Who says Democrats and Republicans are incapable of working together to bring about change? Under the reintroduced bill known as The Strengthening the Tenth Amendment Through Entrusting States Act of 2019 (the States Act), Senator Elizabeth Warren (D-MA) and Representatives David Joyce (R-OH) and Earl Blumenauer (D-OR) are trying to do just that – by reintroducing a bill that if passed would enable each state to regulate medical and adult use of marijuana and would take the federal government out of the fray … at least for the most part.
Both the federal government and state governments regulate the use, production and sale of marijuana and other CBD derivatives, which has resulted in laws that are inconsistent at best. Under the federal Controlled Substances Act, marijuana is a Schedule I drug, which makes it no less “dangerous” than heroin and cocaine. Schedule I drugs are viewed as addictive and as having no medical benefits. It is a felony to produce, distribute and use marijuana under federal law. This characterization of marijuana as a Schedule I drug has been highly criticized on both sides of the aisle.
Currently, 33 states and the District of Columbia have laws that allow the use, production and sale of marijuana for certain purposes. Ten of the states and the District of Columbia allow for adult use of marijuana and all 33 states and the District of Columbia allow for its use for medicinal purposes, although not all states’ laws are consistent as to the types of ailments that marijuana may be used to treat.
Marijuana and its derivatives, including cannabis products that contain significant levels of tetrahydrocannabinol or THC, are Schedule I drugs under the CSA. The CSA makes it “unlawful for any person knowingly or intentionally (1) to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute or dispense, a controlled substance.” 21 U.S.C. § 841(a). Federal law also makes it illegal to “aid and abet” the manufacture, distribution, or dispensing of marijuana.
The difference between the states’ laws and the federal law has led to much confusion and concern among those in marijuana businesses and in businesses that sell or provide products or services to marijuana businesses.
Under the CSA, controlled substances are classified into one of five tiers, largely based on their perceived potential for abuse and dependence and whether they are viewed as providing any medical benefit to the user. Schedule I controlled substances are those considered the most harmful to users due to their propensity to cause injury and dependence with little or no medical benefit.
The recent history of federal law governing marijuana and its enforcement is instructive. Ever since the issuance by the Department of Justice of the “Cole Memorandum” 1 on August 29, 2013, the federal government has generally refrained from prosecuting entities that are involved in the manufacture, distribution, or dispensing of marijuana provided that those entities are operating legally within the states in which they operate. The Cole Memorandum limited the federal government’s enforcement of the CSA pertaining to marijuana to a “short list” of certain enterprises and activities including, among others, distribution of marijuana to minors, marijuana enterprises used to exacerbate organized crime, the use of violence and firearms in the marijuana business, and the possession or use of marijuana on public lands.
Following the issuance of the Cole Memorandum, the Treasury Department issued guidance when it comes to marijuana enforcement policy. The Financial Crimes Enforcement Network (FinCen), a division of the Treasury Department, issued guidance (the FinCen Guidance) 2 regarding assessing risk for financial institutions in their potential dealings with marijuana-related businesses.
Under the FinCen Guidance, enterprises that are in the marijuana business are classified as either Tier I, II, or III. Tier I enterprises are those that “touch the plant” and include marijuana growers and distributors. Tier II enterprises are those that don’t directly “touch the plant” but are critical to the business of those that do. These would likely include, among others, enterprises that sell equipment used to produce marijuana or that package it for sale. These companies could be deemed “aiders and abettors” to a Tier I company because Tier II enterprises are those that primarily service or produce goods used by Tier I enterprises. Tier III enterprises are the furthest removed from the Tier I enterprises and thus they have the lowest risk of being prosecuted under the CSA. They are providers of services or goods used by enterprises that are both Tier I enterprises as well as the public at large. This would include a credit union or bank that provides banking services to a Tier I business.
In recent years, the Cole Memorandum and the FinCEN Guidelines have provided comfort to some that the federal government will not pursue people or enterprises that are in the marijuana industry provided that they are complying with applicable state law. While the Cole Memorandum was rescinded by former Attorney General Jeff Sessions, the FinCEN Guidelines on Cannabis appear to provide similar comfort, but there remain many – including many federally chartered banks – that will not knowingly provide goods or services to Tier I and Tier II marijuana-related businesses.
There are legislators in both parties that support the States Act or at least the concept behind it. Under the States Act, the CSA would be amended so that its provisions would no longer apply to any person or entity acting in accordance with state or tribal marijuana laws. The law would continue to bar the sale or distribution of marijuana to anyone under the age of 21 and would maintain a standing prohibition on the distribution of marijuana at facilities such as rest stops and truck stops. It further calls for the Government Accountability Office to conduct a study on the effects of marijuana legalization on traffic safety.
When will Congress act on the bill? It is still not known, but most agree that the current state of the law in this area is badly broken and is in need of repair.
Representative David Joyce said the following about reforming federal law in this area: “The current federal policy interferes with the ability of the states to implement their own cannabis laws, and the resulting system has stifled important medical research, hurt legitimate businesses and diverted critical law enforcement resources needed elsewhere. It’s past time for Congress to clarify cannabis policy on the federal level and ensure states are free to make their own decision in the best interest of their constituents. The States Act does just that by respecting the will of the states that have legalized cannabis in some form and allowing them to implement their policies without fear of repercussion from the federal government.”
Reed Smith’s Cannabis Law Team is able to help with any number of cannabis-related issues. For additional information, please visit Cannabis Law.
Client Alerts 2019-108