AG Sessions Issues Cannabis Policy Reversal. What Does It Mean For The Industry?

Fox Rothschild LLP

Fox Rothschild LLP

Attorney General Jeff Sessions issued a memo today that effectively ends the Obama Administration’s “hands off” approach to licensed cannabis operations in states where cannabis has been legalized for medicinal or recreational purposes. This announcement is important for all licensed cannabis businesses because the federal Controlled Substances Act classifies cannabis as a Schedule 1 substance, making it illegal to produce, sell, or possess cannabis. It also comes on the heels of the official roll-out of California’s recreational cannabis program, the largest in the country.

The Obama Administration’s policy was set forth in a series of documents drafted by Deputy Attorney General James Cole in 2013, which has become known as the “Cole Memo.” The Cole Memo directed federal prosecutors to prioritize cannabis-related prosecutions focused on, among other things, protecting minors; preventing criminal enterprises from profiting from marijuana sales; and preventing its production or sale on federal lands. The implication was that federal prosecutors should halt investigations involving cannabis operations that were authorized by state laws. The Sessions memo instructs federal prosecutors to “follow well-established principles that govern all federal prosecutions.”

Since the election of President Donald J. Trump and his appointment of Attorney General Sessions, a staunch opponent of cannabis use in all forms, the industry has been waiting to see if the Attorney General would make such a move. It is unclear what new policies will arise from this decision. Additionally, it is unclear if the Attorney General’s decision will be supported by other branches and agencies of the federal government.

For instance, since 2014, Congress has passed and re-authorized the Rohrabacher–Farr amendment (now known as Rohrabacher–Blumenauer), which prohibits the Justice Department from spending funds to interfere with the implementation of state medical cannabis laws. And other agencies of the federal government, such as the U.S. Department of Veterans Affairs, have policies respecting state cannabis programs. On December 8, 2017, the VA issued VHA Directive 1315, which allows VA doctors to discuss the use of medical cannabis with patients licensed under a state program.   

With that being said, here is what licensed cannabis businesses should know:    

For now, cautiously continue business as usual.

The full implications of the Sessions memo remain to be seen. It is possible that this announcement will have different implications for the recreational cannabis industry vs. the medical cannabis industry. As long as the Rohrabacher-Blumenauer amendment remains in effect, the Justice Department, and by extension each local U.S. Attorney’s Office, are not permitted to spend funds in furtherance of investigating or prosecuting state-licensed medical cannabis businesses. But the Rohrabacher-Blumenauer amendment only protects state medical cannabis programs, not state adult-use recreational programs. Further, unless the amendment is renewed, it is currently set to expire on January 19, 2018.  Either way, businesses should gain an understanding of the serving U.S. Attorney in their federal district, and whether that individual has made statements regarding their position on medical or recreational cannabis. The expectation is that these U.S. Attorneys will now have more discretion to enforce the federal ban on cannabis.

The question now is whether the Treasury Department’s FinCen memo, which was issued the same day as the last Cole memo on February 14, 2014, will be retracted. The FinCen memo provided guidance for financial institutions providing services to marijuana-related business in accordance with the Bank Secrecy Act. Retraction of the FinCen memo could well be the death knell to any traditional banks servicing the state-legalized cannabis industry (assuming Sessions’ actions today have not already done so).

Ensure you are in compliance with the law of your state.

It is essential that your operations remain strictly compliant with state law. While it is unclear whether this announcement will lead to prosecutions at the federal level, companies who are in full compliance with state law will be better prepared to combat any such actions. Further, your business will be ready in the event state regulators partner with federal authorities or make changes to their own policies based on guidance from the Attorney General.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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