Alert January 04, 2018

DOJ Rescinds Obama-Era Guidance on Prosecutions of State-Legalized Marijuana Businesses and Service Providers

Summary

The U.S. Department of Justice (DOJ) today issued a memorandum in which it rescinded guidance issued during the Obama Administration related to the enforcement of the Controlled Substances Act, and related money laundering and other federal laws, concerning the possession, manufacture, sale and distribution of marijuana in states which have legalized the medical and/or adult recreational use of marijuana. DOJ’s memorandum specifically rescinds the guidance provided by the so-called Cole Memoranda, which were issued in 2013 and 2014. Today’s action by DOJ, at a minimum, increases the risk of federal prosecution of state-legalized marijuana businesses, and increases the risk of related money laundering and/or aiding and abetting prosecutions of financial and other institutions that service such businesses.

The U.S. Department of Justice (DOJ) today issued a memorandum in which it rescinded guidance issued during the Obama Administration related to the enforcement of the Controlled Substances Act, and related money laundering and other federal laws, concerning the possession, manufacture, sale and distribution of marijuana in states which have legalized the medical and/or adult recreational use of marijuana. DOJ’s memorandum specifically rescinds the guidance provided by the so-called Cole Memoranda, which were issued in 2013 and 2014.

The Cole Memoranda identified eight specific priorities related to federal enforcement of federal criminal law regarding marijuana-related conduct. Noting that states that had enacted laws legalizing marijuana in some form, and that had implemented strong and effective regulatory and enforcement systems to control conduct under such laws “would be less likely to threaten the federal priorities,” the Cole Memoranda announced a policy of largely deferring to state and local law enforcement and regulatory bodies as the “primary means of addressing marijuana-related conduct.” Following the issuance of the Cole Memoranda, and in keeping with their guidance, DOJ has initiated no more than one or two unsuccessful prosecutions. Today’s action by DOJ would appear to reverse DOJ’s policy of the past five years, as it directs federal prosecutors to make determinations whether to prosecute marijuana-related criminal offenses in accordance with the Department’s “well established principles that govern all federal prosecutions.”

Today’s announcement does not specifically address whether DOJ will initiate a prosecution with respect to prior conduct. Nor does the announcement address the status of guidance issued by the Financial Crimes Enforcement Network (FinCEN) in 2014, which piggy-backed on the Cole Memoranda, and described the responsibilities under the Bank Secrecy Act of financial institutions that provide services to marijuana-related businesses. Financial institutions that service state-legalized marijuana businesses must continue to comply with current FinCEN guidance regarding marijuana unless and until FinCEN modifies or rescinds its guidance.

Today’s DOJ action does not necessarily mean that the Justice Department intends to engage in a crackdown on state-legalized medical or adult recreational marijuana dispensaries or on financial institutions providing services to marijuana-related business. Rather, today’s memorandum merely – but importantly – eliminates guidance that discouraged such prosecutions and that contributed to there being only one or two attempted and no successful federal prosecutions of state-legalized marijuana businesses over the past five years. At a minimum, today’s action increases the risk of federal prosecution of state-legalized marijuana businesses and increases the risk of related money laundering and/or aiding and abetting prosecutions of financial and other institutions that service such businesses.

Notably, at least with regard to the potential prosecution of state-legalized medical marijuana businesses operating in strict compliance with state law, DOJ’s hands are tied by the Rohrbacher-Farr amendment to congressional spending legislation. Pursuant to Rohrbacher-Farr, DOJ is prohibited from using any funds to interfere with state implementation of state medical marijuana laws. The amendment first passed in both the House and the Senate as part of an omnibus spending bill in December 2014, and it has been renewed every fiscal year since. In May 2017, Rohrbacher-Farr was renewed and signed into law just days after U.S. Attorney General Jeff Sessions wrote to congressional leaders urging them not to renew the amendment. Most recently Rohrbacher-Farr was renewed as part of the stopgap spending bill that Congress approved on December 22, 2017, which expires on January 19, 2018. The amendment’s immediate future will hinge on the work of a House-Senate conference committee.