Federal criminalization of safe, regulated
intrastate cannabis legal in 38 states is unconstitutional—and
unfair to small businesses
Cannabis businesses are unconstitutionally
prevented from getting small business loans, investments; unable to
have normal banking relations; and subject to discriminatory
taxes
SPRINGFIELD, Mass., Oct. 26,
2023 /PRNewswire/ -- A coalition of U.S. cannabis
operators and investors working in state-legal medical and
adult-use cannabis markets today filed a lawsuit against U.S.
Attorney General Merrick Garland. The coalition, represented
by the law firm Boies Schiller Flexner, seeks to enjoin the federal
government from enforcing the Controlled Substances Act in a
manner that interferes with the intrastate cultivation,
manufacture, possession, and distribution of cannabis, pursuant to
state law. The lawsuit asserts that the federal government has no
basis for enforcing the Controlled Substances Act against
intrastate, state-regulated cannabis operations.
Boies Schiller Flexner and
Lesser, Newman, Aleo & Nasser LLP filed the lawsuit in
the United States District Court
for the District of Massachusetts,
Western Division, and will represent plaintiffs Gyasi Sellers (CEO and Founder of Treevit),
Canna Provisions, and Wiseacre Farm, all of which are local
independent operators in Massachusetts who have suffered significant
harm and business challenges due to federal prohibition. Verano
Holdings (OTCQX: VRNOF) is also named as a plaintiff, while
foundational supporters of the suit include Ascend Wellness
Holdings (OTCQX: AAWH), TerrAscend (TSX: TSND) and Green Thumb
Industries (OTCQX: GTBIF), as well as Eminence Capital and Poseidon
Investment Management.
The lawsuit seeks to confirm the rights of Massachusetts and other states to regulate
cannabis within their borders, and to confirm the corresponding
limits on the federal government's power to regulate
commerce. The federal government's power to regulate commerce
is based on the Interstate Commerce Clause of the
Constitution. The law at issue in this suit, the Controlled
Substances Act, exceeds that limited authority: it bars the
production, distribution, and possession of marijuana, regardless
of whether those activities cross state lines or, as in the case of
Plaintiffs' cannabis businesses, are intrastate. This
unjustified and unconstitutional prohibition on intrastate cannabis
harms Plaintiffs and hinders the efforts of states to provide
patients and adults with access to strictly-regulated and tested
cannabis.
In 2005, the Supreme Court rejected a challenge to the
Controlled Substance Act's cannabis prohibitions, but the facts
today compel a different result. A critical factor in that
decision, Gonzales v. Raich, was that the federal government
intended to "eradicate" the market for cannabis nationwide.
The Court concluded that the federal goal of eliminating commerce
in cannabis, combined with the assumption in 2005 that intrastate
marijuana could not be differentiated from interstate cannabis,
justified the Controlled Substances Act's prohibitions on
intrastate cannabis. Neither of those facts, however, are
true today. In the eighteen years since Gonzales,
Congress and the Executive Branch have abandoned any intent to
"eradicate" cannabis, and numerous states have developed regulatory
programs for legal marijuana that is not fungible
with, and is readily distinguished from, illicit
cannabis.
Today, 38 states including Washington
D.C. have medical or adult-use cannabis programs with
significant regulatory oversight. They require compliance
with a multitude of stringent regulations aimed to protect
patients, customers, and the public at large, including video
surveillance and seed-to-sale tracking. The cannabis that is
cultivated, processed, and distributed under these regulations is
not fungible with, and is readily distinguishable
from, illicit interstate cannabis. The regulated cannabis
products in these states can be traced back all the way to the
original batch of seeds from which they grew.
These changed facts compel a different result than was reached
eighteen years ago in Gonzales. Absent the relief
sought in this lawsuit, Plaintiffs and other state-regulated
cannabis operators will continue to suffer severe harms.
State-regulated cannabis businesses are deemed illegal under the
CSA; their everyday activities are considered federal crimes.
As a result, they are cut off from numerous federal programs and
protections (including small business loans), they are subject to
discriminatory tax penalties, and many organizations—including
banks and credit card processors—refuse to do business with them,
rather than risk being deemed conspirators, aiders and abettors, or
money launderers.
The result is that many cannabis businesses are suffering,
people are losing their jobs and individual wealth is being
destroyed. In addition, social equity licensees harmed by the War
on Drugs and who were supposed to have equal access to the industry
do not have the same benefits as otherwise situated business owners
to start a business and build their wealth.
"The federal criminalization of safe, regulated marijuana
commerce in states where it is legal unfairly burdens legal
operations and expands the production and sale of illegal marijuana
that is unregulated, can be unsafe, and is likely to find its way
to other states," said David Boies,
Chairman, Boies Schiller Flexner LLP. "Federal criminalization also
denies small, legal marijuana businesses of access to SBA loans,
investors, benefits for their employees, and normal banking
regulations (which among other things, forces them to rely on cash
transactions with all of the dangers to them, and to the community,
that result) – as well as burdening them with discriminatory
taxes," said Mr. Boies. "Americans believe that cannabis should be
legal and available subject to reasonable regulation by the states.
38 states have legalized some form of cannabis. The federal
government lacks authority to prohibit intrastate cannabis
commerce. Outdated precedents from decades ago no longer apply –
the Supreme Court has since made clear that the federal government
lacks the authority to regulate purely intrastate commerce;
moreover, the facts on which those precedents are based are no
longer true," said Mr. Boies.
"While reforms such as the SAFER Banking Act and rescheduling
cannabis under the Controlled Substances Act would improve certain
aspects of this broken and antiquated system, they will not solve
the fundamental issue. The application of the CSA to lawful
state-run cannabis business is an unconstitutional overreach on
state sovereignty that has led to decades of harm, failed
businesses, lost jobs, and unsafe working conditions," said
Darren Weiss, President of
Verano. "We are prepared to bring this case all the way to
the Supreme Court in order to align federal law with how Congress
has acted for years. We believe that the Supreme Court will adhere
to the core value on which our country was founded and which is
central to guaranteeing freedom: that the federal government's
powers are limited."
"We want to be treated equally, on an even playing field with
any other small business in Massachusetts," said Meg Sanders, CEO and co-founder of Canna
Provisions, an award-winning independent craft cultivation, with
two retail dispensaries in Western
Massachusetts.
Plaintiffs are represented by David
Boies, Jonathan D. Schiller,
Matthew L. Schwartz, Joshua I. Schiller, and David Barillari of Boies Schiller Flexner LLP
and Thomas Lesser and Michael Aleo of Lesser, Newman, Aleo &
Nasser LLP.
MEDIA CONTACT
Rosie Mattio, MATTIO
Communications
rosie@mattio.com
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content:https://www.prnewswire.com/news-releases/lawsuit-seeks-equal-treatment-for-cannabis-businesses-301969206.html
SOURCE Boies Schiller Flexner LLP
