With no good place to stash profits and a patchwork of local laws, some businesses will make inviting targets for cops—who might get help from the feds.
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Next month, recreational marijuana sales will officially be legal in California. But instead of a bacchanalian scene where previously surreptitious stoners share the sidewalks with suburban dads blazed off fizzy, cannabis-infused root beers, the transition to a post-prohibition California is almost certain to be a messy one. Since passage of Proposition 64 in November 2016, the state has been slowly wading through the regulatory issues and legal grey areas surrounding recreational weed. This despite the state’s long and well-documented history of liberal (ostensibly) medicinal marijuana use, which dates to the 1990s and has amounted, in some instances, to a climate of quasi-legalization.
“It’s going to be a bumpy road the next 12 to 18 months,” said Adam Spiker, executive director of Southern California Coalition, a trade organization representing pot businesses. “It’s going to take time for licensing and regulation to get where it needs to be and for a multi-billion dollar industry to fully come out of the shadows.”
Under the terms of Proposition 64, local governments make their own decisions about whether they’ll be home to cannabis businesses, and what hoops those operations have to jump through. Most cities and counties have opted not to license pot sellers initially, waiting to see how it plays out across the state. But this uncertainty could open up the businesses that do operate right away to special scrutiny from law enforcement. Cops, after all, may not see them as job-creators for their communities, but rather as piggy banks for eventual civil asset-forfeiture actions, where police take property without even charging anyone with a crime.
In a worst case scenario, the federal government—with a Justice Department once again run by an old-school drug warrior—could partner up with local police to create an environment where no one who operates a pot business does so without constant fear of losing their whole livelihood at any moment.
Earlier this year, California's state treasurer, John Chiang, convened a working group to look at how pot businesses might best protect their assets under legalization. Because the federal government still considers marijuana a Schedule I drug (along with substances like LSD and heroin), these businesses have long been shut out of traditional forms of banking. In already-legal states, like Colorado and Oregon, some businesses have found ways around this by hiring armored car services to help them pay their taxes and move their money, or by doing business at least in part via digital currencies like Bitcoin. But in California, with about double the population of all previously recreational marijuana states combined, there will be billions of dollars available for potential seizure at any time.
“The medical marijuana businesses that have operated with impunity are the ones where the local district attorneys haven’t been opposed to it, like in northern California,” said Wesley Hottot, an attorney with the Institute for Justice, a nonprofit libertarian litigation firm that has fought against civil asset forfeiture in dozens of states. “But places like Los Angeles and San Diego, where they have their own micro-climate of politics, the legal landscape for any individual marijuana business is much more uncertain, and that’s where you’re running the, ‘Any day I might get raided’ type of operation.”
The threat posed by possible asset forfeiture on part of the federal government is so great that it merited mention as a key reason the industry has been shut out from banking in Chiang’s report. “One of the risks cannabis businesses face is the possibility of asset forfeiture, that is, that federal law enforcement officials might seize their assets. Since assets such as business property might be used as collateral on loans, a bank lending to a cannabis customer would have no recourse if the property were forfeited,” the report read.
California began regulating wider use of medical marijuana in the mid-2000s, and in the years since, the Department of Justice has been constrained in its response by two separate policies. One was an Obama-era enforcement priority known as the Cole Memorandum, which called for a focus on possible sales to minors as well as sale to residents in non-legal states, among other issues. The second was a congressional budget rider first passed in 2014 that prevented the Department of Justice from spending money to interfere with state medical marijuana programs. This rider has been passed annually each year since, and is currently tied to the passage of the congressional spending bill by the end of 2017.
But US Attorney General Jeff Sessions is no friend of the cannabis industry. In fact, he's repeatedly voiced an eagerness to begin cracking down on legal states. “I do not believe there's any argument [that] because a state legalizes marijuana, that the federal law against marijuana is no longer in existence," Sessions said in a radio interview this October. "I do believe that the federal laws clearly are in effect in all 50 states and we will do our best to enforce the laws as we are required to do so."
The Department of Justice did not respond to a request for comment for this story, but if Sessions continues to be barred from committing major resources to such enforcement, his subordinates may not have the money they need to go after California businesses.
That's where local law enforcement comes in.
By teaming up with the feds to form task-forces, local cops can help enforce federal law, while federal agents can crack down on weed businesses. And when they pull off a raid, both can share in the spoils. Democratic lawmakers in the state tried to stop this type of cooperation last legislative session, drafting a bill that would block local police from helping federal law enforcement take action against licensed marijuana stores without a court order. This was fervently objected to by the California Sheriff’s Association, whose president, Kern County Sheriff Donny Youngblood, called the bill “offensive "and argued, "at some point the federal government is going to have to step in and say, ‘You can’t do that.’”
For its part, Kern County has banned all commercial cannabis activity. The anti-task force bill stalled out in the State Senate, and the California Sheriff’s Association did not return a request for comment on its future enforcement plans for this story. Another proposed bill would call on California's Highway Patrol (CHP)—essentially state police—to step up their own enforcement of "black-market cannabis activity," but did not move quickly enough to advance during this fall's legislative session.
Meanwhile, under California law, over 60 percent of forfeiture proceeds have historically gone to local law enforcement, according to a report by the Institute for Justice, which studied asset forfeiture in California between 2002 and 2013.
That's exactly what happened in January 2016, when local law enforcement, working with support from the Drug Enforcement Agency (DEA), seized over $300,000 in an early-morning raid on a medical marijuana dispensary. Last week, after a lengthy legal process and months of hardship, the owner of the dispensary finally got most of his money back. The government still got to keep $35,000, which is not a bad haul all things considered. (Hottot at the Institute for Justice represented the owner of the dispensary, who pleaded guilty to misdemeanors after initially not being charged with any crimes.)
Sometimes, elected officials in the same city will push enforcement in different directions: Even as San Diego has worked to regulate marijuana sales in city limits, the local district attorney has pursued several high-profile raids of dispensaries.
It’s this kind of anti-weed enforcement action that University of Alabama law Professor Julie Hill, who has written extensively about the legality of marijuana businesses and their banking issues, predicted we could see plenty more over the next few years. Such raids that can have a chilling effect on the pot industry as a whole.
“The next best thing to actually enforcing the law uniformly is having a really big enforcement tool that you only use sometimes. That way, you can intimidate people into doing what you want,” Hill told me in an interview. “Maybe that’s why the federal government is happy with the blurry lines these businesses are forced to operate in.”
And while California was one of the blue states that spoke loudest in rejecting Donald Trump on the ballot last fall, some local police departments in its more conservative regions could see teaming up with the feds in targeting weed as a great way to serve their constituents and pad their pockets at the same time.
Chiang, the state’s treasurer, told me he will be monitoring how the process plays out.
“We have to make sure that law enforcement is upholding the laws of the state, and if people see them doing something contrary to that, then there’s going to have to be some sort of public debate about their role.”
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