Cannabis and the Specter of Federal Law

For today’s post I thought it would be helpful to address a few “frequently asked questions” about cannabis business law from a Federal law perspective.

If I operate a cannabis business in a state in which it has been legalized can I be arrested?

Yes. In the United States we operate in a Federal system with the United States government and the various states. The US and the states have overlapping, and sometimes conflicting, laws. Usually, when the laws conflict US (Federal) law prevails over state law. Currently, cannabis is illegal under Federal law. It is a Schedule I drug, which means that the US government considers it to have “a high potential for abuse” and “no currently accepted medical use.” The fact that cannabis has been legalized in a particular state does not mean that it is legal under Federal law. Cannabis companies that are operating legally under their state laws can and do occasionally get raided by the Feds.

Given that cannabis is still illegal under Federal law, how are cannabis companies able to operate within the US?

The Obama Administration, which as the Executive Power under the US Constitution is responsible for enforcing Federal laws, has outlined its enforcement priorities in several official memos regarding cannabis in states where it has been legalized. Although non-binding, the enforcement priorities set forth cannabis-related activities which will trigger enforcement (ie, arrests and prosecutions). For instance, one of the Administration’s priorities is “preventing the distribution of marijuana to minors.” Another priority (there are several) is “preventing the diversion of marijuana from states where it is legal under state law in some form to other states.” If these activities are present then the Federal government will step in and enforce its laws regarding cannabis, notwithstanding that cannabis may be legal in the state in which the activities are occurring. Absent the triggering of one or more of the Administration’s enforcement priorities the Federal government has indicated its intention to allow state-authorized businesses which are in compliance with well regulated state laws to operate unmolested.

Can I lose my property if I lease it to a cannabis business?

Yes. If you lease your property to a cannabis business your property may be subject to civil forfeiture by the Federal government. This is one of the reasons that landlords tend to demand higher rents from cannabis businesses than more traditional commercial enterprises. However, assuming that a landlord’s tenant operates a business that is compliant with a well regulated state law cannabis regime, the odds of the landlord losing her property is low.

Is there anything that can be done about the Federal vs. State law divide?

Yes. Support a change in the law. Currently, versions of the Compassionate Access, Research Expansion, and Respect States (CARERS) Act are pending in both the Senate (S.683) and the House (HR 1538). There are a number of sponsors, including, Senators Cory Booker (D-NJ), Rand Paul (R-KY), Kirsten Gillibrand (D-NY), Dean Heller (R-NV), and Barbara Boxer (D-CA) and Representatives Steve Cohen (D-TN), Don Young (R-AK), Jon Conyers (D-MI), Richard Hanna (R-NY), Duncan Hunter (R-CA) Zoe Lofgren (D-CA), Jerrold Nadler (D-NY), and Dana Rohrabacher (R-CA), plus Delegate Eleanor Holmes Norton (D-DC). I would encourage you to contact all of these politicians and any from your home state that are not on this list. The reason is that the CARERS Act would eliminate a number of inconsistencies and treat people who operate within their states’ laws fairly. If enacted, the CARERS Act would do the following:

– Allow states to legalize marijuana for medical use without federal interference
– Permit interstate commerce in cannabidiol (CBD) oils
– Reschedule marijuana to schedule II
– Allow banks to provide checking accounts and other financial services to marijuana dispensaries
– Allow Veterans Administration physicians to recommend medical marijuana to veterans
– Eliminate barriers to medical marijuana research

Short of full Federal legalization this progress is vitally important for the cannabis industry to survive and to thrive. The CARERS Act needs to become law. Please support it.