In 2012, Washington voters passed Initiative 502 (I-502), establishing legal marijuana for recreational use. However, the term “legal marijuana” is a misnomer. Marijuana is not ever truly legal in the United States as the Federal Controlled Substance Act (CSA) explicitly prohibits the possession or sale of marijuana. The CSA classifies controlled substances in a series of schedules, with Schedule I substances seen to have a high potential for abuse, no currently accepted medical use, and a lack of accepted safety for use under medical supervision. 21 U.S.C.A. § 812(b)(1). Marijuana is classified under Schedule I and remains illegal under federal law.
Under federal law marijuana is clearly illegal, but the Department of Justice (DOJ) has provided guidance regarding enforcement of the law. On August 29, 2013, then U.S. Deputy Attorney General James M. Cole issued an enforcement policy memo to all U.S. attorneys detailing priorities when enforcing federal drug laws in states that legalized or decriminalized marijuana. The memo named eight enforcement priorities for the DOJ in enforcing the Controlled Substances Act against marijuana-related conduct:
- Preventing distribution of marijuana to minors;
- Preventing cannabis revenues from going to criminal enterprises, gangs, and cartels;
- Preventing diversion of marijuana from states where it is legal to other states where it is not;
- Preventing state-authorized activity from being a cover for illegal activity, including trafficking of other illegal drugs;
- Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
- Preventing drugged driving and exacerbation of other adverse public health consequences associated with marijuana use;
- Preventing the growing of marijuana on public lands; and
- Preventing marijuana possession or use on federal property.
The memo “rests on its expectation that state and local governments that have enacted laws authorizing marijuana-related conduct will implement strong and effective regulatory and enforcement systems that will address the threat those state laws could pose to public safety, public health, and other law enforcement interests.” Law-abiding actors in states with strict marijuana laws and robust regulation should stay clear of the federal government’s enforcement priorities. However, this is an internally circulated memo and does not provide a legal defense for compliant state actors. The bottom line is that the federal government may enforce federal law and that is a risk every actor in the marijuana industry takes.
Unsurprisingly, in light of federal law, Washington has established a robustly regulated marijuana market. The Washington Liquor and Cannabis Board (LCB) regulates marijuana by licensing actors in the market, promulgating rules, enforcing those rules and adjudicating appeals. The result is a heavily regulated marketplace that places a high burden of compliance on business owners.
The I502 marijuana market consists of three tiers of of licensees: producers, processors, and retailers. The LCB initially reviewed and granted licenses through a lottery process in 2013. As of October 12, 2015, the LCB is currently accepting new applications for retail licenses.
The Washington market is made up solely of marijuana grown and processed in Washington. Licensees are restricted on to whom they may sell. A producer may only sell to other producers or processors, processors may only sell to other processors or retailers, and retailers are may sell to anyone (not just Washington residents), so long as they are at least 21 years of age. In order to maintain compliance with the restriction on sales, and to prohibit marijuana from entering or exiting the market, licensees are required to track the marijuana plant and its products from “seed to sale.” Licensees are also prohibited from “vertically integrating,” meaning that one cannot own all three types of licenses. A person or business may possess a producer and processor license, but not a retail license. In other words, a retail licensee may not possess any other kind of license.
The LCB has multiple means to enforce the laws and regulations on marijuana. The LCB may reprimand licensees through fines, suspensions, or even the termination of a license. Licensees who wish to challenge an LCB decision must do so through the LCB’s administrative proceedings.
Washington is currently experiencing significant change it in its medical marijuana industry. For the first year of legalized recreational marijuana, there were two separate markets: medical and recreational. Medical marijuana was sold at dispensaries that were not subject to the LCB’s authority. Recently, the state legislature enacted laws that allow the LCB to regulate medical marijuana. As a result, medical marijuana will now be sold at I502 retail stores that obtain an endorsement from the LCB. The endorsement will allow such stores to sell marijuana for medicinal purposes and will require that store employ a certified consultant, who can make recommendations about the medical uses of marijuana. The LCB and the Washington Department of Health are currently promulgating rules for medical marijuana. All medical marijuana dispensaries will need to comply by July 1, 2016. In the interim, medical marijuana dispensaries continue to operate with little regulation.
Marijuana is a risky and complicated endeavor. First, marijuana is unequivocally prohibited under federal law and actors in the industry face the threat of federal prosecution. Second, Washington heavily regulates all marijuana transactions through the LCB. Third, as illustrated by the current unsettled state of medical marijuana, laws and regulations are constantly changing. Marijuana law is not for everyone, but those who do choose to dive in will not find many dull moments.