inevitable, its persistence and current enforceability remain an obstacle of uncertainty and challenge to business planning for cannabis entrepreneurs. Those risks include, without limitation, not only criminal prosecution, but also: Civil asset “forfeiture,” the confiscation without compensation of property including real estate involved in marijuana production and distribution; dramatically increased federal taxation compared to other state-legal businesses, pursuant to Internal Revenue Code section 280E, which denies the deduction of business expenses allowed for any ordinary business; and, the lack of easy access to ordinary business banking, as federal anti-money laundering laws deter nearly all federally chartered banks (and most other banks) from offering cash management services to the state-legal cannabis trade.

The incongruity between federal prohibition and state marijuana reform creates a tension we refer to as the “Awkward Interval” between prohibition and legalization. As public support for prohibition dwindles among an evaporating minority, public support for legalization grows around evolving state government mainstreaming of this formerly underground economy. This tension leaves in place a formerly widely supported law that most people now oppose, resulting in random and unpredictable enforcement of prohibition. Federal prohibition remains potent despite its growing unpopularity, due to (among other reasons): The seniority of Congressional prohibition supporters; the ability of federal law enforcement (Drug Enforcement Administration agents and federal prosecutors) to grab cash, assets and bribes from the illegal cannabis black market; and the Trump administration’s interest in manufacturing controversies as a distraction from the intensifying investigations of Russia's role in its 2016 election campaign.

The Evolving Federal Response to State Cannabis Reform

The Clinton administration moved to punish doctors after the first medical marijuana law in California in 1996, by threatening to revoke the federal prescription drug licenses of patient-certifying doctors; that action was enjoined and successfully (from the patients' and doctors' perspectives) thwarted by federal courts. In 2003, state-legal California patient cooperatives sought federal court protection from federal prohibition enforcement against their providing medical marijuana to doctor-authorized fellow-patient cooperative-members; federal prohibition enforcement closing the cooperatives was upheld by the U.S. Supreme Court in 2005, however, at the request of the second Bush administration. Despite federal prohibition success in court, state medical marijuana laws and patients’ state-legal access to medicine continue to grow, as state law enforcement authority to interfere with state-legal cannabis ends in the reform states.

The Obama administration reflected the growing public support for reform. In 2009 the federal agency for federal prosecutors – the U.S. Department of Justice (DOJ), headed by the U.S. Attorney General – issued a guidance to federal prosecutors in the states, recommending the lowest priority for state-legal medical marijuana activity and deference to state law enforcement regarding state reform-law compliance. Succumbing to prohibitionist political pressure DOJ allowed some federal interference with state legal medical marijuana in 2011, but changed course after the 2012 elections when non-medical adult-use legalization passed in Colorado and Washington state. In 2013, DOJ enacted a new guidance for federal prosecutors, recommending their forbearance and deference to state law enforcement, in deciding whether to interdict medical and non-medical cannabis commerce in the reform states, a document known as "the Cole Memorandum.”

Congress has the ultimate power to repeal federal prohibition. While the power of prohibition-supporting members of Congress has perpetuated this obsolete policy – protecting the CSA from amendment or repeal – the growing popularity of, and state tax revenues from, state reform laws are weakening federal prohibition's persistence. The Congress has enacted with Obama administration approval, amendments to annual federal budgets since the 2014-2015 fiscal year, that – with more legal protection than an AG's guidance memo – prevent DOJ from interfering with state-legal medical cannabis commerce.

Current Events

Despite Trump administration hostility to reform – in the person of U.S. Attorney General Jeff Sessions’ proclaimed vendetta against state law reforms and opposition to the DOJ-restraining budget amendments – the progress of reform may have eclipsed the federal ability to enforce prohibition. Under the U.S. Constitution’s Supremacy Clause, the Trump administration’s authority – to regulate interstate commerce by means of cannabis prohibition – remains superior to state reform laws that legalize a regulated and taxed marijuana industry. That same Constitution – under Tenth Amendment “Anti-commandeering” Doctrine – forbids federal authority from compelling state officers to enforce federal law. Thus, as states adopt reform laws reducing and ending their prohibition enforcement – recalling states’ historical responsibility for more than 99% of all cannabis arrests, and the end of Alcohol Prohibition (before national repeal of the Prohibition amendment in 1933, states including Massachusetts in 1930 annulled their state prohbition laws, ceding prohibition enforcement entirely to the overwhelmed feds) – federal law enforcement lacks sufficient resources to replace state law enforcement’s role in policing marijuana commerce.

USAG Sessions has carried out his threat to reimpose prohibition, by rescinding the Cole Memorandum and its protection of state-law compliant medical and nonmedical cannabis commerce. Interference with state-legal (licensed) nonmedical production and distribution is within the discretion of federal prosecutors in each reform state. In Colorado, the chief federal prosecutor for the state (U.S. Attorney) has promised to maintain the Cole Memorandum's forbearance. In Massachusetts, however, U.S. Attorney Lelling has refused to provide the state or applicants for cannabis licenses similarly clear guidance, insisting that he has the discretion to stop licensed commerce. Lelling also has stated that his office's current priority is the Opioid Epidemic – and past marijuana enforcement has focussed on large scale imports from other countries involving money-laundering – priorities that appear to exclude a state-legal non-violent tax-paying domestic cannabis industry.

The state and national response to the Cole Memo's rescission generally has supported the new industry and opposed Sessions and Lelling. Republican Governor Charles Baker of Massachusetts, and the state's Attorney General Maura Healey – who both opposed Question 4 in 2016, the initiative law that legalized nonmedical cannabis commerce – have publicly urged Lelling not to interfere with state legalization, and to continue the Cole Memo's forbearance policy. Nationally, no Republican member of Congress has expressed support for USAG Sessions' forbearance rescission, with many Republican and Democrat members of Congress condemning Sessions' hostility to state-regulated cannabis commerce; whether their opposition becomes policy – by extending the current budget amendment's protection of medical marijuana, and expanding the protection to nonmedical production and distribution – remains to be seen.

The longer the federal forbearance continues, the bigger the new industry – and its state defenders – grow. Among the mature reform states, state cannabis tax revenues in Colorado (with nearly 700 retail shops in 2016, and a nearly 20% smaller population than Massachusetts) amounted to nearly $200 million in 2016. Massachusetts now has taken five years to license 16 medical marijuana retailers that serve nearly 50,000 eligible patients and their caregivers; these retailers may convert to serve all adults beginning June 1, 2018, with about 80 applicants awaiting medical licensing consideration (after which they also may convert, from medical patients only, to serve all adults). The national conversation on reform has shifted – from “whether” to legalize, to “how to” legalize – as evidence from the reform-state marketplace demonstrates improved public health and safety; meanwhile, the prohibition myths – of legalization’s alleged risks of increased underage access, driving accidents, and violence – are shown by reform state experience to be false.

In current federal political events, the Trump administration approved an extension of the current federal budget protecting state-legal medical cannabis commerce through the current federal fiscal year ending October 1, 2018. On February 12, 2018, 18 U.S Senators (including three Republicans, and both Massachusetts Senators) formally lobbied for the Senate to enact a budget amendment to prevent USAG Sessions and federal DOJ prosecutors from interfering with state-legal medical and nonmedical cannabis commerce. While that effort failed, on April 11, 2018, President Trump formally committed – note consistency is not his strength – to signing a states-rights for marijuana bill, repealing federal prohibition in the reform states. While that bill may not be permitted a formal vote in the Republican-controlled Congress this year, Trump's support for state-legalization immediately undercuts any federal prosecutor's political consideration of – and limited prosecutorial assets diversion for – interfering with state-legal tax-paying cannabis commerce.

The Future

2018 will show whether federal prohibition can withstand its diminishing popularity. 

Will reform state marijuana tax revenues – and the political contributions of cannabis entrepreneurs and their potential vendors (like bankers) – motivate Republican governors and members of Congress to oppose federal prohibition enforcement, and to amend the CSA to indefinitely (as contrasted with annual budget amendments) protect state-legal cannabis commerce, medical and nonmedical?

Will the growing opposition to the Trump Administration undermine the formerly persuasive influence and will of prohibition supporters, as they grow weaker in confronting the hardening state law foundation for legalization? Will the growing support for legalization among voters embolden Congressional candidates to explicitly promote legalization in their campaigns, enabling the 2018 midterm elections to inaugurate a new Congress with legalization majorities in both houses?

Will USAG Sessions and DOJ prosecutors or USDEA agents take any action against California's opening this year of the largest cannabis marketplace in the world?

We believe that the pressure to reform federal prohibition to accommodate state legalization is irresistible. In Massachusetts, the question of "whether" to legalize already has been resolved by voter initiative and legislative amendment; the state cannabis licensing agency's final implementation rules – “how to" legalize – issued in March 2018 and the licensing process has begun, with existing medical licensees and "economic empowerment" applicants having priority in the licensing process. Whether federal law enforcement remains an obstacle to state-legal cannabis commerce may be resolved by the time non-medical licensing and distribution begins in Massachusetts in June 2018 (with existing medical licensees who obtain nonmedical licenses). Or, the feds may remain where they've been for more than five years: On the sidelines, growling harshly, but doing nothing to interfere with tax-paying, well-regulated, non-violent cannabis commerce.

Stay involved with your members of Congress, and encourage them to repeal federal prohibition entirely – by removing marijuana from the CSA – or, to legislate explicit federal forbearance from interference with state medical and nonmedical reform laws. If you aim to profit from this industry, you need to step up and engage with federal and state politicians, to ensure that the feds not interfere with the industry you wish to join.

Last update: May 14, 2018.