What would happen if the Trump Administration killed the Cole Memo?
During his campaign to become our 45th chief executive, President Trump praised himself on being unpredictable and unconcerned with the traditional decision-making logic of career politicians. His first ten months in office have certainly been unpredictable and untraditional. This maverick style adds to the growing mystery of what cannabis policies our new administration will keep and which they will throw out. Anyone who claims that they know what will happen is lying, including President Trump himself.
Immediately after President Trump’s election, many in the cannabis industry feared a quick and brutal shut down of the growing trade. That crackdown never happened. Federal law enforcement did not publically change its enforcement policies and states have continued to grow and develop regulated state cannabis markets.
But, just because it hasn’t happened does not mean it couldn’t. Federal drug laws have not significantly changed since November. Sessions and Trump could still repeal the Cole Memo and interfere with state-regulated cannabis businesses at will.
To understand the now famous Cole Memo, we must start with its context and purpose. The memo was issued in 2013 in response to a growing number of state ballot initiatives that legalized cannabis. Its author, Deputy Attorney General James Cole of the Department of Justice (DoJ), described the different historical roles that the states and the federal government always played in the War on Drugs. Federal agents focused on large-scale drug manufacturers and distributors, and state or local police focused on small-scale drug dealers and users. The federal government simply never had the resources, nor the desire, to put boots on the ground in every city across the country.
State and local legalization was problematic for the Feds because they could neither endorse legalization nor end drug use without the help of local law enforcement. The Cole Memo gave them a soft “out” to ignore state-licensed cannabis businesses so long as they did not run afoul of eight traditional federal drug policy priorities, including children, gangs, interstate trafficking, violence, etc.
The weakness of the Cole Memo is that it is merely a memo. It is not law. Congress never voted on it and it is an open question whether any court would consider it legally binding. Cannabis is still a Schedule 1 Drug under the federal Controlled Substances Act, legally equal to heroin. Trump, or Jeff Sessions, or even some assistant attorney general could kill the Cole Memo with a simple stroke of a pen.
Setting aside the debate over whether these men would, could, or would want to, what would happen if they did kill the Cole Memo? There would be, undoubtedly, many consequences. The most immediate and pressing effect would be that licensed professions, such as lawyers, accountants, and bankers, may no longer be permitted to assist cannabis business in many cases and state regulatory agencies might face a terrible choice of shutting down immediately or committing a federal crime by merely doing their jobs. I’ll discuss each in turn below.
Lawyers in every state are licensed and regulated by their local bar association. One of the most important roles of the bar association is ensuring that attorneys follow ethical rules that govern how attorneys conduct business, usually called Rules of Professional Conduct. These rules include the duty to keep clients’ secrets, how to handle client’s money, fair advertising practices, and much more.
One of the most important ethics rules is that attorneys may not help a client commit a crime. They may advise a client after they commit a crime (past), but they cannot advise a client how best to commit a crime (present or future). A lawyer who helps his or her clients break the law may be guilty of a crime themselves and could lose their license to practice law or even face criminal charges.
The Cole Memo gave many state bar associations to cover to issue new rules (or commentary on the rules) that allowed attorneys to assist cannabis businesses. Washington allows attorneys to “counsel a client regarding the validity, scope, and meaning of Washington” laws, “at least until there is a change in federal enforcement policy.” (Washington RPC 1.2, Comment 18) Oregon revised their ethics rules to allow lawyers to “counsel and assist” cannabis businesses in understanding Oregon’s laws if they also advised them about any conflicting federal laws. (Oregon RPC 1.2) Colorado similarly allows lawyers to help clients understand state cannabis laws, but must advise clients “regarding related federal law and policy.” (Colorado RPC 1.2, Comment 14) Other states have largely followed these early states’ examples.
These currently permissive rules protect attorneys, but removing the Cole Memo would expose them to criminal prosecution and possible disciplinary action from their state bar associations. Some attorneys will continue to fight no matter what, but risking losing one’s profession and freedom is a high price to pay.
Banks & Financial Advice:
The Financial Crimes Enforcement Network (known as “FinCEN”), a department within the federal Department of the Treasury(DoT), oversees protecting the American financial systems from money laundering, financial fraud, terrorist financing, and other financial crimes. Historically, this included preventing financial professionals and banks from managing and handling monies earned or collected from illegal drug sales, including cannabis revenues. Their policies and powers are the primary reason so many cannabis businesses struggle to keep and maintain adequate banking and financial services.
On Valentine’s Day 2014, FinCEN released guidance, in reliance on the Cole Memo, that banks could service cannabis businesses so long as they complied with certain extra security and reporting due diligence. That due diligence requires banks to determine whether a cannabis business’s activities implicate any of the eight enforcement priorities listed in the Cole Memo. If yes, then the bank must report it as suspicious activity. If not, they still must report it, but with a low priority designation.
Without the Cole Memo, the FinCEN guidance makes no sense. In issuing the guidance, the DoT attempted to bring their criminal enforcement policies in line with the DoJ. If the DoJ changes policies, then there is no reason to believe that the DoT will not likewise do the same, effectively ending the cannabis industry’s already spotty access to banks, institutional financiers, and financial professional services.
State Regulatory Agencies:
After the Washington State legislature passed their first medical marijuana law, then Gov. Chris Gregoire vetoed all regulatory portions of the law. She did not use her veto pen out of some libertarian ideal. No, instead she vetoed the regulations to protect state employees from federal prosecution.
Afraid for public sector employees, Gov. Gregoire asked for assurances from federal prosecutors that state actors would not be charged with aiding and abetting criminal drug crimes merely by inspecting, regulating, licensing, and advising intrastate medical marijuana businesses. The US Attorney’s response was that state employees would have no protection from prosecution and could be committing a crime by participating in state cannabis regulation efforts. Gov. Gregoire was not willing to ask her subordinates to risk federal prison, leading to the veto–a cautious but fair conclusion.
The Cole Memo fixed this major problem by giving states the assurance that so long as they protected against the eight federal enforcement priorities, then the federal government would not interfere with the state’s regulatory efforts. If the Cole Memo were killed, then state employees could, once again, be at risk of criminal prosecution merely for doing their jobs.
It is yet to be seen if the Trump Administration will be a friend to the quickly growing cannabis industry. They could, with little or no effort, kill the Cole Memo. Doing so would start a fierce political fight over the future of cannabis. We might win that fight, but killing the Cole Memo would also immediately startle investors and make it harder for cannabis businesses to access essential services like banking, lawyers, and accountants. It could also immediately cause a crisis within state agencies tasked with enforcing state cannabis regulations. Long-term public opinion trends are in our favor, but it could take a decade or more to repair the damage.
Widespread consumer use of cannabis is here to stay. No change in federal policy will kill consumer demand. We proved that throughout the last 30 years of advocacy and civil disobedience. State decriminalization laws will also prevent most local law enforcement of drug possession and use charges. Businesses, not consumers bear the worst of the risk. However, without licensed cannabis businesses, where consumers get their products? And who will get the millions in revenue? A robust and criminal black market would be inevitable under renewed prohibition.
The only responsible path forward is to maintain the Cole Memo until cannabis is descheduled from the Controlled Substances Act. Lobbying efforts by industry organizations such as the NCIA, Cannabis Alliance, NORML, and MPP are all pushing in this direction. For the sake of the jobs, revenues, businesses, patients, and communities at stake, I hope that the White House and Congress are listening.[/column]