West Coast Weed Coming to an East Coast Pharmacy Menu Soon?

West Coast coming to East Coast menu?

The push for interstate trade is accelerating

In National Lampoon’s 1978 comedy Animal House, Dean Wormer privately announced his intention to put the Delta Tau Chi fraternity on parole. Upon learning that they were already on parole, he announced they would be placed on “double secret parole.”

I recently doubled my bet that interstate commerce will not be governed by law but by courts. The industry’s major three-day conference, MJBizCon, begins November 15, 2022. Jason Reposa of Good Feels cannabis-infused beverages is attending and tagged me in a comment on a post about an Oregon retailer suing the state over interstate commerce .

Well, today, like a five-year-old double-challenging his friend, I’m going to triple my April prediction. The plaintiff, Jefferson Packing House, sued the state of Oregon. Weed Week’s Alex Halperin did a great job covering it. Here is a link to their original article, which reverses citations from the complaint (and which I take from them). Weed Week also provided a link to the complaint – if you’re delving into the industry crystal ball, this is a must-read.

Jefferson Packing House (JPH) argues that states cannot challenge interstate trade in cannabis — that requires federal action, and such action is the domain of the Legislature, not the Justice Department. The lawsuit is relatively concise and only about 8 pages long.

When the federal government quietly sanctioned state marijuana programs, they did so by issuing a series of guides written by Assistant US Attorney David Ogden in 2009 and followed up with three memos by Assistant US Attorney James Cole in 2011, 2013 and 2014 became . The Cole memos are well cited, and Cole #2 identified 8 priorities for federal enforcement. In plain language, federal agencies said marijuana remains illegal, but they have limited enforcement resources and therefore will not focus on the states whose regulations cover the 8 key federal matters.

When a dream team of plaintiffs led by former professional soccer player Marvin Washington sued the federal government, they put forward a compelling argument that some observers saw as the winner. To counter this argument just before a key hearing (the argument relied on the federal guidance), Attorney General Jeff Sessions rescinded the guidance. Interestingly, when asked about marijuana, Assistant Attorney General Bill Barr said he found the division between state and federal laws “unacceptable,” but he acknowledged that he had other priorities and felt the Cole memo Policies seemed to work well (although the memo was repealed by its predecessor).

To understand the Oregon suit, one must understand the 8 enforcement priorities:

“The Department is also committed to using its limited investigative and law enforcement resources to address the biggest threats in the most effective, consistent and sensible manner. As several states have enacted laws governing the use of marijuana for medical purposes, the Department has focused its efforts to advance these goals over the past few years on certain enforcement priorities that are particularly important to the federal government:

  • preventing the distribution of marijuana to minors;

  • preventing proceeds from the sale of marijuana from going to criminal corporations, gangs and cartels;

  • Preventing the diversion of marijuana from states where it is legal in any form under state law to other states;

  • Preventing state-approved marijuana activities from being used as a cover or subterfuge for trafficking in other illegal drugs or other illegal activities;

  • preventing violence and the use of firearms in the cultivation and distribution of marijuana;

  • preventing drug driving and the aggravation of other adverse public health consequences associated with marijuana use;

  • Preventing the cultivation of marijuana on public lands and the associated public safety and environmental hazards caused by marijuana production on public lands; and

  • Prevention of possession or use of marijuana on federal property.

These priorities will continue to guide the Department’s enforcement of the CSA against marijuana-related conduct. As such, this memorandum serves as guidance for Department attorneys and law enforcement agencies to focus their enforcement resources and efforts, including law enforcement, on individuals or entities whose conduct interferes with one or more of these priorities, regardless of state law.”

This major issue that states took to heart was Priority #3: Preventing the diversion of marijuana from states where it is legal in some form under state law to other states. States interpreted this to mean that nothing leaves our borders and drafted regulations accordingly. As Vanderbilt Law School professor Robert Mikos argues, federal authorities have never explicitly stated that there could be no interstate commerce, and his insightful white paper Interstate Commerce in Cannabis, published by the Boston University Law Review in the summer of 2021, points out that states may have misinterpreted this enforcement priority. Its alternate reading involves adding the words “where it’s not legal” to the end of the sentence.

Cannabis trafficking between two states that each have a legal market with regulations that support the 8 enforcement priorities may not go unnoticed at the DOJ. That seems to be the direction Jefferson Packing is headed. Below are some of their best arguments.

7. The apparent purpose of the export ban is to keep Oregon marijuana and marijuana products within the state of Oregon, thereby discriminating against Oregon marijuana growers, processors and wholesalers such as JPH by denying them the opportunity to sell their product to market and sell products in other states. The export ban not only hurts Oregon growers, processors and wholesalers, but also non-residents who are denied access to the high-quality marijuana products made in Oregon unless they physically travel to Oregon to purchase those products.

8. The export ban should be lifted because it violates the dormant trade clause of the United States Constitution by discriminating against and placing undue burdens on interstate commerce.

18. The Export Ban discriminates against interstate trade by openly prohibiting such trade without a legitimate, non-protectionist purpose, and is therefore prohibited by the US Constitution’s Dormant Commerce Clause (“DCC”).

19. There is no constitutionally proper reason for Oregon or any other state to prohibit the import or export of marijuana.

20. Protecting the local cannabis industry is a purely protectionist motive and is therefore clearly unconstitutional under the DCC.

21. Attempting to mollify the federal government’s perceived enforcement priorities in order to induce the DOJ to continue its policy of non-enforcement of state-legal marijuana activities (which violate federal laws, as does the interstate trade in marijuana) implies fatal concerns about the separation of powers, since only Congress can authorize states to regulate interstate commerce, not the DOJ, an executive branch agency. “The DOJ cannot use enforcement actions to provide states with a convenient non-protectionist excuse for restricting interstate commerce in cannabis, since to do so would be tantamount to authorizing states to restrict that commerce.” Robert A. Mikos, Interstate Commerce in Cannabis , 101 BUL Rev. 857 (2021).

As reported by Alex Halperin, “In a covering letter to Oregon Gov. Kate Brown and other state officials, plaintiff’s attorneys cite a recent Maine case in which a federal appeals court ruled that the US Dormant Commerce Clause (DCC) was violated -Constitution prevents the state from imposing residency requirements for MED license holders. “This decision demonstrates a growing consensus within the courts to treat the marijuana trade as like any other trade,” the letter said.

Halperin further quotes the letter: “For example, under the DCC, an Oregon law prohibiting the export of hazelnuts (or grapes, semiconductors, Bigfoot stickers, etc.) would be void,” the letter reads. “We believe it is likely that a federal court will … invalidate state laws” that ban cannabis exports despite federal illegality.

In a Forbes article published on November 3, 2022, Professor Mikos argued that companies could open up interstate markets by suing states and predicted that lawsuits could start in 12 to 18 months.

Looks like “months” has just been reduced to weeks or days.

Anyone interested in good West Coast weed?

Comments? hit me DavidR@CannaVentureLabs.com or drabinovitz@gmail.com. Write me at 617-281-0710.

David Rabinovitz is a cannabis management consultant based in Massachusetts and involved in various cannabis ventures. He is a former director and treasurer of MassCann (the Massachusetts Cannabis Reform Coalition), a former trainer for the Massachusetts Cannabis Control Commission’s social justice training program, and the original host of the cannabis business talk show The Green Rush on ProCannabis Media. David speaks at various industry events about creating compelling financial presentations that investors love. David’s industry insights and analysis are published in multiple media. Connect with David on LinkedIn at https://www.linkedin.com/in/davidrabinovitz/ or contact him at drabinovitz@gmail.com or DavidR@CannaVentureLabs.com




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