Feds Crack Down On MMJ

Earlier this year, Colorado banks were warned by federal prosecutors not to operate bank accounts for medical marijuana dispensaries and a few days ago, the last bank that had medical marijuana dispensary bank accounts closed the last several hundred those accounts.

Federal prosecutors in California have given notice to that state's medical marijuana dispensaries that it wants to shut them down in 45 days, even if they are fully in compliance with state law.  They've threatened criminal prosecutions for operators and forfeitures for landlords. Earlier this week, the IRS presssed the position that no legitimate business expenses of a medical marijuana dispensary are deductible.

The Department of Justice issued a policy memo to federal prosecutors in late June stating that marijuana dispensaries and licensed growers in states with medical-marijuana laws could face prosecution for violating federal drug and money-laundering laws. The Internal Revenue Service has also been scrutinizing dispensaries.

The effort to shutter California dispensaries appears to be the most far-reaching effort so far to put that guidance into action.

"This really shouldn't come as a surprise to anyone. The administration is simply making good on multiple threats issued since President Obama took office," Kevin Sabet​, a former adviser to the president's drug czar who is a fellow at the University of Pennsylvania's Center for Substance Abuse Solutions. "The challenge is to balance the scarcity of law enforcement resources and the sanctity of this country's medication approval process. It seems like the administration is simply making good on multiple statements made previously to appropriately strike that balance."

The law is reasonable clear. The federal government is within its rights (see, e.g., here). The tax deductability law, the federalism issue involved with prosecuting drug crimes when state law provides otherwise, and the propriety of the Controlled Substances Act determination that there is no medical use for marijuana, despite a wealth of evidence to the contrary, has been upheld by the courts in reported and binding precedents. But, the Obama administration made a policy decision early on to refrain from prosecuting dispensaries that were legal under state law, as they are in sixteen states, with Colorado having more dispensaries per capita than any other state.

What was President Obama thinking?

It isn't at all obvious what cause the Obama administration to change its tune. Crime overall is down overall, and there has not been any bump in crime attributable to medical marijuana operations. Destroying large numbers of jobs and small businesses in the medical marijuana industry won't help the economy. It will lower tax collections from the only industry in the nation that is begging for the right to be taxed. It will increase federal spending on law enforcement and prisons. The public is not clamboring for more strict marijuana enforcement; indeed, public opinion has never been more pro-legalization, or at least, pro-MMJ, than it is today. There have been not headline making tragedies connected to the industry.

This appears to be a move driven entirely by internal politics in the federal bureaucracy, in which drug war crusaders against the evils of the demon weed marijuana have finally managed to prevail, and is deeply disappointing.

Members of Colorado's congressional delegation have proposed a change in the law that would permit states to authorize the medical marijuana trade, but with a Republican controlled House of Representatives, the bill seems unlikely to be adopted.