Legislation

Will the Feds Crack Down on Pot or Look the Other Way?


Field of Dreams: Elliott Klug in his Denver dispensary

Photograph by Christopher Wurzbach for Bloomberg Businessweek

Field of Dreams: Elliott Klug in his Denver dispensary

A week after voters in Washington State and Colorado approved Election Day ballot measures legalizing recreational marijuana, Washington Governor Chris Gregoire got on a plane to D.C. A Democrat, Gregoire wanted to know if the new law would put her state at odds with President Obama, whose administration has raided hundreds of marijuana dispensaries in California, where medical pot has been legal under state law since 1996.

Gregoire met with U.S. Deputy Attorney General James Cole, who oversees enforcement of the Controlled Substances Act, the 42-year-old federal law that designates cannabis as a Schedule I controlled substance, the same category as heroin and LSD. If her state’s liquor control board began issuing permits to aspiring pot entrepreneurs, Gregoire wanted to know, would federal agents soon head her way? Cole didn’t have the answers she wanted. “They are ‘looking at the issue.’ That was about the only reaction we got,” says Gregoire’s spokesman, Cory Curtis. Cole, who declined to be interviewed, wasn’t merely stonewalling. He likely couldn’t answer the question because the Department of Justice has yet to spell out a consistent policy for dealing with the growing number of states legalizing pot to some degree, in violation of federal law.

Washington Governor Chris GregoirePhotograph by Jordan Stead/AP PhotoWashington Governor Chris Gregoire

Currently 18 states and Washington, D.C., allow the sale and use of medical marijuana. Now that Washington and Colorado have approved its recreational use, others likely will follow. Half of Americans support legalization, says Gallup, and the Democratic parties in both Colorado and Washington endorsed the ballot initiatives. “It’s starting to show that the American people don’t agree with some uneducated opinions coming out of a legal enforcement agency,” says Elliott Klug, owner of the 60-employee Pink House medical dispensary in Denver. Now he’s thinking about also selling recreational marijuana. “We consider cannabis consumption to be part of a wellness regime for the human. We ultimately seek to reach every customer, whether you have a medical card or not.”

Yet under federal law, the cultivation and sale of marijuana for any purpose is considered drug trafficking. The minimum federal sentence for growing 100 cannabis plants is five years in prison, and sellers face up to $25 million in fines. This has put the Obama administration in the awkward position of deciding whether to enforce a federal law that’s increasingly unpopular with the public and members of the president’s own party—or look the other way and allow states to ignore federal statutes.

For the most part, the Justice Department has avoided prosecuting pot-smoking cancer patients and has only sporadically raided dispensaries suspected of breaking local laws by operating too close to a school, supplying marijuana to nonpatients, or moving suspiciously large amounts of the drug. But the Washington and Colorado laws, which call on those states to regulate recreational marijuana like liquor—issuing business licenses to pot stores and collecting tax revenue on sales—renews pressure on the administration to let would-be sellers and smokers know whether they’re putting themselves at risk of prosecution. “That’s a harder question,” says Erwin Chemerinsky, a professor of law at the University of California at Irvine. “It’s the state actually facilitating the sale of marijuana, as opposed to just not prohibiting” its use.

Pink House medical dispensary in DenverPhotograph by Christopher Wurzbach for Bloomberg BusinessweekPink House medical dispensary in Denver

In the coming months, the Justice Department must decide whether to sue Colorado and Washington to keep them from issuing commercial pot licenses, a move that would be unprecedented in marijuana cases. If it does take the states to court, says Allen St. Pierre, executive director of the marijuana advocacy group Norml, it “will be a rocket ride all the way to the Supreme Court.”

Short of that, Justice could instruct prosecutors to go after the most flagrant violators of federal law. First prosecutors would have to figure out how to define flagrant, since all sale and possession of marijuana is technically illegal. If it sets out guidelines saying what is and isn’t allowed, the department would be condoning illicit activity. “I don’t think they know what to do,” says Ethan Nadelmann, executive director of the Drug Policy Alliance, a pro-legalization group. “They’re juggling a lot of variables.”

In part, Obama brought this confusion on himself. When he ran for president in 2008, he endorsed a hands-off approach to medical marijuana. He said he wouldn’t interfere with state pot laws and would end federal raids on clinics. Attorney General Eric Holder made good on the promise. In a 2009 memo, he instructed federal officials not to expend resources “on individuals whose actions are in clear and unambiguous compliance with existing state laws.” Entrepreneurs in states that allowed medical marijuana saw the memo as a free pass to start selling. In a letter to his group’s supporters, St. Pierre described it as the Justice Department waving a huge green flag. The number of medical dispensaries in California, Montana, Michigan, Oregon, and other states grew rapidly.

At the same time, federal prosecutors were latching on to another sentence in the memo a few lines away: “On the other hand, prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the department.” U.S. attorneys read that to mean they could still use their discretion in going after large medical dispensaries. In letters to governors in Washington, Montana, Arizona, Colorado, Rhode Island, and Vermont, prosecutors threatened to take legal action against state officials who helped facilitate marijuana use.

The governors appealed to the federal government for guidance, and the Justice Department once again weighed in. In June 2011, Cole wrote a second memo in which he clarified that the earlier directive “was never intended” to shield from prosecution the kind of large-scale, privately operated industrial marijuana cultivation centers that had sprung up—“even where those activities purport to comply with state law.”

This left pot business owners in the position of having to limit their own growth but to an unknowable size. Meanwhile, U.S. attorneys took Cole’s words as permission to prosecute. In Montana and California, police raided hundreds of medical marijuana providers, shutting down businesses, bringing charges, and sending a shock through the industry. “You really have conflicting impulses within the government,” Chemerinsky says. “They’ve sent mixed signals.”

Justice hasn’t done much to clarify things in the wake of the Colorado and Washington votes. Asked how the federal government will respond to recreational pot sellers, spokeswoman Nanda Chitre replied by e-mail: “The department’s enforcement of the Controlled Substances Act remains unchanged.”

Pot sellers preparing to set up shop must stomach the uncertainty until Justice settles on a policy. And they’ll have to navigate a daunting array of state regulations. In Colorado marijuana shops already must catalog every plant and fill out a mountain of paperwork. Veteran medical marijuana sellers such as Klug think it’s worth it because having rules lends the industry legitimacy. “We need to prove that we can do this safely and within the parameters of normal business,” he says. “We have to move out of our basements.”

The bottom line: Voters in Colorado and Washington legalized recreational pot, but it’s still against federal law—with stiff fines and prison time for violators.

Dwoskin is a staff writer for Bloomberg Businessweek in Washington. Follow her on Twitter: @lizzadwoskin.

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