DOJ Moves to Stop Cannabis Lawsuit
The TDR Three Key Takeaways:
1. DOJ vs. State Cannabis Laws: The DOJ aims to dismiss a lawsuit from cannabis companies challenging federal authority over state-legalized cannabis, highlighting a critical dispute over federal versus state jurisdiction.
2. CSA Enforcement Dispute: Plaintiffs contest the CSA’s applicability to state-regulated cannabis activities, citing harm to businesses and public safety, while the DOJ defends the CSA’s constitutionality and questions the plaintiffs’ legal standing.
3. Implications for Cannabis Industry: The lawsuit signifies a significant moment for the cannabis industry and state sovereignty, with potential major impacts on the regulation of intrastate commerce and the operations of state-legal cannabis businesses.
The DOJ (U.S. Department of Justice) is seeking to dismiss a lawsuit filed by several cannabis companies, including Verano Holdings and Canna Provisions. The lawsuit challenges the federal prohibition of cannabis in states that have legalized it, arguing that the Controlled Substances Act (CSA) should not apply within these states. The DOJ, in its motion to dismiss, contends that the plaintiffs lack standing and finds their arguments unconvincing. The federal government maintains that the regulation of intrastate marijuana activities is constitutional and that there is no fundamental right to distribute, possess, or use marijuana.
The plaintiffs assert that the enforcement of the CSA against state-legal activities undermines state marijuana programs, harms businesses, and threatens public safety. They seek a declaratory judgment that the CSA is unconstitutional as applied to intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law. They also request an injunction preventing the DOJ from enforcing the CSA in a way that interferes with these intrastate activities.
The DOJ argues that the precedent set in the 2005 Supreme Court ruling Gonzales v. Raich supports the constitutionality of federal regulation of intrastate marijuana activities. The plaintiffs, however, believe that times have changed, with regulation of legal cannabis in many states, and that the precedent no longer applies. The DOJ’s motion also points out that the plaintiffs cannot claim direct injury as they have not been federally prosecuted, and a congressional rider has been in place for a decade, preventing the DOJ from using federal funds to interfere in state-legal medical cannabis laws.
The lawsuit highlights the challenges faced by state-legal cannabis businesses, including the lack of access to banking services, credit cards, and federal tax deductions under IRS code 280E. These financial obstacles increase the risk of public safety issues, such as robberies at dispensaries that predominantly deal in cash. The plaintiffs argue that the continued federal prohibition of cannabis is an unjustified intrusion of federal power and lacks any rational basis.
The case also draws attention to the changing cannabis laws in the U.S. Over the years, the federal government’s approach to cannabis has shifted from a strict prohibition to a more ambivalent stance, allowing states to experiment with their own cannabis laws. The lawsuit points out that this patchwork approach to marijuana regulation provides no basis for Congress to regulate intrastate marijuana.
The lawsuit represents a significant challenge to the federal prohibition of cannabis and highlights the tension between state legalization efforts and federal law. The outcome of this legal battle could have far-reaching implications for the cannabis industry, state sovereignty, and the federal government’s authority to regulate intrastate commerce.
At TDR we will keep our readers up to date on these changing policies and the effect that changes in 280E specifically would have on the value of US based Cannabis companies.
