Jeff Sessions Rescinds Cannabis Protection

On Thursday, January 4, Attorney General Jeff Sessions rolled back a memorandum from the Obama administration that had set guidelines for federal law enforcement not to interfere with marijuana-friendly states. This move is not surprising — Sessions has long been an extremely vocal critic of any kind of marijuana reform, and is of the opinion that the drug is highly dangerous. The industry has been waiting for this type of move since Sessions took office, and while some were hopeful that he’d leave it alone, most knew that it was just a matter of time.

The Cole Memo, written by former US attorney general James M Cole in 2013, directs federal prosecution to have a more hands-off approach with minor marijuana-related offenses in legal states, and focus on crimes like distribution of marijuana to minors, prevention of violence and firearms in cultivation and distribution of marijuana, prevention of drugged driving, and prevention of revenue from going to gangs and cartels — all things that should absolutely be prosecuted in cannabis-legal states. Now that these guidelines have been rescinded, the manner in which federal prosecutors treat cannabis-legal states is somewhat of a question. The US attorneys in Colorado and California have already issued statements that they do not plan to make any changes in regard to marijuana prosecution and will protect their state’s existing legislature. Senator Ron Wyden from Oregon, another legal state, stated earlier, “Trump promised to let states set their own marijuana policies. Now he’s breaking that promise so Jeff Sessions can pursue his extremist anti-marijuana crusade. Once again the Trump administration is doubling down on protecting states’ rights only when they believe the state is right.”

RGB elf motif-printWith the announcement coming only three days after the launch of recreational sales in California, the overwhelming reaction from those in the industry is that of alarm. Publicly traded cannabis companies were down 15% on the stock market in the afternoon following this announcement. California is expected to collect over $1 billion in tax revenue in 2018 alone, having the largest and oldest medical cannabis market to provide the framework for a very successful recreational market. Despite assurances from state AG offices, US attorneys choose which cases to review, and Sessions will surely be appointing attorneys with ideologies in line with his own. The day before releasing this announcement, he announced the appointment of 17 interim US attorneys, some of whom are in three different cannabis-legal states, including Massachusetts.

The Bay State has a new US attorney, Andrew Lelling, who assumed office on December 21, 2017, and now has a large ability to influence the state’s recreational cannabis market. Lelling released a statement that he would continue to prosecute federal marijuana crimes, but hinted at looking over small scale crimes and choosing to “aggressively investigate and prosecute bulk cultivation and trafficking cases, and those who use the federal banking system illegally.” One major risk with the timing of this announcement is that dispensaries and cultivation operations in the state are in their final stages of acquiring licensure, and are at risk of losing private investors, whose equity many burgeoning cannabusinesses depend on. Owners and investors may feel the risk is too great with Sessions as AG, and this could reduce the $44 million to $82 million in expected tax revenue for 2018. The Cannabis Control Commission, in charge of writing and enforcing the rules and regulations, have said that they plan to continue full steam ahead and hope that Lelling respects the wishes of the voters in the Commonwealth to regulate the substance. Adult use sales are expected to begin July 1, 2018.

The DEA and FBI will also feel increased pressure to pursue more cases. This shift in policy direction could go many different ways, and the stakes have never been so high; as companies large and small pay hefty application and licensing fees to compete in their state’s market, many risk their savings and livelihoods on the chance that federal prosecutors may interfere. The next step is to wait and see how the attorneys choose to increase their involvement. As is always the case with the cannabis industry, two steps forward and one (very unsettling) step back.