Last week was an exciting and somewhat scary week for the marijuana industry. It started with California kicking off its long-awaited, newly regulated medical and adult use markets on Monday. Then, only two days later, U.S. Attorney General Jeff Sessions rescinded the Obama-era Department of Justice guidance (the “Cole Memo”) that essentially kept the DOJ’s hands off state-legal marijuana operators. And it wasn’t just that guidance that got the axe; all DOJ enforcement memos issued before and after the Cole Memo are now gone as well. Sessions’s taking down the Cole Memo is no surprise given Sessions’s entrenched loathing of marijuana, but what does it mean and what are its immediate impacts?
First, some history.
On August 29, 2013, former U.S. Deputy Attorney General James M. Cole issued the Cole Memo to U.S. Attorneys across the DOJ. The Cole Memo announced that the DOJ wouldn’t waste its time seeking to overturn state legalization initiatives. It would instead focus on eight enforcement priorities in states with legalization or medical marijuana reform that ranged from the diversion of marijuana across state lines and out of the country to dealing with any drug cartels or other nefarious criminal interests. The Cole Memo never legalized marijuana or changed marijuana’s schedule listing under the federal Controlled Substances Act; the Cole Memo was designed only to provide guidance to U.S. Attorneys on how and why to prosecute marijuana crimes in states with marijuana-friendly laws.
The Cole Memo paved the way for the DOJ to issue another memo in 2014 that addressed financial institutions providing banking services to the cannabis industry despite existing anti-money laundering laws. This led FinCEN (of the Department of Treasury) to issue its own guidance in 2014 telling financial institutions what to do if they wanted to bank the industry.
Now, both Cole Memos, the DOJ banking memo, and the Ogden Memo are rescinded and in their place, we have a one-page memo from Sessions that “returns” enforcement of federal marijuana laws to individual prosecutors with no qualifying conditions on enforcement. The Sessions Memo starts out by saying that “. . . marijuana is a dangerous drug and . . . marijuana activity is a serious crime,” and then provides that:
In deciding which marijuana activities to prosecute under these laws with the [DOJ’s] finite resources, prosecutors should follow the well-established principles that that govern all federal prosecutions. . . these principles require federal prosecutors deciding which cases to prosecute weigh all relevant considerations, including federal law enforcement priorities set forth by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.
Industry reaction has ranged from nonplused to utter panic (check out my Q & A with Leafly on some of the finer details on losing the Cole Memo). Only time will tell if the Sessions Memo is part of a bigger crackdown that’s heading for the industry or nothing more than puffery (though Sessions did go on record stating that the Cole Memo “undermined the rule of law”). The Sessions Memo directs U.S. Attorneys to follow the principles of enforcement in the U.S. Attorneys’ Manual when it comes to marijuana crimes, but that document merely reiterates the level of discretion and authority each U.S. attorney already has. Ultimately, the Sessions Memo means increased uncertainty for the marijuana industry as it’s now clear that each U.S. Attorney (of which there are 93 across the country) is now free to enforce federal marijuana laws according to their own prosecutorial discretion. And though these U.S. Attorneys have always had this discretion, under the Cole Memo they didn’t necessarily have free reign to go gangbuster with prosecutions against state-law compliant marijuana businesses.
Certain U.S. Attorneys have already stated how they will handle the Sessions Memo (see here, here, and here). Others have directed questions on this to the DOJ or just said nothing at all. Speculation is also running wild as to whether U.S. Attorneys with deep backgrounds and successes in prosecuting drug crimes and traffickers will now pursue marijuana businesses.
The ripple effect of the Sessions Memo on the ancillary sector may also be significant. Banking will be a major unknown for some time as FinCEN’s 2014 guidance heavily relied on the Cole Memo and DOJ banking memo, both of which are now gone. FinCEN could still reinforce its own guidance, but that’s going to be hard to do without these other memos in place. We likely will see at least some financial institutions stop providing banking services to the cannabis industry. We are also anticipate some investors and landlords will pull out of the industry as well for fear of asset forfeitures and secondary criminal liability.
Whether this enforcement shift brings unpredictable selective enforcement by certain U.S. Attorneys, legal challenges between the states and Feds over states’ rights in this area, or nothing at all, it has surely spurred bipartisan support (and backlash) from Congress for federal legislation to let the states have full reign over marijuana.
Source: Cannabis Business Executive