Research | Spring 2018 Issue

Will California get its way on weed?

Washington hesitates in response to state efforts to legalize marijuana.

By Kathleen Kelleher


In November of 2016, California legalized recreational use of marijuana. This New Year’s Day, even the sale of cannabis for enjoyment became lawful. On January 4, the attorney general of the United States issued a stern memo to all U.S. attorneys. It “rescinded immediately” the Obama
administration’s hands-off guidance on enforcing a federal law against marijuana.

With that, Sessions put Washington and California into conflict.

“In the Controlled Substances Act, Congress has prohibited the cultivation, distribution and possession of marijuana,” Sessions said. Related activities, such as money laundering and unlicensed money transmissions, and the Bank Secrecy Act, which outlaws them, reflect Congress’ determination that “marijuana is a dangerous drug and marijuana activity is a serious crime.”

Not so in California. Today, people seeking pleasure through pot, as well as those wanting to cultivate, sell or transport it, are permitted to do so by the Golden State. But the matter does not rest there.

In April, Sen. Cory Gardner (R-Colo.) said President Donald Trump assured him that Session’s rescission of the hands-off guidance would not affect Colorado’s legal marijuana industry. “Furthermore,” Gardner told the Los Angeles Times, “President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.” The White House confirmed Gardner’s account.

Citing a Justice Department source, the Times said Trump had not told Sessions before talking to Gardner, reflecting the President’s ongoing disregard for his attorney general. It quoted marijuana advocates as expressing caution. “The agreement itself appears narrow and only applicable to that state,” Aaron Lachant, a Los Angeles attorney who represents marijuana businesses, told the Times. As for other states, it quoted Rep. Earl Blumenauer (D-Ore.) as saying, “We should hope for the best, but not take anything for granted. Trump changes his mind constantly.”

Who’s in charge here?

Smoking pot is an exercise in federalism. Under the U.S. Constitution, power is shared between the federal government and the states. The Controlled Substances Act, passed by Congress in 1970 and signed by President Nixon, ranks marijuana as a Schedule I drug, alongside heroin and LSD, and declares it illegal on grounds that it has no known medical value and high potential for abuse. Under Proposition 64, however, approved by the voters, it is lawful in California for adults to use cannabis recreationally.

California is not alone in its clash with the federal government. It was theeighth and the most populous state to legalize marijuana for enjoyment.Vermont approved a recreational, adult-use marijuana law on January 22, becoming the first state to do so legislatively. In all, medical marijuana is legal in 29 states, the District of Columbia, Guam and Puerto Rico. More than half the states in the union, home to half the American people, have legalized marijuana either recreationally, medically or both.

What happens when federal law conflicts with state marijuana laws and with the will of the people?

“State governments can have any marijuana laws they want, and at the same time, the federal government can have any kind of marijuana law it wants and decide how to enforce it,” said Erwin Chemerinsky, dean of the UC Berkeley Law School and co-author of an article in the UCLA Law Review that calls the struggle over marijuana regulation one of the most important federalism conflicts in a generation. “Legally, the federal government can prosecute marijuana violations however they want to,” he said. “The question is, how aggressive does the federal government want to get in enforcing marijuana laws under the Controlled Substances Act? Most people assume that, given priorities, the federal government is not going to do that, but there is no way to know.

“And there is no way to stop it from doing so.”

If Sessions were to attempt to preempt California’s marijuana law, Chemerinsky said, “His constitutional argument should fail. States have the right to have any marijuana law — or no marijuana law — as they prefer.”

There is legal precedent for this right. Nearly two years ago, a three-judge panel of the U.S. 9th Circuit Court of Appeals decided unanimously that the federal government cannot prosecute people who grow and distribute medical marijuana as long as they are in compliance with state laws.

In a separate case, the federal government has dropped a civil forfeiture action against Harborside Health Center, a medical cannabis dispensary based in Oakland, among the largest in the nation.

The power of the federal government

Brad Rowe, a lecturer at the UCLA Luskin School of Public Affairs, cites intent of Congress, along with legal precedent, as guidance for evolving public policy on cannabis and other drugs. But unless Congress acts to change laws, he said, no one should underestimate the power of Jeff Sessions. “He is a whole other animal,” Rowe said. “He has the authority to do whatever he wants.”

Rowe, 47, a graduate of the Luskin School, is a former chief executive of BOTEC Analysis, a public policy consulting firm. Affable and animated, he was once an actor. Now his policy specialties include crime, drug laws, drug trafficking, post-incarceration re-entry and disproportionate impact of drug laws, prosecution and incarceration on communities of color. Rowe has overseen medical cannabis market measurement projects for Washington state, helped develop cannabis and hemp policy for Jamaica and moderated discussions about cannabis science and federal impediments to legalization. He recently launched Rowe Policy + Media, a consulting firm focused on policy issues that affect safety, well-being and equity in society. Rowe is helping community members and city councils come to grips with basic concepts of recreational cannabis dispensaries, cultivation and manufacturing businesses. Cities are calculating whether the costs of cannabis regulation and compliance can be offset with fees and taxes, he said. “Instability due to a tough stance on cannabis and instability in flower price and shifting product demand add some unease in moving forward. Just because a lot of people voted for Proposition 64 apparently doesn’t mean they want [marijuana] in their own backyard.”

Although Sessions cited federal banking laws as an indication of congressional intent to oppose state legalization of recreational marijuana, Rowe offers the Rohrabacher-Farr Amendment (also known as the Rohrabacher-Blumenauer Amendment) to a federal appropriations bill as direct evidence to the contrary. Passed in 2014, the amendment forbids using government funds to prosecute people whose medical marijuana possession, cultivation or distribution complies with state law.

Sessions has urged Democratic and Republican leaders in Congressnot to support Rohrabacher-Farr. However, Rowe said, “the spirit of the Rohrabacher-Farr Amendment has been upheld through several challenges.” Indeed, members of Congress have introduced more than 15
additional bills to protect recreational and medical cannabis businesses and research from federal overreach. They include measures to shield banks, which are federally regulated, from penalties for providing services to marijuana enterprises that are legal under state laws. They also include tax credits and deductions for such enterprises when they make financial investments in areas that have been hard hit economically by discriminatory drug policies.

Passing such proposals, however, is a struggle — as would be removing marijuana from the Controlled Substances Act. “Removing cannabis from the CSA would be impossible to get approved by representatives from Idaho, Wyoming, Nebraska, Kansas, Oklahoma, Texas, Iowa, Missouri, Wisconsin and the Bible Belt,” Rowe said. “But we’ll likely see 10 or 15 more of the most highly populated states hop on board in the next four years. At that point, I think the U.S. Congress would have to pull together a coherent regime” of marijuana laws.

Meanwhile, a bipartisan effort, led by Reps. Lou Correa (D-Calif.) and Matt Gaetz (R-Fla.), who introduced a “Sensible Enforcement of Cannabis Act” in February, calls for reinstatement of the Obama administration’s deprioritizing of federal marijuana prosecutions in states where cannabis is legal.

The bill would turn hands-off guidance into federal law, instead of a memo vulnerable to rescission by Jeff Sessions.

Business on the edge of banking

For financial institutions, the clash between state and federal marijuana laws, under the aegis of federalism, is particularly vexing. Lack of protection for financial institutions facing federal prohibitions against cannabis is causing a public safety problem. Marijuana business owners, forced to deal largely in cash, are easy targets for assault and robberies.

“Depositing the proceeds of criminal activity in a federally regulated bank is a crime, and it is money laundering,” said Mark A.R. Kleiman, professor of public policy at New York University’s Marron Institute of Urban Management and a professor emeritus of public policy at the Luskin School. “It is generally understood among bankers that it is not good to do business with criminals.”

In an op-ed last October for the Sacramento Bee, Rowe said financial firms that provide pot-related banking services charge excessive fees —as much as $5,000 to $7,000 monthly — ostensibly to offset the cost of oversight and extra paperwork the federal government requires. Rowe also estimated that 60 percent to 70 percent of marijuana businesses deal only in cash, a dangerous circumstance when dispensers carry duffel bags of money from one place to another, including to pay taxes.

California Treasurer John Chiang and state Attorney General Xavier Becerra are looking into the possibility of creating a publicly operated depository, perhaps a state bank, to serve marijuana businesses, projected to become a $7-billion industry. Hawaii is experimenting with an electronic pay system to replace the duffel bags. In Washington state, several financial institutions are serving marijuana merchants. Oregon has a credit union that works with cannabis commerce. A community bank in Maryland is opening accounts for marijuana businesses, but the bank bars them from writing checks or seeking loans because it might draw scrutiny from federal regulators. “It is a risk,” said Beau Kilmer, co-director of the Rand Drug Policy Research Center and co-author, with Kleiman and Jonathan P. Caulkins, of “Marijuana Legalization: What Everyone Needs to Know.” “The feds are not taking action, but they could if they wanted to.

“It falls under the rubric of cracking down.”

Confronting marijuana abuse

To Kleiman, however, “all this legal nonsense” shifts focus from a problem that nobody wants to talk about: diagnosable marijuana abuse, known as cannabis use disorder.

In 1992, an estimated 8.9 million Americans reported using marijuana within the past month, said Steven Davenport, an assistant policy researcher at the RAND Corporation, citing the National Survey on Drug Use and Health. He said the survey estimated that 11.26 percent of them reported using it daily to nearly daily (on more than 20 days in the past 30). By 2016, he said, the estimates had grown to 23.7 million users, of whom 34.17 percent reported using it daily to nearly daily. Davenport said these numbers might be low because of under-reporting. The criteria for cannabis use disorder include using it more frequently and in greater quantity than intended; trying to cut back but failing; and finding that using marijuana is interfering with responsibilities, keeping users from spending time with people they care about and preventing them from pursuing other interests. Four million U.S. residents, Davenport said, currently report meeting those criteria.

“We ought to be worried about the price falling, now that it is clear that cannabis is going to be widely available in California,” Kleiman said. “The responsible user is of no financial interest to the cannabis industry.” California’s new recreational-use law has provisions for preventing substance abuse, he said, but the production, taxation and marketing of marijuana support expansion of the market at the expense of public health.

Kleiman, who was the leading adviser for cannabis legalization in the state of Washington (the “hemperor,” he jokes), supports legalization in a “health-friendly way.” He favors rational approval for temperate adult use that both minimizes cannabis use disorder and prevents a rise in the number of adolescent users — who, he said, currently smoke their first joint when they are 15 to 16 years old. Kleiman would like to see restrictions against aggressive advertising, especially anything that would appeal to or reach children, as well as a requirement that marijuana  advertising include health warnings. He would like such warnings to be clearly printed on packaging of all cannabis products, and he supports higher taxes based on potency.

Other public safety concerns fall to law enforcement officers responsible for keeping youth, communities and roadways safe. LAPD assistant chief Michel Moore has said police officers worry about drivers who are under the influence of marijuana. Moore also has said that officers will crack down on purchases or consumption of recreational cannabis by anyone younger than 21, as well as the use of pot in public spaces.

Both are illegal under the new California law.

The law is still novel. Rowe said it will take a while for it to normalize. It also might take time for marijuana advocates to end the friction between the federal government and California on the matter of legalization. But that chafing could abate.

The American Legion, a socially and politically conservative organization of wartime veterans, has voted in favor of removing cannabis from Schedule I of the Controlled Substances Act. This would lift federal restrictions against research into the drug’s effectiveness in treating post-traumatic stress disorder and other illnesses afflicting military men and women. The federal government has imposed strict limits and regulations on studies involving marijuana, which makes it difficult for researchers to secure funding and to access the drug in sufficiently high quality and quantity for research and analysis. Removing the drug from Schedule I would change that.

It would also be a significant step toward legalization in even more states.

Kathleen Kelleher

Kathleen Kelleher

Kathleen Kelleher is a Santa Monica-based writer who has written for the Los Angeles Times, the Orange County Register, Arroyo and other publications.

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