Marijuana banking

Sessions Abdicates His Responsibility on Marijuana

By January 25, 2018 No Comments

On January 4, 2018, Attorney General Sessions issued a memo formally rescinding years of Department of Justice (DOJ) guidance, most notably the 2013 Cole Memorandum, that laid out the federal government’s effectively hands-off approach to state legalized marijuana. It will now be up to individual U.S. Attorneys in those states that have legalized marijuana to decide whether or not to enforce, and how to go about enforcing, federal marijuana laws.

In taking this action, Sessions has done a grave disservice to the states that have legalized marijuana, the marijuana industry, and the U.S. Attorneys he is charged with leading.

Following the Sessions announcement, a DOJ official was quoted as saying that the message for federal prosecutors is that going forward they should approach marijuana cases “like all other cases.” But the fatal flaw in that message is the notion that marijuana cases are like all other cases.

What other federally illegal activity has been able to operate openly and freely under the watchful eye of, and pursuant to policy guidance from, DOJ?

Marijuana cases are unique precisely because DOJ treated them as such for 20 years.

DOJ’s role in state-legalized marijuana

DOJ’s practice and policy of deference to state marijuana laws long pre-dates the Cole Memo.

California was the first state to legalize medical marijuana in 1996, and the response from the Clinton DOJ amounted to a shrug of the shoulders. Other states soon followed suit and before long medical marijuana was an accepted fact of life in America, despite its conflict with federal law.

The first DOJ policy on marijuana enforcement was issued in 2009, and it essentially said that patients who use medical marijuana, and those who provide it, should not be an enforcement priority of the Department.

The 2013 Cole Memo was the first DOJ guidance issued in the wake of Colorado legalizing recreational marijuana. The Cole Memo effectively amounted to a deal: DOJ would allow states to legalize marijuana, but only if they enacted a robust regulatory regime; meanwhile, DOJ would allow businesses, investors, and consumers to operate freely in the state-legal marijuana market, so long as they complied with state law and federal policy.

The Cole Memo was the spark that took legalized marijuana to where it is today: legal in 29 states and the District of Columbia.

And while many of the negative stereotypes about marijuana persist, the state legalized marijuana industry operating today is not your father’s marijuana market from the ’60s. States have established extensive regulatory regimes to ensure that marijuana markets operate consistently with state law and federal policy.

New technologies are capable of tracking marijuana plants from seed to sale. Banking compliance solutions have been developed to address the unique challenges posed by the marijuana industry.

Sophisticated investors have poured hundreds of millions of dollars into the marijuana industry, transforming it into a multi-billion dollar market employing tens of thousands of people and generating significant tax revenue.

As with any emerging market there are some bad actors, but overwhelmingly states, businesses, and individuals involved in the marijuana industry take their responsibilities seriously.

Ironically, the overhang of federal law has caused the state-legalized marijuana industry to become one of the most transparent and compliant in the country.

This is the situation that Jeff Sessions inherited when he became Attorney General almost a year ago.

Not perfect, and certainly not something that anyone would have created from scratch, but nonetheless a functioning system that reflected the public’s ever-increasing support for marijuana legalization. It was no secret that Sessions was determined to do something about marijuana – the question was always how much of what preceded him in office would affect both what he did, and how he did it.

After all, this was not a decision being made in a vacuum, but in the context of 20 years of DOJ implicit and explicit acceptance of state-legalized marijuana.

In other words, his personal views aside, what institutional obligation did Session believe he owed to an industry that had so significantly relied upon the guidance he was preparing to rescind? The resounding answer: none.

Down the memory hole

In rescinding the Cole Memo, and all other DOJ guidance on marijuana enforcement, Sessions issued a simple one-page memo that made no mention of the fact that such guidance, like it or not, constituted the foundation of a significant industry operating in over half the country.

He provided no new guidance as to how U.S. Attorneys should approach marijuana enforcement going forward, other than to say that the U.S. Attorneys’ Manual gives federal prosecutors discretion to decide which cases to prosecute.

Prosecutorial discretion is a critical component of federal law enforcement, as it acknowledges that the enforcement priorities in Florida will likely differ from those in Alaska.

But there is one thing that Florida and Alaska have in common: both states have legalized marijuana.

With the Cole Memo now rescinded, what criteria should U.S. Attorneys in those states use to determine how to enforce federal marijuana laws?

Should every business or individual involved in marijuana be prosecuted? None of them? The Sessions memo offers no guidance.

That raises the likelihood that marijuana enforcement will descend into a random patchwork that varies from state to state, and even within states, depending on the disparate views of U.S. Attorneys.

Say what you will about the Cole Memo, but it at least encompassed a single enforcement mechanism that applied uniformly across the country.

Another revealing aspect of the Sessions memo is its characterization of the Cole Memo and other rescinded marijuana guidance.

According to Sessions, because U.S. Attorneys already enjoy prosecutorial discretion with respect to the enforcement of all federal laws, guidance specific to marijuana was “unnecessary.” Sessions thus effectively conceded that prior federal deference to state marijuana laws, and presumably going forward as well, is perfectly consistent with DOJ’s well-established practice of prosecutorial discretion.

It is akin to the scene in The Wizard of Oz when the Witch of the North informs Dorothy that she possessed the ability to go home the entire time.

On one hand, it should be welcome news to marijuana supporters that Sessions has validated the potential continuation of Cole Memo enforcement priorities – should an individual U.S. Attorney happen to agree with them.

But on the other hand, from a national perspective, this raises the troubling prospect of enforcement practices varying dramatically and arbitrarily, from Cole Memo non-enforcement in one state, to a complete marijuana crackdown in another, based solely on the views of a U.S. Attorney.

It turns out that U.S. Attorneys were not the only ones blindsided by the Sessions announcement.

Since 2014, the Treasury Department has had guidance in place as to how financial institutions can permissibly service marijuana-related businesses. And yet while DOJ’s marijuana guidance has all been rescinded, the Treasury’s marijuana banking guidance remains in place, suggesting a disturbing lack of interagency coordination prior to the Sessions announcement.

The result is that two federal departments now effectively have conflicting policies in place with respect to state legalized marijuana.

Sessions’ decision to undo DOJ guidance deferring to state legalized marijuana did not absolve him of his obligation to do so responsibly.

Instead he outsourced the difficult decision-making to U.S. Attorneys with no direction, and failed to coordinate with other agencies to ensure a united federal government approach. In the process, an industry operating according to DOJ guidance in over half the country, that provides thousands of jobs and critical medical treatment, has been thrust into uncertainty.

As Attorney General, one of Sessions’ primary obligations is to ensure the equal and predictable enforcement of federal law. With his decision on marijuana, he has done the opposite.

 

About the author

John W. Vardaman, III worked at the U.S. Department of Treasury and Justice on AML/BSA policy and enforcement, and was a contributing author of the Cole Memorandum.

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