*Joseph Canner
I. Introduction
On November 6, 2012, voters in Washington and Colorado approved ballot initiatives aimed at legalizing marijuana, becoming the first states in the U.S. to do so.[1] What was at first a trickle has become a flood: as of mid-2021, medical marijuana is legal in thirty-six states and recreational marijuana is legal in eighteen states.[2] However, marijuana growing, distribution, sale, and possession remain completely illegal in three states and under federal law.[3] Differences between state and federal laws cause significant hardships for marijuana-related businesses (“MRBs”), particularly growers.
II. Hardships Imposed by Enforcement of Federal Law
The Controlled Substances Act (CSA) applies to the possession and distribution of marijuana on federal property, as well as to the transportation of marijuana across state lines or from other countries.[4] Notably, the CSA applies not only to marijuana plants and dried leaves, but also to seeds, which are key to starting and maintaining a marijuana-growing enterprise.[5] This results in a conundrum sometimes referred to as the “immaculate conception,” whereby growers in a state where marijuana is newly legal must violate federal law to obtain the seeds from a state or country where marijuana is already legal.[6]
Marijuana growers cannot proactively obtain meaningful legal advice to navigate this problem as lawyers are prohibited from counseling or assisting clients in “conduct that the lawyer knows is criminal or fraudulent.”[7] However, “a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.”[8] Some states, including Maryland, have amended their ethics rules to comply with the state’s marijuana laws, even though marijuana remains illegal at the federal level.[9] States need to adjust their rules to account for changes in enforcement of federal marijuana laws and to provide clarity for MRBs.[10]
MRBs also face difficulties in obtaining financial backing for their businesses.[11] For example, large banks refuse to do business with MRBs.[12] Other banks charge a premium interest rate to loan money to MRBs—sometimes as high as ten percent—or require large equity stakes.[13] These rates are significantly higher than those offered to businesses in completely legal industries, which range from three percent to seven percent.[14] Banks doing business with MRBs also have difficulty obtaining Federal Reserve Bank accounts for their clients.[15] Further, MRBs are ineligible for federal bankruptcy protection because federal law prohibits bankruptcy plans involving illegal activity.[16] These limitations often force MRBs to do business in cash, which carries significant risks.[17]
States, meanwhile, are mostly helpless to address these issues. For example, the Maryland statute legalizing medical marijuana provides great detail regarding licensing requirements for growers.[18] However, the statute does not contain guidance on how to obtain seeds or how to finance a marijuana-growing operation.[19] The statute acknowledges that businesses allowed by the statute face legal hazards under federal law, but it only offers funds for legal aid to state employees.[20]
Similarly, action by the federal government has done little to address these problems. In 2009, Deputy Attorney General David Ogden encouraged U.S. Attorneys not to prosecute those distributing medical marijuana in states that had legalized it.[21] In 2018, however, Attorney General Jeff Sessions issued a memorandum to U.S. Attorneys rescinding all previous guidance regarding enforcement of marijuana laws, including the 2009 Ogden memorandum.[22]
Meanwhile, in December 2020, the U.S. House of Representatives passed a bill legalizing marijuana for the first-time.[23] The Marijuana Opportunity Reinvestment and Expungement (MORE) Act of 2020 passed 228-164, mostly along party lines.[24] A similar bill, sponsored by then-Senator Kamala Harris, died in the Senate.[25]
III. Solutions for MRBs
Because voters on both sides of the political spectrum support marijuana legalization, national legalization is the most obvious way to resolve the problems faced by growers.[26] The House has continued the push for legalization by reintroducing the MORE Act this year.[27] In addition, Senate Majority Leader Charles Schumer announced the Cannabis Administration and Opportunity Act for the purpose of seeking public comment.[28] President Biden himself came out in favor of marijuana decriminalization during his campaign for president.[29] Despite these promising signs, Biden’s Press Secretary confirmed that Biden does not favor marijuana legalization.[30]
Given the uncertain prospects for legalization, the best solution for MRBs is the Secure and Fair Enforcement (SAFE) Banking Act, which protects banks that do business with legal marijuana operations from prosecution and asset seizure.[31] Although the bill is unlikely to change large banks’ attitudes towards doing business with MRBs, it may make small and mid-size banks more comfortable.[32] The American Bankers Association, the National Association of Attorneys General, and many other banking and law enforcement groups endorsed the bill.[33] In a rare show of bipartisanship, the bill passed by a vote of 321-101, with 106 Republicans voting in favor.[34] The bill’s prospects in the Senate are less certain, as Senator Schumer expressed concern that the SAFE Act is too narrow and that its passage might undermine support for legalization.[35] Senator Schumer also expressed concern that the SAFE Act does too much for banks and not enough for small businesses and minorities adversely affected by the war on drugs.[36]
IV. Conclusion
To address the complicated and conflicting legal maze MRBs must navigate, the Senate should pass the MORE Act, and the President should sign it into law. Given the political realities, however, the Senate should pass incremental legislation protecting MRBs, even if it delays full legalization. In the meantime, states should continue to support MRBs in ways that will allow them to do business without fear of federal prosecution.
*Joseph Canner is a second-year evening student at the University of Baltimore School of Law, where he is a Staff Editor for Law Review and a member of the National Appellate Advocacy Moot Court Team. Joseph has a B.S. in Computer Science from the University of Maryland Baltimore County and an M.H.S. in Biostatistics from the Johns Hopkins University School of Public Health. Joseph’s day job is Principal Data Scientist for the Yale University School of Medicine Department of Surgery.
[1] Colo. Const. art. XVIII, § 16 (West 2021) (entire section added in 2012 by Amendment 64); Initiative No. 502, 2013 Wash. Sess. Laws ch. 3, https://leg.wa.gov/CodeReviser/documents/INITIATIVE502.SL.pdf.
[2] State Medical Marijuana Laws, Nat’l Conf. of State Legislatures (Aug. 23, 2021), https://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx.
[3] Id.; Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. No. 91-513, § 202, 84 Stat. 1236.
[4] 21 U.S.C. § 841; Federal Laws and Penalties, NORML, https://norml.org/laws/federal-penalties-2/ (last visited Aug. 30, 2021).
[5] Comprehensive Drug Abuse Prevention and Control Act § 102(15).
[6] Erin Cox, The ‘Immaculate Conception’ Problem: Maryland Medical Marijuana Growers Must Break Law to Grow Plants, Balt. Sun (Jan. 6, 2017, 2:34 PM), https://www.baltimoresun.com/maryland/bs-md-marijuana-seeds-20170106-story.html.
[7] Model Rules of Pro. Conduct r. 3.12(d) (Am. Bar Ass’n 2020).
[8] Id.
[9] See Dennis A. Rendleman, Ethical Issues in Representing Clients in the Cannabis Business: “One Toke over the Line?”, A.B.A. (July 2, 2019) https://www.americanbar.org/groups/professional_responsibility/publications/professional_lawyer/26/1/ethical-issues-representing-clients-the-cannabis-business-one-toke-over-line/; see also Md. R. 19-301.2 (“[A]n attorney may counsel a client about compliance with the State’s medical marijuana law without violating [this rule] . . . , provided that the attorney also advises the client about the legal consequences . . . of the client’s proposed course of conduct.”).
[10] Rendleman, supra note 9.
[11] Cox, supra note 6.
[12] Nathan Reiff, SAFE Banking Act, Investopedia, (Sept. 30, 2021) https://www.investopedia.com/safe-banking-act-4587773.
[13] Cox, supra note 6.
[14] Justin Song, Average Small Business Loan Interest Rates in 2021: Comparing Top Lenders, ValuePenguin, (Mar. 15, 2021) https://www.valuepenguin.com/average-small-business-loan-interest-rates.
[15] See, e.g., Fourth Corner Credit Union v. FRB, 861 F.3d 1052, 1053–54 (10th Cir. 2017).
[16] 11 U.S.C. § 1325(a)(3) (“[A] court shall confirm a plan if . . . the plan has been proposed in good faith and not by any means forbidden by law.”); see, e.g., Arenas v. United States Tr. (In re Arenas), 535 B.R. 845, 847 (B.A.P. 10th Cir. 2015).
[17] Reiff, supra note 12.
[18] Md. Code Ann., Health–Gen. § 13-3306 (West 2021).
[19] Id.
[20] Id. § 13-3315.
[21] Memorandum from David W. Ogden, Deputy Attorney General, to Selected US Attorneys (Oct. 19, 2009), available at https://www.justice.gov/archives/opa/blog/memorandum-selected-united-state-attorneys-investigations-and-prosecutions-states.
[22] Memorandum from Jefferson B. Sessions, Att’y Gen., to US Attorneys (Jan. 4, 2018), https://www.justice.gov/opa/press-release/file/1022196/download.
[23] H.R. 3884, 116th Cong. (2020).
[24] Final Vote Results for Roll Call 235, CLERK: U.S. House of Representatives, https://clerk.house.gov/evs/2020/roll235.xml (last visited Nov. 19, 2021).
[25] S. 2227, 116th Cong. (2019).
[26] Ted Van Green, Americans Overwhelmingly Say Marijuana Should be Legal for Recreational or Medical Use, Pew Rsch. Ctr. (Apr. 16, 2021), https://www.pewresearch.org/fact-tank/2021/04/16/americans-overwhelmingly-say-marijuana-should-be-legal-for-recreational-or-medical-use/.
[27] H.R. 3617, 117th Congress (2021).
[28] Natalie Fertig, Schumer Launches Long-Shot Bid for Legal Weed, Politico (Jul. 14, 2021, 6:00 AM), https://www.politico.com/news/2021/07/14/schumer-launches-long-shot-bid-for-legal-weed-499584.
[29] Arlette Saenz, Joe Biden Supports Decriminalizing Marijuana, Stops Short of Calling for Legalization, CNN (May 16, 2019, 2:39 PM), https://www.cnn.com/2019/05/16/politics/joe-biden-marijuana-decriminalization/index.html.
[30] Maeve Sheehey, Psaki: Biden Unmoved on Marijuana Legalization Despite Schumer Legislation, Politico, https://www.politico.com/news/2021/07/14/biden-marijuana-legalization-499642 (July 14, 2021, 3:10 PM).
[31] H.R. 1996, 117th Cong. (2021); Reiff, supra note 12.
[32] Reiff, supra note 12.
[33] Id.
[34] Roll Call 120 Bill Number: H. R. 1996, CLERK: U.S. House of Representatives, https://clerk.house.gov/Votes/2021120?Page=1 (last visited Nov. 19, 2021).
[35] Kyle Jaeger, Schumer Worries Senate Marijuana Banking Vote Could Undermine Broader Legalization Push, Marijuana Moment (Apr. 20, 2021), https://www.marijuanamoment.net/schumer-worries-senate-marijuana-banking-vote-could-undermine-broader-legalization-push/.
[36] Id.
University of Baltimore Law Review 