Risks remain high when the cannabis business is conducted outside of strict state laws

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While most of the attention for legal cannabis recently has focused on the high profits of mega-deals, the risks associated with non-compliance with state laws remain as high as ever. On July 30, 2021, the 6th District Court of Appeals upheld the marijuana and conspiracy charges and convictions of a person for the manufacture, distribution, and possession of marijuana with intent to distribute, violate the Controlled Substances Act, Section 21 USC § 841, 846,[1] and at the same time weighed up the Blumenauer change. The change, which state officials and their licensed cannabis operators often rely on, purportedly prohibits the US Department of Justice (“DOJ”) from prosecuting anyone who complies with state medical marijuana laws.

The defendant alleged that he was a registered nurse under the Michigan Medical Marijuana Act (“MMMA”), but his prior conviction of a felony was a legal obstacle to lawfully performing the role under the MMMA. Therefore, the court found that the defendant did not strictly adhere to the change. The cost of non-compliance – 188 months in prison; yes, at least over 15 years.

The sixth circle[2] provided one of the few analyzes of the amendments[3] Effect,[4] from which we can take some hints about its practical functioning – at least within the two legal cannabis states that the court covers.

4 keys to take with you

First, the ninth circuit[5] Interpretation of the 2016 amendment[6] provides a well-founded and reliable analysis. The Sixth District relied on the Ninth District case, although it was under no legal obligation to do so, and followed the procedures outlined therein with limited exceptions. The court found – but did not rule – that Section 538 is robust and prohibits the DOJ from spending on prosecuting anyone who “strictly adhered” to state medical marijuana law.

Second, if there are undisputed facts to demonstrate non-compliance with the MMMA, a defendant is not entitled to any protection, if any, that Section 538 may provide, and no pre-trial hearing is required. In this case, the Western District of Michigan Court of First Instance granted the defendant a pre-trial hearing under the burden of proving his “strict compliance” with the MMMA. On the other hand, however, the court warned that the government could use any testimony of the accused as part of their main trial. In such a pre-trial hearing, a defendant must provide at least some initial set of statements of the facts under appeal in order to demonstrate compliance. The defendant declined to testify and did not provide any other evidence, so the government’s version of the facts remained undisputed.

Third, the change did not change the content of the CSA. Although the amendment purports to temporarily refuse funding to prosecute certain crimes, there is no indication in the text that the substantial conduct prohibited by the CSA has now been legalized. So even if the change effectively refuses to fund the pursuit of a particular behavior, that behavior still remains criminal.

Fourth, the government can charge a conspiracy to violate marijuana laws if the conspiracy precedes the change (i.e., Dec 2014). In this case, the charges were dropped prior to the Michigan Recreational Act amendment. Although the court briefly referred to the extension of state law to include adult recreational use, the court did not address any of its implications and the amendment does not contain a provision on recreational use.