Letter Regarding Announcement from Jeff Sessions

The phones, texts and emails are like incoming missiles.
The Panic button has been pushed!
The news? The federal government is going to enforce federal drug laws pertaining to cannabis. The stalemate, or containment policy, an Obama-era policy, is over.

How do we think about this? And most importantly for those who make a living, directly or indirectly from the Cannabis economy, what does the future portend for them?

First and foremost, the numerous waves of federal crackdown on cannabis since 1970,
have not done anything to reduce or stop the growth of the cannabis sector. In fact, like Hydra, who grew 8 heads back each time its head was cut off, every time the federal government has cracked down, the cannabis sector has roared back with a vengeance. We saw this numerous times and most recently in 2011-12. Undeniably, despite almost 50 years of federal prohibition, cannabis has never been more prevalent or accepted in the US. Witness the current exploding cannabis marketplace.

In California, cannabis actors have, as a whole, completely disregarded federal law and federal enforcement for decades. The result? California continues to lead the nation is every aspect of the cannabis sector.

Should this historical perspective give any comfort to us today?
Yes and no. First the bad news (which is not so bad.)

In every War, and the War on Drugs is no exception, there are battles and casualties. This War is not over and I expect there will be more battles and more casualties. Where and when will we see the federal government strike? Initially, look for easy targets out West, those with a state license but which are still operating in a black market fashion.

Now the more comforting news.

Do I see the federal government coming up with a tactically effective approach that would lead to large-scale victories?

No. In fact, the feds have limited options. Let’s review them.

1. Seeking a court order to prevent states from enacting and operating regulatory programs.
I don’t see federal courts issuing injunctions to prevent state governments from regulating cannabis at the state level. Section 903 of the Controlled Substances Act carves out an ability for States to create their own laws to regulate and enforce cannabis. States can make whatever laws they want to relating to cannabis “unless there is a positive conflict between that provision of this subchapter and that State law so that the two cannot consistently stand together.” A federal judge will likely allow the states the latitude to regulate and license cannabis as a way to control it and would likely NOT find a positive conflict between state and federal law. I could be wrong but such a federally-initiated lawsuit case would likely take at least 2 years to litigate and would
certainly end up in the Supreme Court. And even if a court issued a preliminary injunction, I can imagine a scenario where a state would disobey that court order. Lots of possible scenarios! Not many of the outcomes are good for the federal government.

2. Putting boots on the ground
Not only do the feds have limited personnel, but they are going to have a tough time getting their traditional allies – local law enforcement – to cooperate, at least as to any state licensed operations complying with state laws. You might see a splashy raid (see “Bad news” above) but I don’t see how the feds can marshal enough resources to make a significant dent in the fast-growing cannabis market.

3. Scare tactics
This unfortunately, is where the feds have done and will continue to do the most damage. The fed takes advantage of the evolving public opinion and the federal-state conflict, to scare investors away and to create uncertainty in the marketplace. Today’s announcement, like the first Cole memorandum, does have a negative impact.

Bottom line: Stay away from the cannabis marketplace if you are not comfortable taking the risks, known or unknown, that this emerging industry requires. Do join with your colleagues – pro-cannabis politicians, non-profit groups and others – to press for Congress to change the scheduling of cannabis.

STAY STRONG PEOPLE and OBEY STATE LAWS!

Matthew KuminComment