What is the Cole Memorandum and What Does its Repeal Mean for Cannabis States?

Attorney General Sessions just reversed almost a decade of federal policies that generally limited federal law enforcement for marijuana offenses consistent with state laws regarding medical and recreational marijuana.  What will this mean for the growing U.S. cannabis industry and states that have legalized some form of Cannabis use?

The Cole Memo

In 1996, California became the first state to legalize marijuana for medical purposes when voters approved Proposition 215 and now 29 states have passed medical marijuana laws, six states have legalized recreational and medical marijuana and Maine, Massachusetts and the District of Columbia have legalized both uses but not currently allow sales.


National Conference of State Legislatures

Despite the state laws, marijuana remains a Schedule 1 drug banned under the Controlled Substances Act, which is reserved for narcotics such as heroin, ecstasy and LSD “with no currently accepted medical use and a high potential for abuse.”

This did not stop federal enforcement.  In fact, under President George W. Bush, the Drug Enforcement Agency aggressively enforced marijuana laws and the Supreme Court upheld federal authority finding that the Controlled Substances Act contained “no exception at all for any medical use of marijuana” and that it was not unconstitutional for Congress to prohibit intrastate marijuana use given its broader effect on the interstate market.  United States v. Oakland Cannabis Buyers’ Cooperative, 532 U.S. 483, 491 (2001); Gonzales v. Raich, 545 U.S. 1 (2005).

President Obama, however, limited federal enforcement for medical marijuana.  In 2009,  Deputy Attorney General David Ogden instructed federal prosecutors and law enforcement to “not focus federal resources in your states on individuals whose actions are in clear and unambiguous compliance with existing laws providing for the medical use of marijuana.”

In 2012, Colorado and Washington became the first states to legalize recreational marijuana.  As a result, in 2013 the Justice Department revisited its guidance and released Deputy Attorney General James Cole’s memorandum directing federal law enforcement to focus efforts only on the following priorities related to state-legal cannabis operations:

  • Preventing the distribution of marijuana to minors;
  • Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
  • Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
  • Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
  • Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
  • Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
  • Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
  • Preventing marijuana possession or use on federal property.

In a subsequent memo, Cole issued further guidance that these priorities be considered “with respect to federal money laundering, unlicensed money transmitter, and [Bank Secrecy Act] offenses predicated on marijuana-related violations” of the Controlled Substances Act.  The Department of Treasury issued similar guidance to enable financial institutions to provide services to marijuana-related businesses consistent with their Bank Secrecy Act obligations.  Even with this clarification, only about 400 financial institutional out of more than 10,000 institutions nationwide openly work with cannabis clients.

Rohrabacher-Farr Amendment

In 2014, Congress passed an omnibus spending measure that included an amendment by Reps. Dana Rohrabacher (R-CA) and Sam Farr (D-CA) prohibiting the Justice Department from using funds “to prevent . . . States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”   The amendment has been renewed and currently is set to expire on January 19, 2018.  It does not apply to recreational uses.

In signing the law extending the amendment in September, President Trump issued a signing statement that the amendment would be treated “consistently with my constitutional responsibility to take care that the laws be faithfully executed”.

Attorney General Sessions

Jefferson Beauregard Sessions III is an unlikely Attorney General.  A former U.S. Attorney for Mobile whose 1986 nomination to be a federal judge was rejected by a Republican-controlled Judiciary Committee over charges of racism.  One of the charges made during his confirmation was that he thought the Ku Klux Klan was “OK until I found out they smoked pot.”

Sessions was elected to the Senate in 1996 where he was a staunch opponent of marijuana legalization.   Sessions was the first Senator to endorse Donald Trump and was rewarded with the nomination for Attorney General.  Once in office, Session opposed the extension of the Rohrabacher-Farr amendment.

Yesterday, three days after California became the largest state to legalize recreational marijuana use, Sessions issued a memorandum rescinding all prior guidance “specific to marijuana enforcement [as] unnecessary.”  Sessions stressed the Controlled Substances Act, Bank Secrecy Act and related statutes “reflect Congress’ determination that marijuana is a dangerous drug and that marijuana activity is a serious crime.”

While the memo has no immediate effect, it is a signal of future enforcement and asset seizures and will have a chilling effect on the industry.  In particular, it will discourage any further banks from working with the industry and may drive institutions currently serving the industry away altogether.

Sessions and States Rights

Like many Southern conservatives, Sessions expresses a commitment to “state’s rights” when it comes to limiting the scope of the Voting Rights Act or allowing states to decide the question of same-sex marriage.  When it comes to immigration, drug enforcement and related asset seizures, however, Sessions is all for strong federal authority.  See Radley Balko, Jeff Sessions supports states’ rights. Except when he doesn’t, Washington Post (July 18, 2017).

In reversing the Cole Memorandum not only is Sessions disregarding a clear expression of the will of the voters of both the medical marijuana and recreational marijuana states, but he is disregarding public opinion overall as sixty-four percent (64%) of Americans support legalization – including a majority of Republicans.

Sessions Is Killing Thousands of Jobs and Raising Millions in State Taxes

The U.S. legal marijuana market is expected to reach $9 billion this year according to Marijuana Business Daily.  According to CNN, industry sales are projected to reach $23 billion with 280,000 jobs by 2020 – more than 3½ times the number of jobs in the entire coal industry.   The New York Times reports that in Oregon, which legalized marijuana for recreational use in 2015, the industry has created 19,000 new jobs.

In addition to the industry’s economic impact, it has a huge fiscal impact.  New Frontier Data projects states will generate $655 million in taxes from marijuana sales in 2017 alone.  Oregon, for example, yielded $100 million in state tax revenue in its first eighteen months.  Colorado is projected to collect nearly $250 million in taxes in 2017.

Sessions’ action likely will mean fewer jobs and will force states to either cut services or raise taxes to account for the lost revenue.  Not surprisingly, the move has been widely criticized by Democrats and Republicans alike from cannabis and non-cannabis states.

Most notable was Colorado Senator Cory Gardner (R-CO) who said that Sessions assured him during his confirmation process that he had no plans to reverse state legalization efforts and that marijuana policy was not part of President Trump’s agenda.  A visibly angry Gardner took to the Senate floor to denounce the move and announce:

And that’s why I will be putting today a hold on every single nomination from the Department of Justice until Attorney General Jeff Sessions lives up to the commitment that he made to me . . .  in my preconfirmation meeting with him . . . that we had that was specifically about this issue of states rights in Colorado. Until he lives up to that commitment, I will be holding all nominations to the Department of Justice, the People of Colorado deserve answers.

Republicans like Gardner have reason to worry since marijuana legalization, like net neutrality, is very popular with younger voters and the Trump administration is on the wrong side of popular opinion on both issues.  The two issues combined could drive younger voters to the polls to vote Democratic in 2018, increasing an already large Democratic advantage.  This may create pressure to renew or even broaden the Rohrabacher-Farr Amendment.