Federal and State Marijuana Laws and Your Pot Business
By Olivia Wathne, Esq. | Legally reviewed by Amber Sheppard, Esq. | Last reviewed August 14, 2023
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Marijuana is a Schedule I drug. The federal government views cannabis products derived from the cannabis plant as having a high potential for abuse. Under federal law, possession of a small amount of marijuana results in a misdemeanor. If it is a second offense, it can result in a felony. If caught selling under 50 kilograms of marijuana, you can face up to five years in prison and a $250,000 federal fine.
Many states have made marijuana legal. They have authorized businesses to produce and distribute medical cannabis. Some state legislatures have even legalized the drug's recreational use. As a result, Americans have established adult-use dispensaries that produce and distribute marijuana products. But the federal government still views medical use marijuana and recreational marijuana as illegal.
The conflict between federal law and state laws puts cannabis business owners in a tough situation. This article discusses the risks marijuana businesses face. It also looks at how some businesses try to shield themselves from liability at the federal level.
Marijuana Prohibited Under Federal Law
Federal marijuana laws remain strict. Congress passed the Controlled Substances Act (CSA) in 1970. The CSA established a system for the classification of controlled substances. It divides substances into groups known as Schedules. The schedules depend on the drug's potential for abuse and use in medical treatments.
Thirty-one states, and the District of Columbia, have decriminalized possession of marijuana. Thirty-eight states allow for medical marijuana. Twenty-three states allow recreational cannabis use. These states include Oregon, California, Colorado, Washington, Missouri, Nevada, Illinois, Virginia, and New York.
Medical marijuana laws are also affected by federal law restrictions. For instance, doctors cannot prescribe medical marijuana. Instead, they can provide a "recommendation" for the personal use of marijuana. This is different than a prescription for Marinol. Marinol is a synthetic THC drug used for pain management. Medical marijuana dispensaries are unable to insulate themselves from criminal penalties. They are in direct contact with an illegal drug under federal law.
Convicted Despite State Law Compliance
The Drug Enforcement Administration (DEA) enforces federal marijuana laws. Many state lawmakers have legalized medical and recreational cannabis. As a result, the DEA has changed its marijuana enforcement policies. Particularly, it has changed its position on cannabis industry businesses that follow state laws.
The DEA has brought many federal enforcement actions against cannabis businesses. Take a look at the Supreme Court's decision in Gonzales v. Raich. The Court held that even if a business complies with state regulations, it risks conviction for federal offenses. The DEA says that while it can prosecute these businesses, it will choose not to do so.
Changing Federal Enforcement Policy
The Attorney General of the United States Department of Justice ("DOJ") enforces federal weed cases. In a 2013 memorandum, the DOJ changed its federal marijuana enforcement policy. It announced that prosecutions would focus on activities outside of state legalization.
In a 2018 memorandum, Attorney General Jeff Sessions rescinded the 2013 memorandum. The 2018 memorandum re-directed federal prosecutors to pursue prosecutions related to marijuana activities. The DEA initiated new law enforcement actions against marijuana businesses that comply with state law.
In 2022, President Joe Biden forgave all federal offenses of simple marijuana possession. He also directed the Attorney General to review the classification of marijuana under federal law. These steps likely bring the federal government closer to federal marijuana decriminalization.
The federal legislature has been active in trying to decriminalize marijuana. The Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) aims to de-schedule cannabis. The Senate has yet to pass it despite being up for a vote since 2019.
Contact an Attorney About Your Cannabis Business
The marijuana industry will continue to expand in the coming years. This means more protections will surround medical marijuana and recreational marijuana use. Until the federal view on marijuana changes, marijuana business owners should pay attention to their state's laws.
Compliance with state and local drug policy and public health regulations may prevent many legal problems. But the potential for criminal prosecution for conducting a marijuana business is possible. It is wise to consult with an experienced cannabis law attorney.
Can I Solve This on My Own or Do I Need an Attorney?
Cannabis is a complex area of law. Start by learning what you need to form and operate a cannabis business:
Then, protect your rights by calling a business lawyer familiar with cannabis laws. Many attorneys offer free consultations.
DIY Forms for Cannabis Business
Restrictive federal laws and ever-changing state laws make the marijuana industry a dynamic environment for cannabis business owners. Before you open a cannabis business, make sure it is legal in your state, and follow your state laws. Once you decide on an LLC, S-corp, or C-corp business, you can register your business entity online using DIY business formation forms.