By Troy Sims
The Biden Administration has the opportunity to be the first administration to rid our legal system of cannabis regulation chaos.
State laws governing medical or recreational cannabis conflict with federal regulations, leaving cannabis consumers, businesses, and the lawyers representing them caught in the middle.
Guidance documents from the Department of Justice (DOJ) are an often-overlooked source of complexity and confusion in the cannabis industry. The Biden administration should seek to reconcile state and federal cannabis law.
The DOJ’s authority to regulate cannabis stems from the Controlled Substances Act (CSA), passed by Congress in 1970. The CSA created unprecedented federal authority over substance control, an issue traditionally left to the states. It sorted substances into different categories called “schedules” based on the government’s perception of their risk. Today, the Drug Enforcement Administration (DEA) maintains the schedules, and it categorizes cannabis in Schedule I, the most restrictive category, though the appropriateness of this classification is the subject of ongoing debate.
During the Obama administration, the DOJ issued a series of memos providing enforcement policies for cannabis regulation. The “Cole Memo” was the most significant memo, and relaxed federal enforcement of cannabis. Rapid growth of the cannabis industry followed.
However, former Attorney General Jeff Sessions rescinded these memos in 2018. Since then, ambiguities and shortcomings of the law that governs federal agencies have contributed to lingering confusion regarding the legality of state cannabis industries.
At issue in this case are exceptions to requirements of administrative law.
The Administrative Procedure Act requires federal agencies, including the DOJ, to have consistency, transparency, and accountability when passing or enforcing regulations. But, because guidance documents are considered statements of policy, instead of law, they are assumed not to bind the public.
Thus, the DOJ has relatively broad freedom when issuing guidance documents. This means the Cole Memo, and its rescission, did not require safeguards like notice-and-comment.
However, the assumption that guidance documents do not bind the public is not valid; guidance documents on cannabis policy have shaped the public’s behavior.
After the DOJ issued the series of cannabis-related memos, state cannabis policies changed drastically. Currently, 37 states allow cannabis medically, recreationally, or both.
As cannabis businesses opened, states began changing their ethics rules to allow these entities access to legal representation. Now, 26 states have amended or addressed the ethics of representing cannabis clients.
Created in reliance on DOJ guidance documents, these new state policies promoted expansive growth of state cannabis industries. During his confirmation hearing, former Attorney General William Barr stated that “reliance interests have arisen as a result of the Cole Memo.” In this case, “reliance interests” involve economic, business, and consumer rights or privileges based a government policy; such interests were recently discussed by the Supreme Court in Department of Homeland Security v. Regents of the University of California.
In Department of Homeland Security v. Regents of the University of California, the Supreme Court reviewed the rescission of a memo which created the Deferred Action for Childhood Arrivals (DACA) program. The Court held that the rescission of the memo violated the Administrative Procedure Act (APA), in part due to the reliance interests created by it.
The Court acknowledged that people started careers and businesses because of the memo, and the loss of these interests would cost the economy billions and lead to lost tax revenue. The Court added that, prior to rescinding the memo, the agency was “required to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns.”
This ruling in Department of Homeland Security v. Regents of the University of California would suggest that the rescission of the cannabis-related DOJ memos is also a violation of the APA.
Upon rescission of the Cole Memo, states were required to revise and update their ethics guidelines. The conflicting laws and federal inconsistency has created uncertainty in the cannabis industry, which could result in significant economic losses. (In 2019, the global legal cannabis market was valued at $17.7 billion and had created 211,000 full-time jobs.)
Due to limited federal resources for enforcing cannabis regulation, Sessions’ rescission of the Cole Memo had little immediate impact on the cannabis industry. However, funding can increase and DOJ priorities can shift.
To shore up the cannabis industry, and reconcile state and federal law, Congress should amend the CSA. For instance, the proposed Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), would leave cannabis regulation to the states and eliminate the conflict between state and federal cannabis laws. In addition to de-scheduling cannabis and simplifying regulation, the MORE Act would impose a five percent federal tax on sales.
The Biden Administration can finally resolve the unnecessary legal complexity associated with the cannabis industry. Further, it can help to realize the full economic potential of the industry. The Biden Administration must formulate a consistent regulatory scheme and boundaries in line with the spirit of federalism.
Troy Sims is a recent JD graduate from Gonzaga University School of Law and Assistant to the Chair of the Licensing Subcommittee of the Oregon Psilocybin Advisory Board.