On February 9, 2018, funding was restored to the federal government through March 23, 2018. The spending legislation is significant for the cannabis industry for two reasons. First, the budget deal extends the Rohrabacher-Blumenauer Amendment, which prohibits the Department of Justice (DOJ) from using federal funds to prevent states from implementing their own cannabis laws that authorize the use, distribution, possession, or cultivation of medical marijuana. Second, it reaffirms a split between the executive and legislative branches regarding federal drug policy.
Over the past year, the Trump administration has signaled that the federal government would begin prosecuting state-regulated medical marijuana businesses, in a significant break from the approach taken by the Obama administration. Under President Barack Obama, Congressional spending bills included a provision that defunded federal drug enforcement of state-legalized medical marijuana activities. In addition, then-Deputy Attorney General James Cole issued a memorandum to all U.S. Attorneys instructing prosecutors to stand down from federal prosecution of marijuana-related activities that would otherwise be legal under state drug laws (the Cole Memo). Similarly, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidance to financial institutions permitting them to provide services to marijuana-related businesses as long as they continue to meet their obligations to know their customers and to report possible criminal activity.
A variety of actions in the past year have changed executive branch policy on the issue. On May 5, 2017, President Donald Trump added a signing statement to the spending bill passed at that time that was widely interpreted to mean that he was reserving his right to disregard the federal funding restriction. In January 2018, Attorney General Sessions issued a Department of Justice memorandum instructing full enforcement of federal drug laws, and explicitly rescinding the Cole Memo. Later the same month, the Treasury Department announced that it was reviewing its own FinCEN guidance in light of the Justice Department memorandum.
Against this backdrop, industry followers have watched to see if similar changes would come from Congress. A series of short-term spending bills passed since President Trump took office created uncertainty about the status of federal enforcement in this area. Congressional action affecting the status of the Rohrabacher-Blumenauer Amendment would have the practical effect of reinvigorating federal prosecution of medical marijuana-related activities.
The spending bill signed last week keeps the Rohrabacher-Blumenauer Amendment in place and cannabis businesses can find some comfort in Congress’s continuing limitation on Justice Department funding — at least until March 23, 2018. The new budget deal does not protect recreational marijuana companies in states that have legalized marijuana for that use. It also does not authorize federally insured banks to handle proceeds from medical marijuana companies. This recent action sets the stage for further developments at the federal level, and we will issue further client Alerts as they occur.