Earlier this year, Attorney General Jeff Sessions sent a shock wave through the Medical Cannabis Industry by rescinding a policy memo established by then Obama Administration's Deputy Attorney General James Cole.

 

On January 4, 2018, the Department of Justice issued a memo on federal marijuana enforcement, updating their policy to eliminate what is known as the “Cole Memo”, a guidance policy released on August 29, 2013 that identified eight enforcement areas that federal prosecutors should prioritize in States with medical cannabis laws. The rescinding of this policy sent a signal to the Industry regarding the Federal Government’s current attitude as it relates to medical cannabis throughout the States.

 

However, this past Saturday, the Attorney General also signaled that the DOJ would not devote resources to “small [cannabis] cases”, acknowledging the limited resources that the Federal Government maintains in order to prosecute Federal cannabis crimes. Despite this statement, the AG has not waivered on his position regarding medical cannabis and offers little support to legitimate State-licensed businesses or patients who find relief for their debilitating medical conditions.

 

Recent attempts at challenging the Attorney General on the scheduling of medical cannabis have failed, although not because the Plaintiffs lacked standing in the suit. The Judge presiding over the case, with the U.S. District Court for the Southern District of New York, acknowledged the legitimacy of the Plaintiffs’ “injury”, but stated their case was not “ripe” as they failed to exhaust the resources at the Federal level in order to challenge the current Scheduling of cannabis. So it appears that we must rely on Congress to iron out the dichotomy between the Federal Scheduling situation and the increasing support from the Citizens and established State laws with regards to Medical and Recreational Cannabis.

 

Last year, the Congressional Cannabis Caucus was formed to build a coalition in Congress to achieve bipartisan support for progressive Cannabis-related bills. Today, there are more States that have legal frameworks for either Medical and/or  Adult-use cannabis, with the largest market, California, initiating their adult-use market at the beginning of this year. Nonetheless, the situation between the Federal Policy and State-led experiments involving medical cannabis seem to be moving in separate directions.

 

In this blog post, Mora Mota Group will outline four solutions that Congress can present, specifically in the Senate, either to maintain or improve the federal oversight in order to protect the Medical Cannabis Industry.

 

Short term solution: The Leahy Amendment (Federal Budget Amendment)

 

There are few but critical protections at the Federal level that allow the Medical Cannabis Industry to exist. Take the Rohrabacher-Farr (“R-F”) Appropriations (known as Federal Budget) Amendment: previously passed in the House in December 2014, R-F is an Amendment used to prohibit Department of Justice funds from being used to interfere with State medical cannabis laws and businesses.

 

While Appropriations for the Federal Government are typically finalized in September, due to multiple continuing resolutions, a short-term deal was made on February 9, 2018 to fund the Federal Government until March 23, 2018. Unfortunately, the R-F Amendment is set to expire without a replacement, as it was not included in the latest House Appropriations bill.

 

Why is this important? The Amendment allows legally operating businesses to focus on following State law without pressure and/or interference from Federal enforcement of the CSA, and provides protection for the medical cannabis patients who seek relief from the products derived from State-licensed businesses. By allowing the previous protection to expire, this limited protection may jeopardize those who rely on and operate within those frameworks in the various State medical cannabis markets. Thankfully, a companion Amendment was introduced last year by Senator Patrick Leahy  (D-VT) known as “The Leahy Amendment” to the FY 2018 Commerce, Justice, Science (CJS) Appropriations bill; similar to the R-F Amendment, the Leahy Amendment will prohibit DOJ funds from enforcing Federal law in states with medical cannabis frameworks.

 

Last July, the vote to include the Amendment earned bipartisan support in the Senate, and now the House is tasked with continuing their majority support to limit funds to the DOJ regarding medical cannabis within the individual States. We understand that this support must be strengthened by the constituents, so if you can, make a call today to your Senator to bolster the bipartisan support required to protect medical cannabis patients and businesses across the Country.

 

Medium term solution: Bipartisan marijuana banking amendment (S.A. 2107)

 

Today, the Financial Crimes Enforcement Network (FinCEN) guideline memo on cannabis, outlining the expectations for financial institutions seeking to provide services to marijuana-related businesses, appear to exist on shaky grounds, despite Treasury Department officials stating that the guidelines are still in force. Regardless, with the unilateral elimination of the Cole Memo by the Attorney General, it doesn’t appear these guidance documents hold the same weight as permanent legislation, so bipartisan legislation is required to secure the various protections.

 

What is it? Introduced in November, 2017, S. 2155 is titled the “Economic Growth, Regulatory Relief, and Consumer Protection Act” and is a bill being considered on the Senate floor this week; this bill would remove some restrictions that were enacted on financial institutions as part of the 2010 Dodd-Frank Act. As it relates to Cannabis specifically, S.A. 2107 adds the Secure and Fair Enforcement, cited as “(SAFE) Banking Act Amendment” to give safe harbor to those financial institutions providing services to cannabis-related legitimate business.

 

The Amendment, led by Jeff Merkley (D-OR) and Lisa Murkowski (R-AK), would prevent federal officials from punishing a financial service provider “solely because the depository institution provides or has provided financial services to a cannabis-related legitimate business.”

 

Prediction on the likelihood of passing? Not Strong; while there are 10 Senators co-sponsoring the Amendment, each one represents a State with Medical Cannabis laws on their books. While there is no indication the Amendment will get to the floor for a vote and become part of the larger banking reform bill, growing bipartisan support in both the House and Senate are seeking the solution to the cannabis business banking issue.

 

Long Term solution: SAFE Banking Act (S. 1152) and Small Business Tax Equity Act (S. 777)

 

The solution to the cannabis business banking issue include standalone legislation of S. 1152 titled the SAFE Banking Act which has 15 Senate Co-sponsors, and its companion bill in the House, H.R. 2215 titled the SAFE Act of 2017. With similar language to S. 1152, as specified by the bill, “a depository institution shall not, under federal law, be liable or subject to forfeiture for providing financial services to a legitimate marijuana-related business.”

 

Beyond solving the cannabis banking issue, unique solutions were introduced in the Senate last year such as S. 777 titled the Small Business Tax Equity Act. As many State-licensed cannabis businesses are aware, IRS Section 280E restricts the ability for businesses ordinary deductions and credits relating to expenditures in connection with marijuana sales conducted in compliance with State law. The passage of S. 777  would “amend the Internal Revenue Code to exempt a trade or business that conducts marijuana sales in compliance with state law from the prohibition against allowing business-related tax credits or deductions for expenditures in connection with trafficking in controlled substances.”

 

Having either the SAFE Banking Ace (S. 1152) or the Small Business Tax Equity Act (S. 777) as law would give the necessary protection to State-licensed cannabis businesses and financial institutions, and improved security and reassurance to the public that we can have fair and equitable laws regarding federal oversight of cannabis among the individual States.

 

Conclusion

 

A significant majority of the Country believe the federal government should not have enforcement oversight over State made frameworks regarding Cannabis, Medical or Adult-use otherwise. Currently, over 90% of individuals believe medical cannabis should be legalized and 73% do not support federal law enforcement actions that undermine state marijuana laws, and support for adult-use cannabis is at record levels.


Nonetheless, it is up to the citizens in those 46 states that have legalized some form of cannabis to contact their Senator and Representative to ask for their support to make small steps to improve the federal conditions and oversight regarding cannabis among the individual States. Even Attorney General Jeff Sessions attested to, at his Confirmation Hearing in 2017,  that Congress made the “sale and distribution of [Cannabis] illegal” and if “that something [meaning Cannabis being Schedule 1] is not desired, then Congress should pass a law to change the rule.”

 

We at Mora Mota Group hope that Congress helps make that change in 2018.

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