The Uncertainty Principle for Legal California Cannabis Businesses After Sessions Rescinds Cole Memo
Businesses in all industries mostly prefer to work in stable, predictable environments. Buying permits and licenses, setting up storefronts, building facilities up to code, and training employees costs money and takes time. And if the rules change mid-stream, then more money and time must be spent to adapt.
Cannabis businesses which are already struggling in a new industry with changing rules are worried about Attorney General Jeff Sessions rescinding the Cole Memo this week.
Without a stable business climate, legal cannabis businesses will find it difficult to thrive. Marijuana related stocks plummeted after news of Sessions’ actions began to be reported. According to CNN, the leading marijuana index lost 25% of its value on Thursday following Sessions’ announcement. Politico reported that even mainstream companies such as Scotts Miracle-Gro Company were affected–their stock price dropped more than 5% as a result of Sessions’ decision.
What comes next? Prosecutions—big ones. Eight states and the District of Columbia have legalized marijuana for recreational use. In light of state law and the Cole memo, growers and distributors have made no effort to conceal their businesses. They’re sitting ducks. Federal prosecutors can easily charge them with possession, distribution, even racketeering. Participants in the cannabis economy face decades in prison for doing their job. Prosecutors could also go after individual users who obtain their marijuana openly and lawfully, scaring customers back to the black market, which will undoubtedly prosper from Sessions’ move.
With Sessions’ decision, federal prosecutors in each district could now choose to crack down on cannabis businesses within their district which, while following state laws legalizing marijuana, are not within federal guidelines which allow for severely prosecuting growers, distributors, and even those merely possessing cannabis.California is divided into four federal judicial districts–South, Central, Eastern, and our Northern District. In spite of their names, the districts only roughly conform to their geographical descriptions with, for instance, the Northern District running from south of San Francisco to the Oregon border in a thin strip along the West Coast.
Trinity County is in the Eastern District but Humboldt, Mendocino, and Del Norte are in the Northern District.
Each of these districts has a United States Attorney that files federal charges–typically much more severe than state charges for the same crime. Two of those US Attorneys—in the South and Central Districts of California–are temporary or interim appointments until the Trump administration nominates someone to fill the positions permanently. The interim attorneys, were appointed by Sessions and presumably sympathetic to his agenda. The Eastern District is led by US Attorney McGregor “Greg” Scott who was nominated by Trump and is awaiting confirmation by the Senate.
The Northern District was led by US Attorney Brian Stretch who was appointed by the Obama administration. Then on Thursday, he announced he would be leaving the post. According to the San Francisco Chronicle, Stretch said that Session’s actions didn’t affect his decision to step down. He said that he had planned to leave and it was simply time to move on. Presumably, Sessions will appoint someone to replace Stretch temporarily until President Trump nominates someone to fill this position. [UPDATE: On Sunday at 9:34 a.m., the Department of Justice announced that the acting US attorney would be Alex G. Tse who had served under Stretch and was the Chief of the Office’s Civil Division from 2012 – 2015.]
According to the East Bay Times,
During Stretch’s tenure, federal [marijuana] charges were rare but not unheard of. In 2016, his office filed federal drug trafficking charges against a suspected large-scale trafficking ring that was connected to a homicide in Mexico and last year, charged a New Orleans man with marijuana trafficking before securing a conspiracy to commit murder indictment months later.
California’s new recreational cannabis laws may now be shaken at its foundation by its four federal judicial districts led by attorneys appointed by either Sessions or Trump.
Perhaps more importantly and most disturbingly for cannabis businesses, “Enforcement is “going to vary from district to district,” said Timothy Purdon, a former U.S. attorney for North Dakota,” according to a report in the Washington Examiner.
The black market which doesn’t have permits, licenses, and, for the most part, storefronts, to worry about will be affected less by the instability Sessions’ decision engenders and it may actually be revitalized by prosecution of legitimate cannabis state businesses.