When the Cole Memo was rescinded in January, uncertainty was rife on all sides of the state-regulated cannabis industry. Neither the regulators, the regulated, nor the unregulated knew what to expect from the federal government. The U.S. Department of Justice told each of its 93 United States Attorneys to exercise his or her own discretion when it comes to enforcing the federal prohibition on cannabis. While some indicated that they would more or less continue to follow the Cole Memo, the nature and status of enforcement priorities suddenly became an open question. Through the recent budget bill, thankfully, we learned that Congress would continue to prohibit the DOJ from enforcing against state-legal medicinal cannabis operators, but case law interpreting that law is relatively undeveloped.
On the other side of the equation, California regulators continue to struggle with the still-unlicensed operators who have decided that it’s better to continue operating unregulated and unlicensed—and tolerate the ongoing risk of a crackdown—than it is to incur the costs of compliance. That calculus depends largely on the robustness of the state’s enforcement efforts, which, like the federal government’s priorities, has also been somewhat of an open question. Two recent developments in California suggest what direction the Department of Justice may be headed on the question of cannabis enforcement. Perhaps even more interesting, however, is how the interests of the federal government and the state of California have apparently converged—if only for a moment—on the issue of cannabis enforcement.
Recently, hundreds of federal agents and local law enforcement officers conducted raids at 74 houses in and around Sacramento, in the Eastern District of California, and filed more than 100 civil asset forfeiture actions against residential properties. The houses, many gutted to make room for indoor grow rooms, were reportedly part of a Chinese organized crime operation for the secret cultivation and export of cannabis, and may have been purchased with funds of dubious origin. But the U.S. Attorney in charge of the enforcement action made clear that it had nothing to do with California’s cannabis regulatory regime, as the authorities weren’t conducting actions interfering with state cannabis laws, and that the alleged actions would be “illegal under anybody’s law.” Needless to say, the suspects did not have state or local licenses to conduct any cannabis activity.
In United State v. Gilmore, a case on appeal from the Eastern District of California, the court held that the operators of an El Dorado County cannabis garden on federal land were not entitled to the protections of the Rohrabacher-Blumenauer amendment, which restricts DOJ funds from being used to prosecute medicinal cannabis in states where it is legal. The court reasoned that nothing in federal or California law purports to allow anyone to grow cannabis on federal lands: In other words, there is no set of circumstances under which this operation would be compliant with state law. (Of particular note was the court’s rejection of the appellants’ claim that they were unaware they were growing on federal land—a good plug for the value of due diligence in a real estate transaction).
In both the Sacramento and El Dorado County cases, the federal government carried out or continued enforcement actions against operators who were neither licensed nor in compliance with state law. Also in both cases, the exit of unlawful operators from the marketplace furthered the state of California’s regulatory priorities; local law enforcement even assisted with the Sacramento raids. It is not clear what DOJ’s cannabis enforcement priorities will be going forward, but it cannot be ignored that at least in these two cases, the interests of both governing bodies were served, and under circumstances consistent with Cole Memo priorities to boot. It begs the question of what might result from future alignments of priorities, but the reality is that California has an unregulated black market cannabis problem, and at least in these two cases, that problem was alleviated to some degree.
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Author: Daniel Dersham