Federal Marijuana Prohibition Has ‘No Rational Basis,’ Companies Say In New Court Filing

In a new federal court filing, lawyers for a group of marijuana companies argue that ongoing broad cannabis prohibition has “no rational basis,” pointing to the government’s largely hands-off approach to the recent groundswell of state-level legalization.

The lawsuit alleges that while Congress’s original intent in banning marijuana through the Controlled Substances Act (CSA) was to eradicate illicit interstate commerce, lawmakers and the executive branch have since abandoned that mission as more states have moved to regulate the drug.

“Dozens of states have implemented programs to legalize and regulate medical or adult use marijuana,” the new filing from the plaintiffs in the case says. And by providing consumers with “safe, regulated, and local access to marijuana,” those states “have reduced illicit interstate commerce, as customers switch to purchasing state-regulated marijuana over illicit interstate marijuana.”

The new 32-page document comes in response to the government’s effort in January to dismiss the cannabis companies’ underlying suit. At the center of the case is a 2005 Supreme Court decision, Gonzales v. Raich, in which justices held that federal prohibition preempts state-level legalization because of Congress’s interest in preventing illegal marijuana from entering interstate commerce.

Plaintiffs argue that given the changes since then—not only at the state level, but also in terms of the government’s own tolerance of commercial cannabis activity in legal jurisdictions—”the federal government no longer has any basis for insisting that state-regulated, intrastate marijuana must be banned to serve Congress’s interstate goals.”

“The ground-shaking shifts in marijuana regulation since Raich, together with the nation’s long history of marijuana cultivation and use prior to the CSA,” lawyers wrote in the new filing, “demonstrate the widely-held understanding that Plaintiffs’ marijuana activities implicate a liberty interest that requires protection.”

In the overarching lawsuit, filed in October, the businesses behind the case claim that perpetuating marijuana prohibition in state markets is unconstitutional, creating undue public safety risks while precluding licensed cannabis operators from accessing critical financial services and tax deductions that are available to other industries.

The challenge is being led by multistate operator Verano Holdings Corp. and the Massachusetts-based cannabis businesses Canna Provisions and Wiseacre Farm, along with Treevit CEO Gyasi Sellers. They’re represented by the law firms Boies Schiller and Flexner LLP and Lesser, Newman, Aleo and Nasser LLP.

The latest filing was submitted Friday by accomplished litigator David Boies, whose list of prior clients includes the Justice Department, former Vice President Al Gore and plaintiffs in the case that led to the invalidation of California’s ban on same-sex marriage.

“In the two decades since Raich, all the legislative and operative facts on which Raich‘s conclusion rested have changed,” it says. “It is therefore necessary to assess Congress’s regulation of intrastate marijuana based on the new regulatory framework and new factual circumstances.”

Noting that “over three dozen states permit medical marijuana and twenty-four states (representing most of the nation’s population) permit adult-use marijuana,” the new filing calls CSA “an aberration, not consistent with the nation’s practices at the founding, nor at the passage of the Fourteenth Amendment, when marijuana was widely used for medical and recreational purposes.”

“While states may sometimes regulate those activities when appropriate for the public health,” it adds, “the federal ban fails under such scrutiny.”

Plaintiffs argue that not only has Congress annually renewed an appropriations rider barring the Justice Department from using federal funds to intervene in state medical cannabis programs, but attorneys general over the course of multiple administrations have also spoken to their lack of interest in criminalizing people over marijuana-related activity that’s sanctioned by the states.

“What was once a single-minded federal crusade against the cannabis plant has been replaced with an ambivalent set of inconsistent policies, some aimed at reducing federal interference with state efforts to regulate marijuana,” the original lawsuit says.

“In short, the federal government has long ago abandoned the goal of eliminating marijuana from commerce,” the complaint adds. “Nor does Congress have any comprehensive—or even consistent and rational—approach to marijuana regulation.”

“Therefore, even if Congress still wished to eliminate interstate transactions in marijuana in their entirety (it does not), it has no rational basis for banning state-regulated activities that reduce interstate traffic in marijuana.”

Though the federal government has taken a largely hands-off approach to cannabis in recent decades, state-licensed marijuana businesses continue to suffer unique financial burdens, including a lack of access to banking services, credit cards and federal tax deductions under an Internal Revenue Service (IRS) code known as 280E. As such, many marijuana businesses rely heavily on cash, which even government officials have acknowledge creates public safety risks.

“State-regulated marijuana dispensaries have become targets of robberies,” the complaint says. “These collateral harms increase the costs of state-regulated marijuana businesses and reduce participation in state-regulated marijuana markets. As a result, there is less innovation and less consumer choice.”

Friday’s filing was first reported by Law 360, which also spoke to Joshua Schiller, a lawyer on the case, Canna Provisions v. Garland.

Asked why the suit includes Verano, a functioning multistate cannabis business, Schiller told the publication that “even though it’s a multistate operator, each of its markets are intrastate. They’re not even allowed to bring a seed [across state lines].”

“We like having a multistate operator just to show a different business,” he said, “to show a different story about a different business.”

The lawsuit comes as the Drug Enforcement Administration (DEA) carries out a review into marijuana scheduling after the U.S. Department of Health and Human Services (HHS) recommended moving it from Schedule I to Schedule III under the CSA. Such rescheduling could resolve certain tax-related issues for the industry under 280E, but it would not legalize the plant or permit intrastate commerce.

“The federal criminalization of safe, regulated marijuana commerce in states where it is legal unfairly burdens legal operations and expands the production and sale of illegal marijuana that is unregulated, can be unsafe, and is likely to find its way to other states,” Boies said in a press release in October. “Federal criminalization also denies small, legal marijuana businesses of access to SBA loans, investors, benefits for their employees, and normal banking regulations (which among other things, forces them to rely on cash transactions with all of the dangers to them, and to the community, that result)—as well as burdening them with discriminatory taxes.”

“Americans believe that cannabis should be legal and available subject to reasonable regulation by the states. 38 states have legalized some form of cannabis,” he said. “The federal government lacks authority to prohibit intrastate cannabis commerce. Outdated precedents from decades ago no longer apply—the Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce; moreover, the facts on which those precedents are based are no longer true.”

Cannabis business executives first described plans to file the lawsuit challenging the constitutionality of enforcing criminalization of intrastate marijuana activity under the CSA last year.

“I think the fact that one of the leading constitutional law firms in the United States is willing and eager to take this case speaks volumes to the seriousness of the action and the potential likelihood of success,” the then-CEO of Ascend Wellness Holdings told Marijuana Moment at the time, saying that he hoped the legal challenge would prompt Congress to pass cannabis banking legislation of other reforms.

“Hopefully, this will be another factor [so] that the Senate says, ‘you know, we’ve gotta get off our ass or we’re gonna lose this issue to the courts,’” he said.

On the same day as the new legal filing, Vice President Kamala Harris held a White House meeting with a group of people who received marijuana pardons under the administration’s recent clemency actions.

At the meeting, she urged DEA to reschedule marijuana “as quickly as possible,” calling it “absurd” and “patently unfair” that cannabis is still classified in the same category as heroin.

“This issue is stark when one considers the fact that on the schedule currently, marijuana is considered as dangerous as heroin. Marijuana is considered as dangerous as heroin and more dangerous than fentanyl,” Harris said. “I’m sure DEA is working as quickly as possible and will continue to do so, and we look forward to the product of their work.”

While the purpose of the meeting was focused on the president’s clemency action—which he historically touted in his State of the Union address this month—the event seems to be the latest signal that the administration is hoping to appeal to voters ahead of the November election by promoting an issue with bipartisan popularity, especially among critical young voters.

The president’s mention of his marijuana pardons and administrative scheduling review directive during his speech before a joint session of Congress was a key acknowledgement to that end. And it was well-received, evidenced in part by the massive social media response it elicited.

That said, the president did again misstate the scope of his administrative actions on marijuana, falsely asserting that he expunged thousands of records when, in fact, a pardon does not clear a person’s record.

Biden also told a supporter at a campaign stop in Wisconsin last week that he was “taking care” of marijuana reform, touting his pardons.

The popularity of administrative cannabis reform was also underscored in a recent poll that showed how Biden’s marijuana moves stand to benefit him in November. The survey found the president’s favorability spiked after people were made aware of the possibility that cannabis could be rescheduled under the Biden-initiated review.

Harris, for her part, also faced criticism last month after sharing a video where she claimed the administration had “changed federal marijuana policy.” While Biden has issued thousands of simple possession pardons and directed the ongoing review into federal cannabis scheduling, the law itself has not changed at this point, and campaign pledges to decriminalize marijuana have yet gone unfulfilled.

The vice president’s video also showed a map with incorrect information on which states have legalized cannabis to date.

Following its review, HHS advised DEA specifically to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA).

While that possibility evidently moves the needle for Biden among the general public, equity-focused advocates have stressed the point that it would not legalize marijuana, nor would it do anything to address the decades of harm under prohibition. It would allow state cannabis to take federal tax deductions that they’re currently barred from under an Internal Revenue Service (IRS) code known as 280E, however.

Whether DEA accepts the HHS recommendation is yet to be seen. And while many expect an announcement will happen before the election, the timeline is uncertain. HHS Secretary Xavier Becerra defended his agency’s rescheduling recommendation during a Senate committee hearing on Thursday and later told cannabis lobbyist Don Murphy that he should pay DEA a visit and “knock on their door” for answers about the timing of their decision.

Certain DEA officials are reportedly resisting the Biden administration’s rescheduling push, disputing the HHS findings on marijuana’s safety profile and medical potential, according to unnamed sources who spoke with The Wall Street Journal.

The Biden administration was recently pressed to reschedule marijuana by two coalitions representing military veterans and law enforcement—including a group that counts DEA Administrator Anne Milgram among its members.

On the president’s pardon action, Rep. Barbara Lee (D-CA), co-chair of the Congressional Cannabis Caucus, told Marijuana Moment last month that the clemency should be “extended all the way out, and any unintended or intended consequences of the war on drugs should be dealt with to repair the damage.”

Former Rep. Ed Perlmutter (D-CO), however, told Marijuana Moment that he’s been “very pleased” with Biden’s clemency actions, arguing that the president has “taken some pretty, in my opinion, bold steps.”

Meanwhile, the U.S. Army recently clarified in a branch-wide notice that marijuana possession violations under the military drug code weren’t eligible under the president’s pardons. Sen. John Fetterman (D-PA) called it a “mistake” to exclude military from the relief.

Also, the governor of Massachusetts announced on Wednesday that she is moving to pardon “hundreds of thousands” of people with misdemeanor marijuana convictions on their records, in line with Biden’s push for state-level clemency.

Read the plaintiffs’ response to the federal government’s motion to dismiss the lawsuit below:

Biden Tells Supporter He’s ‘Taking Care’ Of Marijuana Reform At Campaign Stop

Photo elements courtesy of rawpixel and Philip Steffan.