An end to gov’t meddling in MJ industry? Impact of federal marijuana legislation uncertain

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Tucked inside the enormous 1,600-page spending bill Congress passed last month is a key marijuana-related provision that some industry insiders say will bring about the end to federal meddling in states that have legalized medical or recreational cannabis.

The provision specifically prohibits the Department of Justice from using federal funds to block states from implementing laws “that authorize the use, distribution, possession, or cultivation of marijuana.” It names 32 states and the District of Columbia, each of which have already passed some form of marijuana reform law.

“The war on medical marijuana is over,” one cannabis lobbyist crowed after the bill received final approval.

California Republican Congressman Dana Rohrabacher, who helped shepherd the provision into the bill, rejoiced as well, saying it signals that the government is “taking an approach to respect the many states that have permitted the use of medical marijuana to some degree.”

Encouraging words for the future of the cannabis business, to be sure. The move could convince more investors and entrepreneur to get involved, sway lawmakers in states considering medical or recreational marijuana legalization, and generally remove the biggest risk facing cannabis businesses.

But, as with so many things in Congress, it’s not that simple. And there’s no guarantee that the federal government will take a hands-off approach to the industry going forward, especially in states with weak or non-existent regulatory structures.

A symbolic victory?

Some industry executives are hesitant to classify the provision as a watershed moment for the industry.

“It’s largely a symbolic gesture on behalf of the Congress. It’s a great piece of feel-good legislation, but it really has no teeth,” said Victor Pinho, the director of marketing and communications at Berkeley Patients Group, a California dispensary. “There’s nothing in there to really change the (modus operandi) of these U.S. attorneys who are conducting raids.”

The central problem is that the new law doesn’t explicitly forbid federal agents from targeting marijuana businesses. It only ties their hands with respect to states that want to implement their own laws.

“It won’t mean the end of raids,” explained Paul Zukerberg, a Washington DC attorney and marijuana reform advocate. “You have to be in compliance with a state marijuana regulatory law, and the way (federal agents have) gotten around it is they’re saying, ‘Ah-ha, you’re not in compliance with state law, because of 1, 2, 3, or 4.'”

And the obvious problem for MMJ businesses in states like California that don’t have comprehensive marijuana regulations in place is that there are no rules to comply with. This is a primary reason that a federal lawsuit against Berkeley Patients Group hasn’t yet been dropped, Pinho said.

“Ultimately, this thing did not change any of the ways in which the DOJ does business. Therefore, we can’t look at this and say it’s a victory,” Pinho said.

A perfect example of the quandary emerged from Michigan on Wednesday, when news broke that a man charged with illegally growing marijuana tried to use the new law as a defense.

Michigan is in the same situation as California – voters approved MMJ years ago, but the state has no overarching regulations for businesses to comply with. Nevertheless, the man even filed a legal brief without the help of an attorney, claiming that he had done legal research that led him to believe he was in the right.

Responding to the suit, Michigan Assistant U.S. Attorney Mark Courtade said “nothing in this legislation has in any way undermined the prosecution.” The presiding judge agreed, saying that the spending bill has no impact on either federal drug laws or the prosecution. The defendant ultimately pleaded guilty to maintaining a drug-involved premises and could be sentenced to up to 20 years in prison.

‘Loosen up the bulletproof vest’

That doesn’t mean the new law is completely ineffective, however. For one thing, it arguably grants more protection to marijuana businesses in states that do have comprehensive regulatory systems, such as Colorado.

“I like to be able to go to bed and sleep peacefully at night without worrying that the federal government will come in and shut down my business. In states that have regulations, you have that confidence,” said Diane Czarkowski, a principal at the marijuana consultancy Canna Advisors in Boulder.

The new law lets people in the industry “loosen up the bulletproof vest a little bit,” Czarkowski said.

“But we’re not ready to take it off yet,” she added cautiously.

Canna Advisors has clients spread across the country, but mostly in states that have strict regulatory structures, such as Massachusetts, Connecticut, Illinois and Nevada. Even so, Czarkowski said she advises businesses to be very careful about following the rules so as not to attract attention from the DOJ or the Drug Enforcement Administration.

But there is definite benefit to the new law, Czarkowski said. It “gives (businesses) more ammunition, if you will, if there were to be a conflict” with the federal government, she said.

The new law may also help reassure potential investors who have been sitting on their hands waiting for some indication that the federal government will ease up on the industry. This means companies that have been struggling to find financial backers may have an easier time securing investments.

The political upside

The other piece of good news is simply that the law passed.

“It’s the first time in history that either chamber of Congress has voted to scale back marijuana enforcement,” said Dan Riffle, director of federal policies at the Marijuana Policy Project. “We’ve beaten the DEA specifically on a marijuana issue. It shows that we’re closer to, or perhaps past, that tipping point, and we can start looking at more significant legislation that actually does change substantive federal law.”

Riffle said the inclusion of that small provision in the omnibus spending bill means that changes to federal banking regulations, the troublesome 280E section of the tax code or even full marijuana legalization could be on the horizon.

“It shows that the House of Representatives is open for business,” Riffle said. “We’ve been pushing this for 10 years.”

That, however, doesn’t mean cannabis advocates can rest on their laurels. Far from it, said Zukerberg.

“Everything is up in the air, because Republicans are going to control both houses of Congress, and we may have a Republican president (after 2016). So who knows where it’s going to go in the future?” Zukerberg said. “Everything is subject to political change, and it’s up to marijuana reformers to keep the pressure on.”

John Schroyer can be reached at