New Federal Lawsuit Could Be Gamechanger for Cannabis Businesses

New Federal Lawsuit Could Be Gamechanger for Cannabis Businesses

A new lawsuit challenging the constitutionality of the Controlled Substances Act (CSA) could dramatically impact cannabis businesses. If successful, the suit would prohibit the federal government from enforcing its cannabis ban with respect to state-legal activity.

The federal lawsuit, Canna Provisions, Inc. et al v. Garland, was filed in the U.S. District Court for the District of Massachusetts.  In this case the plaintiffs allege that the federal government has no right under the U.S. Constitution to regulate legal intrastate commerce. It further maintains that the federal government’s half-hearted approach to enforcing the CSA with respect to legal state markets is having a devastating impact on the cannabis industry, particularly small businesses.

“In short, the federal government has long ago abandoned the goal of eliminating marijuana from commerce. Nor does Congress have any comprehensive—or even consistent and rational—approach to marijuana regulation,” the plaintiffs argue. “This inconsistent, patchwork approach to marijuana regulation provides no basis for Congress to regulate intrastate marijuana.”

Federal Cannabis Prohibition

As discussed in greater detail in prior articles, the use, possession, sale, cultivation, and transportation of marijuana is still illegal under federal law in the United States. Under the CSA, marijuana is a Class I substance, a classification reserved for drugs with “high potential for abuse, no accepted medical use, and no accepted safety for use in medically supervised treatment.” 

The CSA stands in stark contrast to state-level cannabis laws. As of November 8, 2023, 24 states, two territories and the District of Columbia have enacted laws regulating cannabis for non-medical adult (recreational) use. A total of 38 states, three territories, and the District of Columbia allow the medical use of cannabis products.

To date, efforts to end the federal cannabis ban through both litigation and legislation have been unsuccessful. In Gonzales v. Raich, 545 U.S. 1 (2005), the U.S. Supreme Court held that the Constitution’s Commerce Clause authorizes the federal government to enforce the CSA despite state laws legalizing medical marijuana use. In reaching its decision, the Court reasoned that because Congress intended to “eradicate” cannabis from interstate commerce, the federal government had a rational and thus lawful purpose in encroaching on states’ cannabis regulation.

Nonetheless, the Department of Justice (DOJ) has softened its stance on marijuana in response to growing state-level legalization. In a 2013 memo, the DOJ indicated that it would defer its right to challenge state-level cannabis laws so long as states implemented strong regulatory systems. While the Trump administration rescinded the “Cole Memo” in 2018, the DOJ continues to largely take a hands-off approach with regard to state-legal cannabis.

As cannabis businesses are acutely aware, federal laws have still hampered the industry, with the threat of federal enforcement making it difficult for state-legal businesses to obtain financial services. Among other challenges, the federal ban also prevents cannabis businesses from obtaining federal grants/loans, taking certain federal tax deductions, and registering trademarks.

Cannabis Lawsuit Challenging CSA

In their lawsuit against U.S. Attorney General Merrick Garland, Verano Holdings Corp., Canna Provisions, Wiseacre Farm, and Treevit CEO Gyasi Sellers argue that the CSA is unconstitutional as applied to state-regulated marijuana markets. In support, the cannabis businesses cite the DOJ’s policy of non-enforcement in state-legal cannabis markets, as well as the harm caused by the federal marijuana law.

“While Congress has authority to ban marijuana from interstate commerce, it has no general police power over marijuana grown, transported, and distributed in intrastate commerce. Neither the Commerce Clause nor the Necessary and Proper Clause of the Constitution permit this overreach by Congress,” the complaint states.

In support of their claims, the plaintiffs note that a lot has changed since the Supreme Court’s Raich decision, most notably the federal government’s abandonment of any intent to “eradicate” marijuana. “Despite these changes, the federal criminal prohibition on intrastate marijuana remains in place, an unjustified vestige of a long-abandoned policy,” the complaint states. “This unjustified intrusion of federal power harms Plaintiffs, threatens the communities they serve, and lacks any rational purpose.”

The plaintiffs further contend that their businesses have been significantly harmed by federal cannabis prohibition. “Without access to credit cards or online payment, state-regulated marijuana businesses must rely heavily on cash, creating serious public safety risks. State-regulated marijuana dispensaries have become targets of robberies,” the lawsuit maintains. “These collateral harms increase the costs of state-regulated marijuana businesses and reduce participation in state-regulated marijuana markets. As a result, there is less innovation and less consumer choice.”

In addition to declaring the CSA unconstitutional as applied to state-legal markets, the suit seeks to prohibit the attorney general from enforcing the CSA “in a manner that interferes with the intrastate cultivation, manufacture, possession, and distribution” of cannabis under state laws.

What’s Next?

The lawsuit must now work its way through the legal system, which will take time. Nonetheless, the litigation could still be quicker than a legislative solution.

Given the high stakes and key constitutional issues involved, it would not be surprising for the U.S. Supreme Court to get the final word. Should the suit reach the Court, the cannabis businesses will likely have at least a few supporters. In response to the justices declining certiorari in a 2021 cannabis case challenging the federal ban on tax deductions for state-licensed cannabis businesses, Justice Clarence Thomas was critical of the federal government’s marijuana stance. “A prohibition on interstate use or cultivation of marijuana may no longer be necessary or proper to support the federal government’s piecemeal approach,” Justice Thomas wrote in Standing Akimbo, LLC et al v. the United States.

While the success of the latest cannabis suit is uncertain, Justice Thomas’s statements add credibility to arguments to decriminalize marijuana at the federal level. We encourage New York and New Jersey cannabis businesses to closely monitor the suit, as well as the numerous legislative reforms currently pending in Congress. For assistance navigating the ever-evolving cannabis legal landscape, we strongly recommend consulting with a member of Scarinci Hollenbeck’s Cannabis Law Group.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New York, New Jersey and the United States at large. Prior articles in this series are below:

• New Jersey Poised to Expand Range of Available Cannabis Edibles
• Open for Business – New Jersey Now Accepting Applications for Cannabis Licenses
• Act Now to Take Advantage of New York’s New Cannabis Licensing Opportunities

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing