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By Deb Tharp
While the cannabis industry continues to wait for DEA to decide on rescheduling, it may be downplaying a more consequential issue playing out in Washington: the Supreme Court’s review of Chevron deference.
Chevron, simply put, is the precedent that allows regulatory agencies to interpret ambiguous legislation as they see fit. The doctrine requires courts to defer to the administrative branch’s best judgment when creating regulations for unclear laws, even if the courts would have interpreted the laws differently.
Back in the day, deferring to regulators’ expertise was rather radical. Before the precedent was established in, ironically, 1984, administrators were generally held to strict interpretations of law, which made it difficult for regulators to be effective if laws weren’t crystal clear. The courts often struggled to render judgment in battles between regulators and lawmakers because they were not the subject-matter experts most qualified to interpret these ambiguities. So, they solved the problem by handing over their judicial power to interpret to the actual subject matter experts in the room: the regulators.
Many predicted serious problems with this new policy at the time. After all, it was the judicial branch’s job to interpret ambiguous laws and the executive branch’s job to enforce them. Handing interpretive power over the executive branch was seen as a radical violation of this separation of powers.
The fear was that unelected regulators would pay little heed to elected officials—a prediction we have seen play out time and again in the cannabis industry. For instance, when Louisiana legalized telehealth for medical marijuana evaluations, regulators refused to enact the law, claiming that the legislation was unclear. It took the legislature more than a year to force regulators to accept this change.
Justice Gorsuch argues that giving this de facto law-making ability to unelected regulators leads to unpredictable changes in policy depending on who is in power at the time. He says this puts businesses at a disadvantage, pointing out that industry leaders could “plan for and predict future regulatory changes” or “lobby agencies for new rules that match their preferences,” but that small businesses are “unexpectedly caught in the whipsaw of all the rule changes a broad reading of Chevron invites.”
This is a concept with which cannabis operators are all too familiar, and Schedule 3 will make Big Pharma a seriously empowered industry leader in the cannabis field.
Cannabis operators in the know are divided as to whether SCOTUS should use its power to either dial back Chevron or gut it entirely, as doing so would further concentrate power in the judiciary generally and in SCOTUS in particular. It’s hard to say whether this would be helpful to the existing industry, although it’s indisputable that the decision will affect the industry.
The crux of the broader debate around Chevron is: Which branch of the federal government—the judicial branch or the executive branch—has shown that it is more trustworthy with rule-making power? From the perspective of the cannabis industry, almost everyone who reads this will note that the correct answer to that question is “neither.” But that does not mean the Court’s review, and likely weakening, of Chevron does not matter to cannabis businesses. It really does.
States have their own versions of Chevron deference, and will likely adapt their deference policies based on the SCOTUS decisions coming this summer. If SCOTUS nukes Chevron, more states will weaken deference as well and empower state courts to set the standards by which cannabis businesses operate. In other words, new stakeholders will be steering the ship.
Would they be better? It is probable. A weaker regulatory deference may well pressure elected state legislators, particularly those in states with existing adult-use markets, to pass better laws that guide the industry. This would be a positive outcome because it would deliver more certainty than the status quo.
New York is perhaps the most egregious example of how byzantine regulation can kneecap legalization. More than three years after Albany passed the adult-use law, there are still nowhere near enough licensed retailers open to meet demand because of the onerous regulatory requirements.
The flip side to a dialed-down Chevron deference is that the industry would no longer be able to rely on administrative gifts like the Cole memo. This, right now, would be incredibly concerning if other forms of progress—the SAFER Banking Act, rescheduling, and voracious public support for legalization—were not already in play.
At the end of the day, what the industry needs more than anything is clarity and stability. It’s hard enough to fund a cannabis business with its razor-thin margins. When investors are faced with the certain knowledge that industry-changing regulations will pivot based on who’s in power, funding is nearly impossible. This doesn’t just hurt the industry, it hurts consumers.
We’ve already shown that black-market cannabis products are riddled with impurities and hazardous chemicals. Both regulators and legislators need to help the legitimate industry grow instead of hampering it. When one considers that more than 17% of adults use cannabis regularly, access to clean, tested, safe products is a major public health concern. Perhaps an end to Chevron deference will help this happen.deb
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