States Decry DOJ Decision to End Hands-Off Marijuana Policy

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By Tripp Baltz

Governors, state attorneys general, and other elected officials in states with legal marijuana criticized U.S. Attorney General Jeff Sessions for his announcement rescinding 2013 guidance on marijuana regulation and enforcement by states.

Sen. Cory Gardner (R-Colo) said Sessions’ decision, announced Jan. 4, was “extremely alarming.” President Donald Trump said in 2016 marijuana legalization “should be left up to the states and I agree,” Gardner said. Colorado is one of eight states with legalized recreational marijuana regimes, topping more than $1 billion in legal marijuana sales in 2016.

Gardner and other state and federal policymakers sounded off on the Justice Department decision to revoke the 2013 Cole Memorandum, named for its author, former Deputy Attorney General James M. Cole, which outlined enforcement priorities for federal prosecutors in states with legal medical or recreational marijuana. The memo represented a “hands-off” approach by the federal government, allowing states to regulate the sale, use, and transfer of marijuana, which remains a Schedule 1 drug under the federal Controlled Substances Act.

Washington Attorney General Bob Ferguson (D) said Jan. 4 his team is “very prepared” to mount a legal challenge to the Sessions recission, depending on what the Justice Department does next. He said his office has worked with attorneys general in other states where marijuana is legal. “We have a structure, an organization of states that have legalized marijuana to talk about this,” he said. “Our legal arguments have been crafted; they are prepared. We are not messing around with defending the will of the voters.”

Colorado is also “going to look at” possible litigation, although it is also considering whether a lawsuit will “inflame emotions,” Gov. John W. Hickenlooper (D) said at a news conference Jan. 4. “I would ask the Justice Department, ‘what serious drug trafficking is not getting your attention in order for you to divert resources to go after a state-legal dispensary?’”

Direct Contradiction

Gardner said he voted to confirm Sessions as attorney general after Sessions assured him “marijuana would not be a priority” for the Trump administration.

“Today’s action directly contradicts what I was told, and I am prepared to take all steps necessary, including holding DOJ nominees, until the attorney general lives up to the commitment he made to me prior to his confirmation,” Gardner said.

The Cole memo essentially told states: If you create and follow a strict regulatory framework and use a seed-to-sale tracking system to monitor where regulated cannabis is grown, distributed, and sold, the federal government will stay out of the way. Since its release, the Cole memo has been the only thing standing between federal enforcement of marijuana as an illegal drug and state oversight of its use, sale, and transfer where it has been legalized.

The memo “got it right” and was “foundational” in guiding state efforts to regulate the production and distribution of marijuana, Hickenlooper said in a statement. “Thirty states comprising more than two-thirds of the American people have legalized marijuana in some form,” he said.

‘Will of the Voters’

Colorado has created a comprehensive regulatory system in accordance with “the will of our voters,” Hickenlooper said. Even with Sessions’ announcement, the state’s focus “will continue to be the public health and public safety of our citizens. We are expanding efforts to eliminate the black market and keep marijuana out of the hands of minors and criminals.”

The move by Sessions “does not alter the strength of our resolve in those areas, nor does it change my constitutional responsibilities,” he added.

Officials in other marijuana-legal states issued statements reflecting similar sentiments.

In Washington, which legalized marijuana for adult, recreational use in 2012 at the same time as Colorado, Gov. Jay Inslee (D) said Sessions’ decision “disrespects Washington voters who have chosen a different path for our state.”

Marijuana regulation works well in the state, he said. It “keeps criminal elements out, keeps pot out of the hands of kids, and tracks it all carefully enough to clamp down on cross-border leakage,” and Washington will “vigorously defend our state’s laws against undue federal infringement.”

Disruption to Economy

In Oregon, which legalized recreational marijuana in 2014, Gov. Kate Brown (D) said the DOJ’s move will be “disruptive” to the state’s economy.

“Over 19,000 jobs have been created by the market Oregon worked carefully to build in good faith and in accordance with the Cole Memorandum,” she said. “The federal government must keep its promise to states that relied on its guidance. Voters in Oregon were clear when they chose for Oregon to legalize the sale of marijuana and the federal government should not stand in the way of the will of Oregonians.”

Recreational marijuana became legal in California Jan. 1 and has been legal for medical use since 1996. California Attorney General Xavier Becerra (D) told Bloomberg Tax in an email that the state Department of Justice will vigorously enforce state laws and protect state interests.

“In California, we decided it was best to regulate, not criminalize, cannabis,” he said. “Unlike others, we embrace, not fear, change. After all, this is 2018 not the 20th century.”

Maine voters approved legal recreational marijuana in 2016, though a regulatory and tax regime isn’t yet in place. State Rep. Teresa Pierce (D), co-chair of a joint committee in the Legislature on Marijuana Legalization Implementation, which is drafting a bill on marijuana regulation, said it’s unclear what effect the rescission of the Cole Amendment will have.

“We’re going to keep working on our bill,” she told Bloomberg Tax. “ If and when the federal government takes some action, we’ll respond.”

Massachusetts Gov. Charlie Baker (R) said in a statement that he fully supports the will of the voters and the work of the state’s Cannabis Control Commission. Baker originally opposed the 2016 ballot question that legalized recreational marijuana.

“The administration believes this is the wrong decision and will review any potential impacts from any policy changes by the local U.S. Attorney’s Office,” his spokesman wrote in an email to Bloomberg Tax.

‘Pledged to Defend’

Nevada Attorney General Adam Paul Laxalt (R) said that although he opposed the ballot initiative that legalized recreational marijuana in the state in 2016, he is “pledged to defend the measure.” He said his office has facilitated the implementation of the law “in the face of considerable uncertainty about the status of federal enforcement activity.”

The Cole memo followed a similar DOJ memo from 2009 directing U.S. Attorneys not to focus resources on enforcing against marijuana in states with a legal cannabis regime. A memo issued in February 2014 by the Treasury Department’s Financial Crimes Enforcement Network provided guidance for financial institutions on depository accounts and other services to marijuana-related businesses. As of July 2017, about 296 banks and 94 credit unions were providing banking services to marijuana businesses, FinCEN said.

There was no word on whether the rescinding of the Cole memo will affect the 2009 DOJ memo or the FinCEN guidance. A Colorado credit union that fought with federal regulators over whether it can serve the marijuana industry is now trying to get approval from the Federal Reserve Bank of Kansas City to serve social groups supporting pot legalization that aren’t “plant-touching” businesses.

Federal Prosecutor

Bob Troyer, U.S. Attorney for the District of Colorado, said his office was already focused on “identifying and prosecuting those who create the greatest safety threats to our communities around the state,” even before the Cole memo. Now the memo has been struck down, he said his office will continue that approach “in all its work with law enforcement partners in Colorado.” Kevin Sabet, a former Obama administration drug policy adviser who now heads the anti-legalization group Smart Approaches to Marijuana (SAM), applauded Sessions’ decision.

“This is a good day for public health. The days of safe harbor for multi-million dollar pot investments are over,” he said at a Jan. 4 press conference. “This decision strikes a blow against this emerging industry.”

‘Makes No Sense’

NORML, which advocates for marijuana legalization, said it makes no sense from a political, moral or fiscal standpoint for the Justice Department to take this step.

“If the Trump administration goes through with a crackdown on states that have legalized marijuana, they will be taking billions of dollars away from regulated, state-sanctioned businesses and putting that money back into the hands of drug cartels,” NORML Political Director Justin Strekal said in a statement.

With assistance from Brenna Goth, Laura Mahoney, Aaron Nicodemus, and Paul Shukovsky.

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

The Aug. 29, 2013 Cole memo is at http://src.bna.com/vpS

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