Federal law and policy

Donald Trump is expected to announce Representative Tom Marino (R-Pa.) as our country’s next director of the Office of National Drug Control Policy, colloquially known as the US drug czar. As drug czar, Marino would evaluate and coordinate domestic and international our country’s anti-drug efforts and advise the President on U.S. anti-drug efforts. The whole drug czar “thing” is bad news and Marino himself is even worse. He is “just another anti-marijuana, pro-pharma” extremist.

Tom_Marino_Official_Portrait,_112th_Congress

Marino began his professional career as a prosecutor who sought to do his part on in the “war on drugs” by prosecuting drug offenders. Since 2010, Marino has served in the U.S. House of Representatives and consistently opposed measures to reform federal cannabis law.

Marino voted against the Rohrabacher-Farr amendment which prohibits the Department of Justice from using federal funds to prevent states from implementing medical marijuana laws. He also voted against a measure allowing Veterans Affairs doctors to recommend medical cannabis to their patients and he opposed measures to ease federal restrictions on hemp and CBD. When asked about marijuana legalization, Marino stated he would consider legalizing cannabis only “if we had a really in depth-medical scientific study,” and if medical cannabis were available only in “pill form.” In other words, if it has anything to do with liberalizing our cannabis laws, Marino is against it.

 

According to the “Office of National Drug Control Policy Reauthorization Act of 1998” the drug czar “shall ensure that no Federal funds … shall be expended for any study or contract relating to the legalization (for a medical use or any other use) of a substance listed in schedule I” of the Controlled Substances Act and “take such actions as necessary to oppose any attempt to legalize the use of a substance” listed in Schedule I. Cannabis is still a Schedule I substance and therefore subject to this blanket prohibition on legalization and research.

Marino is no friend of cannabis legalization and Trump’s having has tapped someone with such outdated views is concerning. But even more concerning is the mandate that any drug czar must oppose all marijuana legalization efforts. More than half the states  have legalized medical marijuana and eight states have legalized recreational cannabis, with more to come. With legalization, the evidence that it works better than prohibition is piling up. This country’s director of drug policy should have the discretion to consider this evidence and draw his her own conclusions on cannabis prohibition. As things now stand, the role of our drug czar is not so much to craft policies based on changing realities, but to ensure that our drug policies remain stuck in another era. This is bad policy and it makes no sense and it needs to change.

Earlier this year, the Trump administration considered cutting the Office of National Drug Control Policy entirely. Unfortunately, the President’s tapping Marino as the next drug czar indicates he is now heading in a very different direction. Who needs a drug czar anyway? Trump had it right initially. This office should be eliminated and fast.

Cannabis credit cards

Because of federal prohibition, marijuana businesses have limited access to financial services. Distributing cannabis is a federal crime and proceeds from cannabis sales trigger anti-money laundering laws. The Bank Secrecy Act requires banks combat fraud and money laundering and protect against criminal activity. This Act mandates banks investigate their customers for criminal activity and it prohibits banks from doing business with bad actors. Additional banking laws also require national banks file Suspicious Activity Reports (SARs) with the federal government when they know or suspect an account holder is engaged in or trying to cover up illegal activity.

Yesterday, I participated on an educational panel entitled, “The Marijuana Industry & Financial Services: What’s Happening? What’s in Store?” at the American Bar Associations’ Business Law Section Meeting in New Orleans. This panel was co-sponsored by the ABA’s Credit Card Committee, highlighting how important the banking and financial services issues are to both the cannabis industry and to the financial services industry. Federal cannabis prohibition has been hugely costly to the cannabis industry and its customers and to the financial services industry as well, not to mention the massive public safety issues engendered by having to work in an all-cash business.

Federal banking laws kept most banks and credit unions from knowingly working with marijuana businesses until February 2014, when the Financial Crimes Enforcement Network (FinCEN) and the Department of Treasury issued guidelines for financial institutions that want to bank cannabis businesses. These guidelines require banks and credit unions vet their marijuana business customers and regularly report their marijuana customers’ activities to the federal government to ensure compliance with the 2013 Cole Memo.

Though the FinCEN guidelines address getting a bank account (and thoughseveral U.S. Senators have asked for increased guidance from FinCEN regarding banking marijuana ancillary businesses), there are no federal guidelines regarding credit card usage in the cannabis industry, and so none of the big credit card networks (Visa, MasterCard, American Express, Discover) allow their cards to be used for buying or selling of cannabis. This means that even if a marijuana retailer manages to open and maintain a bank account, it likely has no way to accept credit card payments and cannabis customers still typically pay in cash to purchase marijuana products. Even the FinCEN guidelines don’t completely alleviate the cash issue as a result.

These cash payment issues have forced marijuana retailers to employ alternative payment processing methods, such as cashless ATMs, third party payment programs, and bitcoin. These non-bank financial services address many of the problems that arise from running a cash-only business, but they also come with their own set of challenges. Just by way of one example, my law firm’s cannabis business lawyers have handled many cases where banks stopped paying third party payment processors,  resulting in our clients (the cannabis businesses, themselves) not getting paid. No alternative payment service matches traditional credit cards on safety, costs or ease of use. Unless and until cannabis becomes federally legal, cannabis businesses and their customers will still need to employ credit card workarounds (for better or worse).

For more on cannabis and the banking industry, check out our following posts on this topic:

 

Is CBD legalThe DEA announced a new Final Rule late last year regarding “marihuana extracts” that left many in the industrial hemp and CBD industries concerned. The new rule created a separate classification for “marihuana extracts,” which it broadly defined as “any extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis.” This definition facially includes hemp-based goods running the gamut from hemp rope sandals to hemp lotion to therapeutic CBD oils, but critics have countered that such a definition exceeds the prohibition of “marihuana” created by the Controlled Substances Act. Some fear the DEA’s broadening of what constitutes marijuana extracts foreshadows a more aggressive federal enforcement posture that could devastate hemp-related companies the DEA now (and always) regards as criminal enterprises.

The DEA’s rule will soon be put to a court test as The Hemp Industries Association, Centuria Natural Foods, Inc. and RMH Holdings, Inc. last week filed a challenge to the DEA rule in the federal Ninth Circuit Court of Appeals. Whatever the result, this court’s ruling will likely significantly impact the future of the hemp-related industry and implicate key components of the burgeoning cannabis reform movement as well.

The core of the plaintiffs’ argument is that the DEA rule conflates “marihuana”—the substance prohibited by the Controlled Substances Act—with all cannabinoids and all parts of the cannabis plant, which it lumps into “marihuana extracts.” Plaintiffs point to legislative history that in 1937 Congress chose to use the term “marihuana” because at the time there was no meaningful and scientifically valid way to distinguish between the plant itself and the constituent parts Congress sought to outlaw. Plaintiffs also point to the 2014 Farm Bill, which permitted industrial hemp production so long as the plants remain below a threshold THC level, and the Consolidated Appropriations Act, which prohibited using federal funds to enforce the Controlled Substances Act against certain cannabis business. Plaintiffs contend that these legislative moves, along with greater scientific understanding of the cannabis plant and the ability to isolate specific components of the cannabis plant, all indicate Congress’s intent to carve out space for these businesses to operate legally. Plaintiffs also contend that the Ninth Circuit itself, in a 2004 case, recognized that not all naturally-occurring cannabinoids are per se prohibited by the Controlled Substances Act.

Plaintiffs contend the DEA exceeded its scheduling and enforcement authority under the Controlled Substances Act by undertaking a “de facto scheduling” of substances not contemplated by the Controlled Substances Act and that Congress views as distinct from marijuana as a “drug.” Plaintiffs essentially allege that with this rule the DEA is attempting to enforce a law Congress never enacted. This is a common challenge to expansive administrative rulemakings, but its application to any particular situation can be hard to predict and it usually hinges on the court’s reading of the underlying statute and the level of deference the agency’s action deserves.

We will keep an eye out as this case progresses and pass along any important updates as they come in.

Marijuana policy Oregon Washington CaliforniaYesterday, the governors of Oregon, Washington, Colorado and Alaska submitted a brief, plainspoken letter to two federal officials: Attorney General Jeff Sessions, and Treasury Secretary Steve Mnunchin. The letter requests that the Trump administration respect states’ rights, and engage with the governors “before embarking on any changes to regulatory and enforcement systems” related to state-legal marijuana. You can view the letter here.

Anyone following the story of weed in America knows that Jeff Sessions holds retrograde views on cannabis. Mnunchin has been more circumspect, stating only that FinCEN guidance on banking pot businesses is a “very important issue” and that he would “work with Congress and the President to… ensure that all individuals and businesses compete on a level playing field.” Unlike Sessions, Mnunchin has not shown his hand on cannabis policy to date.

The governors’ letter is not the first communication by any of these states with the new regime regarding cannabis. On February 15 Governor Jay Inslee of Washington wrote to Sessions requesting a meeting on the cannabis issue, which appears not to have been granted. The next week, Governor Kate Brown of Oregon attended a meeting with several other governors and President Trump, who purportedly wanted to give “more flexibility to the states”— at least in a general sense, and at least on that particular morning.

Other key players, like Washington Attorney General Bob Ferguson, have taken a less conversational approach, and promised to fight the feds on cannabis. (If you are wondering how that may pan out, see our analysis here and here.) This combative approach has been echoed by Oregon Attorney General Ellen Rosenblum, as well Oregon U.S. Senator Ron Wyden and Representative Earl Blumenauer, dependable cannabis advocates who have been busy charting a Path to Marijuana Reform as well.

So, which approach is best? Maybe all of them. It is clear that state governors, officials and representatives are not going to rest while the threat of federal enforcement looms. Private industry has also banded together, with lobbying groups like the New Federalism Fund, which consists of marquee industry players (including Canna Law Group clients), rising to the fore. The April 3 governors’ letter is only the latest in a series of salvos by states and the industry. Expect more to come.

Though 29 states have some form of cannabis legalization, the federal government still lists marijuana as a Schedule I controlled substance in the Federal Controlled Substance Act (CSA). According to the CSA, cannabis has no recognized medical benefit, has a high risk for abuse, and is too dangerous to research even under medical supervision.

A series of bills introduced in both the House of Representatives and the Senate could change all this. Senator Ron Wyden (D-Ore) and Representative Earl Blumenauer (D-Ore) introduced the legislative package on March 30 as the “Path to Marijuana Reform.” The package is made up of the three following bills:

  • The Small Business Tax Equity Act. This would create an exception to 280E that would allow a marijuana business that complies with state law to claim deductions and credits associated with state-legal selling of marijuana. This would allow marijuana businesses to deduct common business expenses like rent, most utilities, and payroll. Marijuana businesses could also claim tax credits, like those intended to incentivize energy efficiency, research and development, or hiring veterans. In other words, cannabis businesses would start being treated by the tax code as legal businesses, not criminals.
  • The Responsibly Addressing The Marijuana Policy Gap Act. This would address the gap between federal and state law by amending the CSA to exempt persons acting in compliance with state marijuana law from criminal penalties under the CSA. This Act would also reduce barriers for state-legal marijuana businesses by allowing them easier access to banking, bankruptcy protection, marijuana research, and removing prohibitions against advertising marijuana. It would also establish an expungement process for certain marijuana violations which would allow access to public housing and federal financial aid for higher education and would ensure that a person cannot be deported or denied entry to the U.S. solely for consuming marijuana in compliance with state law. Finally, it would ensure veterans have access to state-legal medical marijuana and protect Native American tribes from punishment under federal marijuana laws.
  • The Marijuana Revenue and Regulation Act would remove marijuana from the CSA which would allow marijuana to be regulated at the federal level. It would impose additional taxes on marijuana products, including an excise tax similar to the one currently imposed on cigarettes, and it would establish an occupational tax on marijuana producers and on marijuana products. It would establish federal permitting for marijuana business under a system operated by the Department of Treasury. It would also allow for regulations to control marijuana advertising and packaging.

In a statement, Rep. Blumenauer used his home state to highlight the problems with conflicting state and federal laws on cannabis:

As more states follow Oregon’s leadership in legalizing and regulating marijuana, too many people are trapped between federal and state laws. It’s not right, and it’s not fair.

Passage of all three bills would drastically change an industry that has matured and grown despite federal opposition. It is too early to know whether these bills stand a chance of becoming law, but if these trio of cannabis bills does pass, they would leapfrog the U.S. into one of the (if not the) most progressive countries on cannabis. Even if these bills do not pass this legislative session, they will almost certainly serve as guidelines for eventual legalization. Many are skeptical of these bills passing in light of our current presidential administration, and yet, this may be exactly why their chances may be so good right now. Write your senator and your congressperson to let them know that full legalization is important to you.

Cannabis lobbyingNot much gets done in American politics, especially in Congress, without the influence of the hundreds of lobbyists that represent industries, labor, and other interest groups before Congress and federal agencies. The overwhelming role of lobbying has so far been seen as a net negative for the cannabis industry. Powerful alcohol, tobacco, private prison and pharmaceutical lobbies have every incentive to block federal cannabis reforms that could displace demand for competing products and certain prescription medication or cut down on prison time. Pessimists for the future of marijuana prohibition point to these groups as a primary impediment to generating the political will necessary to legislate an end to cannabis prohibition under the Controlled Substances Act.

In an effort to level the playing field, a coalition of cannabis industry leaders recently formed the New Federalism Fund (NFF). NFF aims to wield the increasing popular support and financial success of state-level cannabis programs to bring pressure on federal lawmakers to support progressive reform.

Who is NFF? Support for the group comes from a wide variety of cannabis industry stakeholders, both recreational and medical, and it runs the gamut from dispensaries to private equity funds. The most widely recognizable company on its founding board is Scotts Miracle-Gro, which entered the ancillary cannabis market in 2016. Other notables include LivWell EnlightenedHealth, Privateer Holdings, Native Roots, and Medicine Man.

NFF is organized as a 501(c)4 non-partisan lobbying organization.

What are NFF’s specific priorities? NFF’s website outlines the group’s founding initiatives for particular reforms and the following priorities:

State-first cannabis regulation. NFF advocates for a state-first approach to cannabis policy, emphasizing that it is the best framework for enhancing local economic prosperity through tax revenue and job creation, ensuring patient access, and diverting cannabis from the criminal market. NFF emphasizes the success of early cannabis states and their potential to serve as policy laboratories to serve as examples for other states as envisioned by the Tenth Amendment.

Codification of the Cole Memo. The tenuous legal authority of the Cole Memo is probably the most immediate threat to the cannabis industry. To that end, NFF advocates for codifying the memo’s hands-off approach to state marijuana legalization. Though Jeff Sessions recently signaled that the Cole Memo is still good authority, codification would provide the cannabis industry greater certainty.

Equitable taxation. NFF argues for changing IRC 280(e), the infamous tax provision that greatly limits cannabis businesses’ ability to take advantage of the tax advantages afforded other legal businesses.

Will NFF succeed? Who knows, and, for that matter, defining “success” in this context is tricky. So long as the federal government does not crack down on existing state cannabis programs, NFF may be able to claim victory simply for having helped to maintain the status quo. But, if the question is whether NFF will secure federal legalization of cannabis, the prospects for success dim significantly. Nonetheless, having a strong pro-marijuana lobby is in the interest of all cannabis stakeholders and is an important sign that the legalization movement is maturing.

Marijuana and cannabis safety standards ASTMASTM International recently announced plans to launch a new committee on creating technical standards and guidance materials for the full life cycle of cannabis products. The new ASTM cannabis committee initially plans to focus on developing voluntary consensus standards related to cannabis in the following six technical areas:

  • Indoor and outdoor horticulture and agriculture
  • quality management systems
  • laboratory
  • processing and handling
  • security and transportation
  • personnel training, assessment, and credentialing

The development of uniform standards for cannabis related products, systems and services is critical to the cannabis industry because there is no currently no consensus on how cannabis products should be produced and processed to ensure product quality and safety. Because cannabis and its derivatives are still illegal under federal law, federal agencies such as the Food and Drug Administration (FDA) have not enacted anything that resembles the regulations it has implemented for tobacco products or medications or food. Some states, such as Colorado and Washington, have some quality control and assurance rules, especially regarding the safety of edibles and the use of pesticides. However, many aspects of cannabis remain wholly unregulated at the state level, and the patchwork of state regulations introduced thus far by various states have been inconsistently drafted and implemented.

ASTM International is one of the world’s largest voluntary standards developing organizations and it has helped develop over 12,000 industry standards for materials and products ranging from aluminum to zippers. ASTM International draws input for proposed standards from volunteer members from around the world that represent a broad range of industry stakeholders such as producers, users, consumers, government and academia. ASTM standards are voluntary, but many government regulators cite to them in their laws, regulations and codes, thus giving them the force of law. They also are commonly referred to in court cases.

The process of drafting, reviewing, and approving ASTM standards for the cannabis industry will take time. Once a technical committee for cannabis is established, ASTM will establish subcommittees to address individual technical areas. Each subcommittee will establish a task group responsible for researching and drafting a proposed standard. The draft standard will then be reviewed and voted upon by the technical committee and then it will go to the full ASTM membership. Depending on the committee and subject matters, ASTM standards can be drafted, reviewed, and approved in as little as nine months, or can take more than a year.

This process of developing industry standards for cannabis presents an opportunity for a data-driven conversation on how the cannabis industry should evolve and mature. Identifying objective standards for best-practices in the processes of growing, producing, processing, transporting, and packaging cannabis products will be a necessary step if the cannabis industry is going to mature and sustain itself on a broader (and potentially international) scale. When railroads were first introduced in the United States, locomotives and railroad tracks used different gauges in different parts of the country because the railways initially were built only to serve local needs. The cannabis industry is in a similar early stage of development, with individual states drafting and implementing cannabis regulations that are inconsistent with others in other states. Ultimately, the development of industry standards is a necessary step that will help the cannabis industry grow beyond its current state limits and speed up the day when our country sees cannabis as just another legal product.

Remember when the DEA adopted a “Final Rule” criminalizing “marihuana extract,” presumably including all extracts from the cannabis plant? Well, the DEA recently clarified that Final Rule, and based on the DEA’s own explanation and interpretation, marijuana extracts derived from mature stalks of the cannabis plant or industrial hemp not illegal under the federal Controlled Substances Act (CSA).

The DEA’s highlights of its clarification are that:

  • The “marihuana extract” definition does not include materials or products excluded from the definition of marijuana set forth in the CSA.
  • The rule includes only those extracts that fall within the CSA definition of marijuana.
  • If a product consists solely of parts of the cannabis plant excluded from the CSA definition of marijuana, such product is not considered “marihuana” or a “marihuana extract.”

This is a significant departure from a plain reading of the Final Rule, which creates a new “Controlled Substances Code Number” for marijuana extracts “containing one or more cannabinoids from any plant of the genus Cannabis.” When the DEA adopted this Final Rule in December of last year, our opinion was that it formally outlawed all CBD products, including those derived from hemp, because CBD is a cannabinoid and hemp is a plant of the genus Cannabis.

Marijuana is prohibited by the CSA and any CBD product derived from marijuana is therefore prohibited. However, the CSA exempts from the definition of “marijuana” the plant’s “mature stalks.” The logical conclusion is that CBD products derived from mature stalks containing no THC were not illegal (though the FDA would disagree). Another arguably legal route existed for CBD products derived from industrial hemp (part of the cannabis plant with less than 0.3 percent THC on a dry weight basis) lawfully grown in a State that has enacted hemp laws in compliance with section 7606 of the 2014 US Farm Bill. Because congress sanctioned industrial hemp, there was an argument allowing the sale of industrial hemp extracts in states with compliant programs. This meant that prior to adoption of the Final Rule, CBD products derived from mature stalks that did not contain THC or industrial hemp existed in a legal “gray” area.

Under the DEA’s Final Rule clarification, CBD products derived solely from mature stalks or industrial hemp containing little-to-no THC are not prohibited under the “marihuana extract” rule. However, this clarification is not an official ruling by the DEA as it does not have the same authority as a formal rule. Instead, this clarification provides guidance as to how the DEA will enforce the “marihuana extract” Final Rule. In addition, the marihuana extract Final Rule is currently subject to a lawsuit filed in the Ninth Circuit Court of Appeals by members of the hemp industry, and this clarification may cause that court to rule that the clarification limits the Final Rule.

The bottom line is that this clarification should be taken with a grain of salt as the Final Rule itself carries more legal authority and this clarification is not an official ruling by the DEA — it’s just the agency’s interpretation of its own rule, which can change as the DEA so desires. So, if you’re selling hemp-based CBD products with little to no THC, keep your head on a swivel as the DEA develops and implements this Final Rule.

 

Government cannabis lawyersYesterday, the Washington Post ran an illuminating and sad little story on government marijuana, which is pot grown under the oversight of the National Institute on Drug Abuse (NIDA). The government marijuana photographed and featured in the story is a sample distributed to a researcher for use in ongoing clinical studies for treatment of military veterans suffering from PTSD. The marijuana in question looks a lot like green tea: it is blanched and dry, stems and leaves. It does not resemble cannabis.

We have written before about the embarrassment that is our federal system for cannabis research. When the Drug Enforcement Agency (DEA), which oversees NIDA, says things like “[r]esearch is the bedrock of science, and we… support and promote legitimate research regarding marijuana and its constituent parts,” you must forgive the industry for rolling its eyes. The DEA clearly has no interest in studying anything that resembles the plant anyone actually ingests.

In addition to the dismal aesthetics of the government weed (reported to also lack smell), the WaPo story reports that the strain at issue tested out at 8% THC, which is less than half the average concentration found in commercial grade marijuana. The government weed also tests high in common contaminants, like yeast and mold, which would mandate its destruction in states with cannabis consumer safety laws (like Oregon, Washington or Colorado). In all respects, it would be difficult to mistake government cannabis for actual cannabis.

According to researchers, the quality of the NIDA cannabis makes highly controlled medical experiments next to impossible. One example of such an experiment includes the very experiment for which the cannabis was provided. After wending through a labyrinthian 7.5 year approval process and amassing a budget of $2,156,000 (based on a grant from the State of Colorado), it seems like a shameful waste of time and resources to test this “cannabis” on military veterans suffering from PTSD. If the government cannot grow real marijuana, it should at least know where to acquire it.

We have written before that given the lay of the land, it is up to states and private actors to take the lead on cannabis research – just as they have in all other aspects of ending prohibition. Constituent parts of the cannabis plant have real medical value, but they must be investigated properly to explore these promising features. Journalism like the WaPo piece, showing the NIDA shake, is helpful in pushing back on DEA claims that the law enforcement agency is a champion of science that “promotes legitimate research.” It does not. Really, the pictures say it all.

 

Cannabis lawyersJust about whenever Attorney General Jeff Sessions speaks, the cannabis industry panics. Stop it people.

This week Jeff Sessions gave an interview where he was asked about possibly using the federal Racketeer Influenced and Corrupt Organizations (RICO) Act to tackle legal marijuana. The media (the cannabis media in particular) have covered that interview as though it sets forth a roadmap for federal cannabis policy. And since that interview, probably every single cannabis lawyer at my law firm (in California, Washington and Oregon) has received at least one client call seeking an opinion on it.

Stop it everyone. Just stop it. Really. Sessions didn’t do anything in this interview but muse about a seldom used federal statute.

In this interview, Sessions hinted that he might be open to using RICO to pursue cannabis businesses in cannabis legal states:

INTERVIEWER: One RICO prosecution against one marijuana retailer in one state that has so-called legalization ends this façade and this flaunting of the Supremacy Clause. Will you be bringing such a case?

SESSIONS: We will, marijuana is against federal law, and that applies in states where they may have repealed their own anti-marijuana laws. So yes, we will enforce law in an appropriate way nationwide. It’s not possible for the federal government, of course, to take over everything the local police used to do in a state that’s legalized it. And I’m not in favor of legalization of marijuana. I think it’s a more dangerous drug than a lot of people realize. I don’t think we’re going to be a better community if marijuana is sold in every corner grocery store.

Of course he might be open to using RICO to pursue federal criminal law violations by cannabis businesses. I actually do not believe Attorney Generals Holder and Lynch, who were the Attorney Generals during the Obama Administration) would have answered this question substantively much differently. You are not going to get an Attorney General to say, “yes, we have this really important law on the books, but nobody worry because we will never enforce it. Just go ahead and violate it.” Really?

And if you listen to the entire interview here, you will hear Sessions poo-poo the benefits of bringing a RICO action against state-legal cannabis businesses:

INTERVIEWER: [I]t would literally take one racketeering influence corrupt organization prosecution to take all the money from one retailer, and the message would be sent. I mean, if you want to send that message, you can send it. Do you think you’re going to send it?

SESSIONS: Well, we’ll be evaluating how we want to handle that. I think it’s a little more complicated than one RICO case, I’ve got to tell you. This — places like Colorado — it’s just sprung up a lot of different independent entities that are moving marijuana. And it’s also being moved interstate, not just in the home state.

RICO was designed to pursue the mafia and other organized crime groups. RICO provides powerful criminal and civil penalties against people who engage in a “pattern of racketeering activity” and have a relationship to an “enterprise.” “Racketeering activity” includes roughly a hundred different offenses, including violations of the Controlled Substances Act. A “pattern” is established when an offense occurs more than one time in a given statutorily defined time period. An “enterprise” includes any individual, partnership, corporation, association, or other legal entity, and any group of individuals associated together even if they are not in a formal business relationship.

The broad interpretation of “enterprise” means that on a technical legal basis, RICO could pose a significant risk to cannabis businesses. The production and sale of cannabis is prohibited by the CSA and, therefore, regular sales of cannabis could serve as the predicate offense for a RICO charge and all those involved with legal cannabis sales, including vendors, contractors, landlords, lawyers, accountants, and even state officials could arguably be in an enterprise engaging in illegal activity.

But nobody should panic about this, not even close. RICO is a powerful but seldom used tool and that is because both prosecutors and judges view it as a very powerful weapon that should only be used in limited circumstances. The RICO statute has been around since 1970 and I cannot recall a single cannabis case having been brought under it. I am not saying there has never been such a case, but I am saying that it has been used sparingly in dealing with cannabis, if at all, including during Nixon’s “War on Drugs” and Reagan’s “Just Say No” administrations. In this same interview Sessions noted that the federal government has limited resources and it cannot simply commandeer local police forces to pursue RICO charges against cannabis users. RICO cases take a massive amount of effort to prosecute criminally and apparently not even Jeff (“good people don’t smoke cannabis“) Sessions deems this would be money and time well spent.

It also bears mentioning that a few years ago, some private citizens brought RICO claims against marijuana businesses and non-cannabis businesses alleged to have been operating in concert to sell cannabis. As we wrote here, the federal court dismissed those claims.

There is though one important thing cannabis businesses should take from this interview. Sessions is concerned about cannabis businesses that move marijuana from state to state. Note how he brings this up when he says: “it’s also being moved interstate, not just in the home state.” This IS important. The states are mostly in charge of prosecuting criminal activities that happen entirely within their own state borders. A robber in Portland or Seattle or San Francisco will almost certainly be prosecuted by state-city prosecutors; but a robber who brings stolen goods from Seattle to San Francisco could very well be prosecuted federally. The same has always been true of illegal drugs, including cannabis. If you are caught with weed in Newton, Iowa, you risk city or state prosecution. But if you are caught transporting cannabis from Iowa to Illinois, you risk federal prosecution.

So if you want to panic based on this Jeff Sessions interview, you should if you are planning to transport cannabis across state lines. The federal government has never liked interstate cannabis transport and it has always made this clear, as have we, in the following posts:

In Marijuana Law Myths. Not Everything Changes With Legalization, in Myth #2, we explain why it is so dangerous to fall for the myth that you can legally transport cannabis from one legal state to another and why this myth is so dangerous:

2. Now that marijuana is legal in Washington, Oregon, and Alaska, it is legal to sell Washington-grown marijuana in all three states. We hear this one ALL the time, mostly from marijuana businesses that intend to do this, believing it to be legal. It isn’t and please, please do not do this, unless you want to go to federal prison. The same holds true for Washington D.C., where marijuana was just legalized. You cannot just take your “legal” marijuana there and start selling it.

Taking legal pot across ANY state borders by boat or by car or by air is a big deal as it amounts to unlawful interstate drug trafficking.

More importantly, taking marijuana from one marijuana legal state to another is a federal crime. Marijuana is still a Schedule I Controlled Substance. The U.S. Constitution gives the federal government the authority to regulate interstate commerce. This means that it can (and does) prosecute people for transporting marijuana across state lines, even if the transport is from one marijuana legal state jurisdiction to another.

We are not saying that you should expect FBI agents to be sitting at the borders waiting to arrest people for going from one state to another with marijuana, but this is to say that traveling from state to state with marijuana is not advised, particularly by boat or by airplane. More importantly, a business plan that assumes this is legal is a business plan that will set you up to fail, especially if you publicly reveal that your business does this.

This is also a good time to remind you that if you are going to drive from state to state, clear out your cars, your boats, your airplanes, your clothes and your luggage before going from a cannabis legal state to one that is not. State troopers in states like Nebraska, Kansas, and Idaho (and even Nevada where cannabis is legal for medical us but not recreational) love making easy money by arresting and fining people entering with marijuana from Colorado and Washington.

Transporting a Schedule I Controlled Substance, including marijuana, across any state line is a federal felony. This is the case even if your medical marijuana patient card is honored in the next state over, and even if you are moving between jurisdictions that have legalized recreational marijuana. Keep and consume your cannabis in the state where you purchased it, or you run the risk of federal criminal charges for transporting a controlled substance.

So yeah, moving cannabis across state lines (yes, even from one cannabis legal state to another) is a really bad idea.

Oh, and one more thing, many (even some in the cannabis industry) are acting as though one RICO case would do what this interviewer says and “send the message” to all those in the cannabis industry to terminate all their employees and shut down their state-legal cannabis businesses. In other words, many are acting as though one RICO claim would be “lights out” for legalized cannabis all across the country.

This is absurd. The federal government has been trying to shut down cannabis for more than one hundred years, and for much of that time, it had overwhelming popular support for doing so. Today though, the majority of Americans favor legalization and those numbers keep getting better. Were the federal government to pursue “just one” RICO claim, it would likely be against a really large cannabis business that transported cannabis across state lines and I do not believe such a lawsuit would lead to a single state-legal cannabis business shutting down. If anything, it would be more likely to galvanize our country to legalize cannabis once and for all.

So please, nobody panic.