- Cultivated
- Posts
- The lawyer behind the suit to keep the federal government out of cannabis answers: Why now?
The lawyer behind the suit to keep the federal government out of cannabis answers: Why now?
Plus, New York holds a marathon hearing on cannabis, and more.
Hi everyone,
It’s been a busy couple weeks for your humble Cultivated EIC.
I was on the Cannabinoid Connect podcast last week, where myself and host Kevin Carillo discussed New York’s legal cannabis rollout, investor sentiment, and more.
And on Friday, I’ll be moderating a panel at the Business of Cannabis: New York with the Office of Cannabis Management’s John Kagia, ConBud CEO Coss Marte, and Union Square Travel Agency President Arana Hankin-Biggers.
If you’re around the show on Friday, say hi.
-Jeremy
Today’s Cultivated is sponsored by The 2023 New York Grower’s Cup.
Great news: The 2023 New York Growers Cup awards show and reception is coming up on Friday, December 1st in beautiful Brooklyn, New York! Tickets are on sale right now!
The New York Growers Cup is an annual, statewide competition that elevates New York’s best cannabis growers. The New York Growers Cup awards show and reception celebrates those growers, and connects them with New York's core cannabis community: Operators and consumers.
Get your tickets here — and I’ll see you there.
💡What’s the big deal?
What happened: Powerhouse law firm Boies Schiller Flexner filed a lawsuit on behalf of a number of cannabis companies in a Massachusetts district court last week that seeks to prevent the federal government from interfering with state-legal cannabis businesses.
The firm is led by David Boies, who perhaps most famously represented Al Gore after the 2000 election, among other high profile cases.
“What was once a single-minded federal crusade against the cannabis plant has been replaced with an ambivalent set of inconsistent policies, some aimed at reducing federal interference with state efforts to regulate marijuana,” the complaint reads.
What the lawsuit would do: The suit seeks to declare the Controlled Substances Act (CSA) unconstitutional as it pertains to state-legal cannabis businesses.
Simply put, it would enjoin the federal government from enforcing the CSA when it comes to legal cannabis companies.
If that happens, cannabis businesses would be treated like any other industry.
That means these companies would be able to access loans, the banking system, payment providers, and even list on US exchanges, like any other business.
That would provide much-needed relief for companies that have struggled lately.
So, why now?
Legislative efforts to legalize cannabis — or at least, to make it easier for cannabis businesses to stay afloat — have “stalled out,” Josh Schiller, a partner at Boies Schiller Flexner told me.
Despite recent federal movements, including the Senate Banking Committee passing the SAFE(R) Banking Act — though its prospects in the Republican-controlled House look dim — and the Department of Health and Human Service’s recommendation to move cannabis to the less strict Schedule III, cannabis businesses are still treated in a discriminatory way by the federal government.
“The federal government doesn’t have the right to regulate intra-state commerce,” Schiller said. “That’s a key principle of federalism.”
Schiller said his team hopes to prove, specifically, how the federal government’s enforcement of the CSA has discriminatory impacts on cannabis businesses. These include high taxation, the lack of small business loans and insurance providers, and the inability to hire qualified employees, among other things.
Okay, let’s back up: A previous effort to do this, Gonzales v. Raich, was struck down by the Supreme Court in 2006.
But the facts have changed since then, Schiller said.
In 2006, the court said that enforcing the Commerce Clause when it comes to state legal medical cannabis is crucial for preventing the spread of illicit cannabis.
“Ten or so years later, Congress started to walk back from a policy of eradication, to define a more modernized, hybridized approach to allow cannabis to exist within these state markets,” Schiller said.
Strike while the iron is hot: The makeup of the court is now more conservative than it was in 2006.
That rightward turn could be a boon to getting the federal government out of the cannabis industry’s way.
Schiller says it’s his view the Court will be “highly skeptical” as to whether there’s enough to continue to enforce the Commerce Clause over state-legal cannabis.
He’s not wrong. In 2021, Justice Clarence Thomas — one of the dissenters in the Raich case — railed against the federal government’s “half-in half-out” approach to cannabis.
“Federal policies of the past 16 years have greatly undermined its reasoning,” Thomas wrote, referring to the Raich case.
Schiller said he, the plaintiffs, and his team have been watching legislative efforts to ease restrictions on cannabis closely.
But now’s the right time for them to strike.
What others are saying: I’ve read some interesting pieces from among the (reasonable) cannabis take-o-sphere. Among them, Marc Hauser’s Cannabis Musings:
One of the (possibly unintended?) consequences of this lawsuit is how it sort of forces the hand of the Department of Justice to thread the needle of arguing that it’s indeed very interested in banning intrastate commerce, even though, as a practical matter, the DOJ hasn’t actually done anything about state-licensed commercial cannabis for years. That’s gonna be a fun response to read.
I’ve been practicing in this space for 14 years, and this is really the first time that all three branches of government are seeing the cannabis movement all at once, which is exciting and should give the industry some much needed hope
The Wall Street Journal, quoting lawyer Ted Olson (Bush’s lawyer in the Gore case):
“His timing is good. This is the sort of thing that this court is looking at,” Olson said. Other advocates, including gun activists, have sought to narrow the federal commerce power with limited results. Using marijuana, typically associated with more progressive jurisdictions, to sue against federal regulation might “get a result that you wouldn’t have gotten if it was brought by the firearms people,” he said.
🥊 Quick hits
New York’s Senate Subcommittee on Cannabis held a marathon seven-hour hearing to address how the state’s legal cannabis industry is going so far — and what everyone from entrepreneurs, to lawmakers and regulators, want fixed. Cannabis Wire has what you need to know.
A bipartisan group of lawmakers is calling on the Drug Enforcement Agency to fully deschedule cannabis, Punchbowl News reports.
Dama, a banking and payment service provider for cannabis companies, will acquire Candid AI, an e-commerce platform for dispensaries. Financial terms of the deal weren’t disclosed.
📚 What I’m reading
Two Kentucky boys, 15 acres of farmland, and a homegrown hemp company are hoping to grow the Commonwealth into a new agricultural era by returning the state to its historical roots.
As New York’s recreational cannabis market has sputtered through a tortuous rollout, the investor putting $150M up to support the fledgling industry is adopting a new approach. (BisNow)
As harmful as this case has already been for social equity cannabis businesses, there is potential for greater disruption in the long term. This case could spell the end of the CAURD program entirely. (NY Cannabis Insider)
The narrator, an evangelist for wine and an enemy of hashish, offers one of the only known depictions of the pothead (al-mastul) in medieval Arabic or Jewish poetry. (Medievalists)
While many marijuana enthusiasts believe that components called terpenes are responsible for strains’ distinctive smells, a new study published by the American Chemical Society has identified “previously undiscovered cannabis compounds” that challenge that conventional wisdom of what really gives each variety its unique olfactory profile. (Marijuana Moment)
There’s something unique about Ascend Cannabis’ adult-use marijuana store in Montclair, New Jersey, an affluent New York City suburb. (Marijuana Business Daily)