July 27, 2016

By John Schroyer

There’s a good argument to be made that James Cole has had a bigger impact on the U.S. cannabis industry than any other single individual in modern history.

The former U.S. deputy attorney general, who served from 2010-2015, authored a trio of memos essentially outlining federal policy on the cannabis industry.

  • The first, in 2011, came barely six months into his tenure and resulted in a wave of crackdowns on the medical cannabis industry at the time.
  • The second, in 2013, was aimed at addressing the seeming contradiction between the federal prohibition of cannabis and Colorado’s and Washington State’s popular votes to legalize recreational marijuana in 2012.
  • The third, in early 2014, was an attempt to alleviate the concerns of banks that didn’t want to work with law-abiding licensed cannabis businesses, so that legitimate companies could obtain financial services (it kind of worked, but it’s not as though Bank of America is advertising to MJ companies).

The second memo in particular laid the groundwork for the current rec industry as it exists today in the U.S., and also helped build upon the earlier 2009 Ogden Memo, which had set the stage for today’s medical marijuana market under a permissive Obama administration.

Marijuana Business Daily sat down with Cole a year and a half after his departure from the DOJ to get his thoughts on how the industry has developed and the role his memos have played in that evolution.

Your first major memo sent a chill through the industry. How did that come about, and what was the intention behind it?

You have to go back to the Ogden Memo, which was the first one kind of in a series, and the sense that I think the U.S. attorneys had, and came to me to try and remedy, which was that people were over-reading the Ogden Memo.

The Ogden Memo was really intended to say people who are really are sick, and people who give them care in that illness, are not going to be the topic of our conversations in our prosecution efforts, because that’s just not a productive use of the time of the Department of Justice. There are more important targets for drug enforcement than that, and we’re going to leave them alone.

It referenced the fact that many of them are doing it under the state laws that allow for medical marijuana, but it wasn’t intended to say that anyone who’s doing it in compliance with state law is just fine, and that’s where the misreading was coming in. So we wanted to try to clarify that.

Was the 2013 memo intended as a policy reversal, as opposed to the 2011 memo? Because that’s what it seemed like, and that’s how many in the industry took it. What changed or evolved in those years?

It was a combination of two things, and it wasn’t really intended to be a huge policy shift as much as reacting to the situation and trying to use some common sense.

The two things were the law, and what our goals are in trying to fight drugs. We looked at the statutes and the initiatives that were passed in Colorado and Washington State, and I asked the people in my office to do some research into whether the federal government could preempt those laws, whether there was a supremacy issue because we have the Controlled Substances Act (CSA).

What we came to was looking at these initiatives as two pieces – one was the decriminalization of marijuana in those states, and secondly, setting up a regulatory scheme, through which it can be controlled and taxed.

The conclusions that we came to were, number one, that we cannot preempt the decriminalization, because the CSA itself says the federal government is not preempting the field here. The states are free to have their own laws. So the conclusion was we could not force the states to abandon their legalization. Now, in essence, people are going to smoke marijuana in those states.

We also heard in our legal analysis that if you wanted to, you probably could stop the regulatory scheme because it probably could stop conduct that’s illegal under federal law. And so we said, “But what’s the point of that?” Because all we’re going to do is cut off our nose to spite our face and help the drug cartels  make lots of money.

So what we came up with was, where are our priorities in this? Because there are some harms that we believe come from the marijuana industry.

So we listed them in the memo in 2013. And then we basically set out that when you have those conditions present, the U.S. attorneys can go ahead and prosecute.

We were saying to the states, “You guys have to become serious about your regulatory enforcement here.” Recognizing that it hadn’t been done very well in the past, we were basically admonishing them.

Were you or anyone else at the DOJ frustrated at the states over lack of action over cannabis? Because it seems like your memos were sort of substituted for lack of action on policy from Congress.

The biggest interaction I had with Congress was right after the state of Washington and the state of Colorado had voted their initiatives in. I had a number of members of Congress who called me to talk about it, and the views were all over.

There were a number who wanted to preempt it, and there were a number who said, “Now you know what the will is of the people and you shouldn’t enforce it at all.” My reaction was, “You’re the ones who make the laws. If you want to pass a law that gives me direction about what to do, either way, go ahead, that’s your job, because then we’ll enforce the law.” And nothing came out of that.

Probably the biggest frustration over time – and it comes from both what Congress does, because they have the power to do this, and what the regulatory process is through both FDA and DEA – is marijuana continuing to be a Schedule I drug.

And that, I think, needs to be changed. Because there is an enormous amount of anecdotal evidence of marijuana having some sort of medical efficacy.

Given that state regulatory systems have been such a constant theme in your memos, how do you think that has played out? Do you think that states have done their jobs?

It depends on the state, and it’s also going to take some time to really see this play out. The early indications are that the states, especially Colorado and Washington, are doing a responsible job of this.

There doesn’t seem to be a rampant increase of importation from legal states to illegal states. That’s one of the areas we said we would prosecute, if we saw it. But we haven’t seen a wholesale growth of bad conduct that we thought was harmful.

Do you think it’s accomplished what it was meant to accomplish, or is there still work by private companies and the states that needs to be done in terms of complying with those priorities?

The jury is still out. The trends seem to be good, but you have to look at this over time.

The area that concerns me the most going forward is the topic of my third memo, which is banking. The last thing you really want here is a cash business, because there’s a lot of cash involved, and what that breeds is armed conflict, because people are either trying to steal the cash or they’re trying to protect the cash, because they can’t avail themselves of banking.

And that generally involves the use of weapons, which is a big danger for public safety. That’s why both FinCEN and I issued memos together saying, “Banks, go ahead and do this, we want the banking to go forward.”

This interview has been edited for length and clarity.

John Schroyer can be reached at johns@mjbizdaily.com

This article originally appeared at http://mjbizdaily.com/the-famous-marijuana-memos-qa-with-former-doj-deputy-attorney-general-james-cole/ and FOCUS makes no claims to ownership or authorship.