Will the government crack down on marijuana companies? Legal weed advocates are worried

Will the government crack down on marijuana companies? Legal weed advocates are worried
Source: AP
Source: AP

Time to stockpile those doobies: The feds may soon begin cracking down on legalized pot. Despite steadily loosening state restrictions on the marijuana industry, insiders are concerned about the future, following a warning by White House press secretary Sean Spicer in a press briefing on Thursday. He said Americans should expect "greater enforcement" of federal marijuana laws going forward.

Weed industry advocates argue freer laws in recent years have been putting pot businesses on track to create hundreds of thousands of jobs, many of which offer healthy salaries. That could change now, they cautioned.

"We all are very worried," said Sean Lowell, a grower and co-owner of California's Lowell Farms. "If just one of these hard working Americans lost their job ... it would be a goddamn shame."

Crucially, potrepreneurs warn that Spicer's statement — which suggests marijuana is a gateway drug — will leave the door open for more restrictive policies on cannabis access, even in states like Colorado, where recreational adult use is permitted.

"There is a big difference between [medical] and recreational marijuana," Spicer said, according to a White House transcript. "And I think that when you see something like the opioid addiction crisis blossoming in so many states around this country, the last thing that we should be doing is encouraging people." 

Indeed, "greater enforcement" of federal laws suggests a departure from President Barack Obama's policy of deferring to states' laws on marijuana; one power of the presidency is being selective about enforcing federal laws that may conflict with state-level statutes. 

As far as the federal laws regarding cannabis go, it's still a Schedule 1 illegal substance with "no currently accepted medical use." And while more than half of states allow marijuana in some form, mostly for medical use, players in those states effectively rely on lax federal enforcement in order to do business.

Spicer's statement was strong enough that some aspiring cannabis entrepreneurs are reportedly already looking north of the border, where a progressive Canadian government is said to offer greener pastures: "I've picked up an increase in chatter about activity in Canada," said Joel Milton, CEO of Baker, a company that helps dispensaries with customer service. "Even internally, it's hard ... not to start to think about alternative plans."

Yet it might be too early to give up on legalized marijuana in the United States — whether you are a customer, investor or worker in the industry. Here's how leaders at weed companies are interpreting Spicer's statement, plus 3 of the likeliest scenarios regarding the future of U.S. marijuana laws.

Industry players from growers to investors are concerned about Spicer's statements regarding cannabis.
Source: P. Solomon Banda/AP

1. The government could change cannabis laws 

Two documents support lax enforcement of federal marijuana laws: The 2013 Cole memo — which discourages U.S. attorney generals from cracking down on adult recreational use in states where pot is legal — and the Rohrabacher-Farr amendment, which allows for medical use.

That's one reason marijuana industry leaders are confused about Spicer's statement, which seemed to depart from President Donald Trump's previous line during his campaign — that the matter should be left to the states. 

"It seems to me the Spicer was shooting from the hip," wrote Troy Dayton, the CEO of Arcview Group, a market research firm focused on cannabis, in an email. "A crackdown would be in direct conflict with the president's campaign promise that he made multiple times that he would leave marijuana policy to the states."

In addition, by drawing a distinction between medical and recreational cannabis, Spicer confused the issue, said John Hudak, who studies drug policy at the Brookings Institute. Nationwide, there's really no distinction between recreational and medical cannabis — federal laws say clearly that marijuana has no accepted medical purpose: "He lacked really any understanding of the subject," Hudak said.

Then again, Hudak also said there are a few ways the administration could find a way to make Spicer's prediction a reality — by cracking down exclusively on recreational pot. 

"You could decide that certain behaviors are going to be in the interest of law enforcement and certain behaviors are not," Hudak said, adding that the administration could direct authorities to crack down on recreational dispensaries, while letting players in the medical space do their thing. 

But that's scenario is unlikely, Hudak said, because it would be complicated and expensive. Many industry players own a mix of medical and recreational dispensaries, and the whole industry is interconnected. Joseph Bondy, a criminal attorney in New York who follows cannabis law, agreed.

"If you walk into a dispensary in Washington or Colorado, you have the same sellers operating pursuant to the same laws and regulations ... for the recreational and medical market," Bondy said. "Once you start to peel the onion back, you can find a lot of possible violations of federal law."

If you enforced federal law, Bondy said, pretty much anyone involved in the medical cannabis industry could be subject to a minimum five to ten year prison sentences to start with. Ancillary offenses — like if a medical marijuana cultivator committed bank fraud in order to set up a checking account — would ramp up the costs of enforcement even more.

But if — instead of cracking down — the government loosened regulation of marijuana, Bondy argues, that could help grow and professionalize the industry. That would require a change to federal law, which Bondy said he believes could occur thanks to two bills introduced by the GOP-led Congress. 

"The notion of being able to pay taxes, have a business, take deductions, go to a bank, those are inherently Republican ideas," Bondy said. "It furthers the conservative objective of federalism and states rights while not having people lose jobs."

A dispensary in Boulder, CO, where legalization has largely been touted as a success.
Source: Brennan Linsley/AP

2. States could take the Trump administration to court

If targeting recreational pot proves to be enough of a priority for the administration, then the industry might see a crackdown. 

"Ultimately this will end up at the Supreme Court," said Steve Gormley, CEO Seventh Point LLC, an investment firm focused on acquiring legal cannabis assets in Los Angeles. 

"Really what [Spicer's statement] impacts is states that have thriving adult use businesses like Colorado," Gormley said. "And if the feds decide to go after Colorado, given the overwhelming support of the citizens in Colorado and how well it's gone there... the federal government will have a big fight on their hands."

Indeed, Gorley said he liked the industry's chances in a legal battle — pointing to a case brought by Oklahoma and Nebraska against Colorado over its legalization law. The Supreme Court refused to hear it.

But Bondy warned even though states like Washington would put up a fight, the Trump administration would likely win out — and that's a big risk for people investing in the weed industry right now.

"Federal law is federal law and the federal government has the right to enforce it," Bondy said. "There's a certain wish, a lot of optimism and hopeful thinking going on from people who have invested a lot of funds. But if you were about to invest funds right now, it's not clear to me that you really would." 

Industry insiders seem to be more concerned with Trump's attorney general Jeff Sessions, than they are with the president himself.
Source: Pablo Martinez Monsivais/AP

3. The Trump administration might back down 

Among some of the industry experts consulted by Mic, there was still a degree of optimism that Spicer's statements were a fluke. The toothpaste is out of the tube, the thinking goes, and a Republican administration is unlikely to ignite a major battle at the expense of states' rights.

"We hope that the administration would stick to what has always been the Republican mantra, which is 'states first,'" said Mark Doherty, who works with East Coast growers at agricultural equipment company Urban Gro. "If the voters of a state approved these changes ... then we would hope that administration would abide by that and respect that right."

Other players agreed that Spicer's statement was too much of a departure from Trump's to be taken literally.

"My guess is that the administration is going to change the way it talks about marijuana enforcement but ultimately do very little different from Obama," Hudak said.

Other weed advocates agreed that the administration is unlikely to take extreme measures against the industry: "The most realistic possibility is that we will not see the same hands-off approach in adult-use states," said Paul Armentano, deputy director of NORML, an advocacy group that favors broader cannabis access. "But politically, this going to be a difficult tightrope if it intends to go in this direction. I don't see a political upside."

In short? The high cost of a crackdown — coupled with pro-weed public opinion — could be enough to dissuade the federal government from messing with the marijuana industry too much, at least for now. But make no mistake: America's legal high faces a tenuous future, whether you've got a prescription or not.