Good Law | Bad Law #104 - Is Anti-Cannabis Federal Law All Smoke? w/ Robert Mikos

Aaron Freiwald: [00:00:00.27] Welcome back to Good Law Bad Law. On this episode my guest is Rob Mikos. He is a law professor at Vanderbilt Law School and the author of the nation's first textbook on marijuana law and policy. Well we just had to talk to Professor Mikos about where we stand in this country regarding marijuana law and it turns out that not only are more and more states turning to legalizing marijuana for medical use and even for recreational use. And more and more states are going to follow in the years to come. But this issue is touching every aspect. Of our economic and social life from banking to employment. You know what is a company that employs people in a state where marijuana is now legalized. How do you deal with that as an employer. There are so many questions to understand the answers to here. And Rob is a leading authority and a great great scholar on the subject. I know you'll find this episode as we explore marijuana law and the implications for our states and for the federal government. In this episode I know you enjoy thanks and stay tuned.

 

Aaron Freiwald: [00:01:27.7] Welcome back to Good Law Bad Law. My guest today on the program is Robert Mikos. Rob is a law professor at Vanderbilt Law School and has the first ever textbook. He's had published he's written and had published on marijuana law and policy. So we have just the person to have walk us through where we are in this country today in terms of marijuana law in the various states and the tension with the federal government we're going to talk about all that today with Robert Mikos. Rob thanks so much for being on the program.

 

Robert Mikos: [00:02:05.81] Thanks Aaron for having me.

 

Aaron Freiwald: [00:02:08.63] I have to say this is really an extraordinary statement about how far we've come in this country that in a major American law school we have an individual yourself who not only teaches marijuana law but has actually written and had published the first textbook on this area of the law. So that's first of all congratulations. That's really something. And maybe you know as that as the jumping off point you could give us a little background on yourself and how you came to this subject and came to become the authority on it that you are today.

 

Robert Mikos: [00:02:50.07] Sure, I had no intention when I started as a law professor. I had no intention or even any expectation that I'd ever be teaching and or or writing about marijuana law. I had no passion for the subject no familiarity with it. When I got started more than a decade ago but I was actually teaching out at the University of California Davis. That's where I had my first teaching job. There was a big federalism case coming up before the Supreme Court and I started out as a federalism scholar. The case was Gonzalez vs. Raich. Ostensibly it dealt with the outer limits of Congress's interstate commerce power. But it happened to be applied to the issue of medical marijuana. It was all about whether Congress could ban the intrastate cultivation and distribution of marijuana even though the state was allowing that.

 

Aaron Freiwald: [00:03:50.03] Just I to make sure people understand what federalism means as you're using the term here.

 

Robert Mikos: [00:03:56.82] Yes federalism is all about the relationship between state governments and the national government the federal government. So that's what we mean by federalism broadly. You know what sort of things can the federal government do. Are there any areas of law that are off limits to the federal government. How do we reconcile when both the states and the federal government try to regulate a subject. How do we try to reconcile their laws. So that's really what I mean by federalism broadly understood. I was interested in federalism, interested in this case. The case came down and upheld this federal ban on marijuana even as applied to activities that took place entirely within the state. You had a dissent from then Justice Sandra Day O'Connor saying this would put an end to California's medical marijuana law. California was a pioneer in this area. California decided to legalize marijuana for medical purposes in conflict with federal law. But what was interesting to me being out in California is I saw that the case didn't change anything on the ground. You still had at the time these medical marijuana dispensaries operating out in the open. You saw more and more of them operating out in the open. I thought this is an interesting situation here we have a federal law that bans this activity. A state law that allows it and the federal ban doesn't seem to have much traction doesn't seem to be having much effect. So I thought I'd be done with it at that point I thought I'd studied this case and tried to figure out why there was this disconnect between the court's ruling and the effects on the ground. And then I started digging into these medical marijuana laws at the time and discovered that they raised all sorts of fascinating questions about federalism. Exactly what can the state get away with. Can it legalize a drug the federal government forbids, can it regulate the drug. Could you even have state operated stores for example, raises all sorts of separation of powers issues like could the president unilaterally legalize marijuana without a new statute from Congress. Raised all sorts of other substantive issues that were of interest to lots of different parties. Like can lawyers practice. Can they provide advice to marijuana licensees without flouting the Model Rules of Professional Conduct. So I started digging into those issues and I discovered over time even though I moved from very liberal California out here to a very red state Nashville, Tennessee which is in Tennessee here and Vanderbilt. I stayed interested in these issues and discovered that there are lots of people out there who really need legal advice in this field. And so I proposed a textbook. Thought Law Schools should be offering this subject proposed a textbook and fortunately I not just had a big law school a major law school support me in my deans and my colleagues support me in this but it's a Law School and in the Deep South and I had a leading law school publisher Aspen which is owned by Walters who were a big loss will publisher jump at the chance to publish this book and it took several years to actually write it. It was a much more difficult topic than I even imagined at the start but it came out last year and I think it's been pioneering and I think it made it much easier for other people to offer the course and really has opened the door in law schools for a lot more of them to offer courses in this area.

 

Aaron Freiwald: [00:07:55.4] Well it's fascinating that as you might imagine that a course on marijuana law would be kind of a fringe course and as you're explaining it really isn't and bring this into play so many issues that go beyond the subject of marijuana whether it's constitutional law and the issues of federalism, criminal law, tax law, business law, you know all these different issues played out through the lens of marijuana but similarly this you know you were you were in California ten years ago but in the last decade we moved from a time when this was something primarily that was being pioneered by California to a point and I had to look this up this morning just to double check the numbers but there are now thirty one States along with the District of Columbia, Guam and Puerto Rico who have legalized marijuana for medical use and there are nine states now who have legalized marijuana for recreational use. Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, Washington, and the District of Columbia. So this is far from a fringe subject. This is now mainstream and just seems more and more like a big wave that is sweeping over the country.

 

Robert Mikos: [00:09:30.36] It has it's you know geographically speaking I think you've gotten the numbers right. It's hard to keep track given that there's so much movement in this area but in addition to those 31 states plus D.C. that have medical marijuana laws and that includes those nine states plus D.C. that have the recreational. Really every state but Idaho at this point has legalized some drug that the federal government considers to be marijuana for medical purposes. Those other 18 states that are not included in the medical states they've legalized CBD which is a non psychoactive chemical, a cannabinoid found in the cannabis plant for certain medical purposes. So it's you know it's really spread geographically farther than than most people recognize. And those medical reforms have started to permeate even into more conservative parts of the country. Oklahoma, Arkansas, North Dakota, Florida have all adopted them. Utah is on the fringe of adopting a full blown medical marijuana law. So it's, it's really remarkable how far these reforms have come in the course of about two decades. California started this back in 1996 within Proposition 215 its a medical marijuana law. But it's remarkable just how far these reforms have come.

 

Aaron Freiwald: [00:11:01.11] Well I want to get into some of the issues that you you can project for us. We're going to be facing in say the next decade as both the business and the law and the politics really of marijuana continue to advance in our country. But I want to pause for a minute and try and understand this incredible change that has come come across all across the country. And recently Canada announced that it was legalizing marijuana. I think for all uses there. So we're seeing not only change within our country but change that's going to affect the citizens of this country by actions that are taken in other countries too so what what how do you looking back explain all of this is it that met the medical uses of marijuana really kick started this and drove this wave of change that's come about is that is that what you see when you look back.

 

Robert Mikos: [00:12:10.41] Yes I think we've seen a shift since then. But I think it all started with the claim that marijuana might have some medical benefit for people suffering from certain serious medical illnesses. And that was a very sympathetic claim to make. And I think the public was willing back in the 1990s to look at that and say all right we can legalize this drug which might otherwise be bad but we can legalize it for some people who might actually benefit from it. So it's not a you know it's maybe a controversial claim to make scientifically but politically speaking those initial medical marijuana laws were built on or fueled by the notion that marijuana can have some medical benefits. The people who are suffering otherwise and I think once states like California adopted those laws and other states came onboard as well and they demonstrated that well if you do this if you allow some people to have access to medical marijuana and the sky doesn't fall it fall in those states I think people start to become more comfortable with this notion that maybe we could relax the laws regarding marijuana. And then you know around 2010 and really it wasn't until 2012 that we got these broader recreational or adult use laws. I think the sales pitch started to change at that point. So people were more and more comfortable with medical marijuana laws but then to convince people to approve of broader recreational laws the sales pitch became more about tax revenues and about jobs and less about you know sort of the medical benefits. Right. So you know proponents would say hey you know rather than letting black market dealers make all the money from this why don't we legalize it that we can create a licensed and controlled industry to help deal with the harms of the drug but then we can take a cut of the revenues by taxing it and collecting licensing fees. And so it became much more in an economic push I think that was partly due the timing as well we were still going through the effects of the financial crisis. States were running short of tax revenues. And so this shift from benefiting seriously ill citizens to sort of benefiting the state financially and creating new jobs really worked. And that's what's been driving recreational marijuana laws since 2012.

 

Aaron Freiwald: [00:15:03.31] How much Rob do you think the growing appreciation for the impact of criminalizing marijuana possession in particular has had on the changes that we've seen and the evolution we've seen over the last 15 20 years. Because we all know a big huge part of our country bought into the 1980s war on drugs you know just say no but I think that men have been without fully appreciating what the impact of that was going to be filling up our jails and prisons in a way that makes us number one I think in the world in something we don't want to be number one in. And so you know there have simultaneously been moves to decriminalize and I think maybe you need to explain what what that means because there is a difference between legalizing and decriminalizing and how do you think that has been a factor as states have dealt with this. You know we talked about the medical aspect. We talked about the business aspect of this but how much do you think that the decriminalization move has been a factor as well.

 

Robert Mikos: [00:16:21.91] Yes. So decriminalization that means you know taking some activity like possession of marijuana that at one point was criminalized that carry criminal sanctions if you engaged in it and making it a civil offense but it's still illegal. So when you decriminalize say marijuana possession you're making it more like a traffic ticket that you might get for speeding if you go 10 miles an hour over the speed limit. You were doing something that's illegal but it's not criminal under state law. You typically get a fine. So some states before they legalized marijuana they decriminalized it or decriminalized some of the activities concerning it by taking away those criminal penalties and sort of downgrading the offense. The states. When we talk about these state that have legalized marijuana they've done something more audacious they say hey it's not illegal to possess grow or distribute marijuana. We're not going to fine you for it civilly or otherwise what you're doing is it's perfectly legal as long as you stay within the limits imposed by the law. And so it's important to recognize that there is a difference between decriminalization and legalization. Now you know your premise or that the first point that you were making about trying to undo some of this damage from the war on drugs or maybe looking at marijuana prohibition especially the criminal prohibition and seeing all the costs that those prohibitions imposed on society on you know for a time there were almost a million arrests annually across the United States at the state and federal level involving marijuana crimes. So that is every year almost a million arrests involve some marijuana offense that's more than probably any other offense out there other than maybe simple battery or domestic violence. That was a very big chunk of the criminal law docket. And one of the arguments that's been given for legalization is a social justice argument. It's saying that these prohibition were overbroad that they were too harsh that they were unfair and we should not criminalize behavior that is relatively harmless or if it does any harm is likely just to harm the person who's engaging in it. So I think that was an argument out there but it was it was not driving these reforms. I think most people tend to believe hey I'm not going to be arrested for marijuana. So what do I care if it's prohibited or not. I think these were these sort of arguments where appealing to a certain set of society that may be more concerned about social justice. Again I think that the main thing driving these reforms is really that we're creating jobs we're creating tax revenues.

 

Aaron Freiwald: [00:19:34.66] Right. Well I mean. But a million arrests is you know does impose a huge cost not only on the dockets in the court but then the police resources and you know taking people out of their communities and the costs of running jails filled with people you know convicted of marijuana. I mean there's a lot of ways that that imposes a huge cost and in all of these arenas you know as you said earlier you have to have some state or a few states who are brave or audacious enough to take these steps and then you have to see that as you pointed out the sky didn't fall. You know people aren't running committing you know violent crimes because of reefer madness you know as the old film warned us would be the case so. So there's there's just a matter of time and getting used to these things as well I would think that's a big part.

 

Robert Mikos: [00:20:32.54] Yeah.

 

Aaron Freiwald: [00:20:32.75] Well what but go ahead go ahead.

 

Robert Mikos: [00:20:34.95] And you know the the one of the aspects of those million arrests on one of the troubling aspects was that many of those were borne by minority communities by African-Americans in particular. You know there was a much higher arrest rate for marijuana offenses. As for other drug offenses for African-Americans compared to whites and so on. Again you know that I think that provides a good principled argument for legalization but it's an argument that probably a a certain subset of the population cares about more than others communities of color for example are going to care more about that perhaps than upper class white communities. That's why I think it hasn't played a huge role in these debates although it is another argument that can be made for reform.

 

Aaron Freiwald: [00:21:32.99] Well and then we have to deal with the challenges that have been faced by states moving in these directions whether first to decriminalize than to legalize for medical use than to legalize for all uses set against a federal law. And I think the law you're talking about is the Controlled Substances Act. Is that right. The federal law.

 

Robert Mikos: [00:21:57.85] That's correct. So the Controlled Substances Act which has been on the books at the federal level was passed back in 1970. From 1970 until today it's really been unchanged it bans outright the possession manufacture and distribution of marijuana. Really making no exception for any medical or any other type of purpose. So all the while when states have been engaging in these broader and broader and bolder and bolder reforms we've had this federal ban on the books and that that's created a lot of tension obviously between state and federal law and it's created a lot of headaches for state and for the people they're trying to regulate. Even up until today when when we've got the federal government taking a more relaxed stand on enforce of that ban. So when when California first adopted its medical marijuana law this was during the Clinton administration back in 1996 it was interesting that that a Democratic president took a very hard stand on California's law and basically called upon all federal agencies to consider what they might do to help crack down on this drug. So at that time there was a lot of hostility between the federal government and the states even though the gap between state and federal law was not as broad as it is today because it really was all about at the time medical use of the drug. Since that time you know the federal government under the Bush administration and then the Obama administration in particular softened its stand on marijuana. It didn't change federal law it didn't change the scheduling to marijuana didn't change that content of federal law. But you started to see especially during the Obama administration the Department of Justice suggesting that it wouldn't prosecute people if they were acting in compliance with state law that it would defer to the states and respect the choices that they had made with respect to this particular drug. And even though the Trump administration and the new Attorney General Jeff Sessions rescinded some of that guidance that had been issued by the Obama administration there still hasn't been a federal crackdown on all of these businesses that are operating with the state license. So I think we've we've got federal tolerance at this point although even if that the DOJ is sort of sitting by the wayside isn't prosecuting or initiating cases against the industry there's still a lot of problems that are created by the federal ban on marijuana that companies in this industry still have to deal with.

 

Aaron Freiwald: [00:24:55.94] It seems like part of the tension in this is theoretical tension because the Controlled Substances Act which lists marijuana in the same category as you know the hardest drugs that have been declared illegal in this country because they haven't changed that law at any moment. And I think a lot of people worried about this when President Trump was elected in sessions became attorney general that at any moment enforcement priorities could change. And you have a law that allows for federal enforcement of that law and they could start I don't know raiding facilities confiscating you know funds from these enterprises I mean arresting individuals arresting lawyers. I've talked to lawyers who practice in this area who said you know I don't know if under this current administration I could find myself in jail just because of being a lawyer who represents companies in this area. So there any sign that you're seeing that this theoretical tension could become more real under the current administration and if not why do you think that is. Why do you think they're sitting back in the same way that Obama and George W sat back.

 

Robert Mikos: [00:26:26.75] Well I think it all goes back to that Gonzalez versus Raich case that I talked about at the outset the case that got me interested in this area in the first instance. Part of what I discovered at the time that the reason why California was able to continue to rollout its medical marijuana law other states jumped on the bandwagon as well is that even though the federal government has these expansive constitutional powers including the power under Supreme Court precedent to regulate even the cultivation and distribution of marijuana that takes place entirely within a state its resources to enforce that ban are really limited. That's really where where it comes down to. That helps explain a lot of the state's successes in rolling out these reforms. So you've got a federal ban on the books. The DOJ has all sorts of weapons at its disposal criminal prosecutions civil forfeiture actions and so on. And yet the DOJ just doesn't have enough manpower to go out there and start arresting people.

 

Aaron Freiwald: [00:27:38.63] Well couldn't they pick one state let's say and or you know what you can one city and start going after banks and businesses and dispensaries and you know some of the larger targets within one area just to send a signal.

 

Robert Mikos: [00:27:58.84] You can try to send a signal so to speak and that's that's oftentimes you know what people worried about is I don't want to be made an example of.

 

Aaron Freiwald: [00:28:06.81] Right.

 

Robert Mikos: [00:28:07.66] But the problem even with that. You know. Imagine you you've got the federal DEA Drug Enforcement Agency that's responsible for marijuana as well as all other illicit substances heroin LSD Meth and so on as well as all legal prescription medications. So Oxycodone everything that you get at a pharmacy and you've got 5000 law enforcement agents working with the DEA worldwide. They're responsible for all of those drugs. You've got more than that number of licensed marijuana shops in the country right now sprinkled across those 32 states or 31 states and the District of Columbia. So that's a lot of targets for the DEA to pursue. Now sure they they could go after a handful of these and say hey we're making an example of them. But I think you know if they go after 10 of those the other four thousand nine hundred ninety would probably say Well I'm off the hook you're going after them you're going to be spending the next five or six years trying to prosecute them initiate civil forfeiture actions. So that means you're not going to have the time to go after me. And I think that's really what's going on here you have so many targets so many users and certainly so many growers and retailers out there that it would be hard to get a big enough slice of them to actually make an effective example because there are so many historically who have been willing to flout federal law and take on these legal risks so many more who would be willing to step in if some were sort of taken off the board. And you've also got to recognize that criminal prosecutions and these other legal actions that the DOJ could take they take a long time to actually you know to actually succeed and to actually conclude if you are a marijuana dispensary that happens to be targeted by the Sessions led DOJ what you might do is just try to delay the proceedings as long as possible until you get a change in Congress that's more sympathetic with you or you get a new presidential administration that would simply drop the case.

 

Robert Mikos: [00:30:36.51] Right.

 

Aaron Freiwald: [00:30:37.69] And I think it's at this stage now that wouldn't be waiting for terribly long in fact with medical marijuana. Congress has already barred the DOJ from conducting any criminal prosecutions of the medical marijuana industry throughout the land. If the Sessions DOJ were to target a handful of recreational marijuana companies even in just a few states I think Congress would probably step in at that point and cut off funding for those it wouldn't legalize the drug. You'd still be subject to some other legal hassles but it would prevent the DOJ from really cracking down on that. So I think that that lack of resources and the fact that the political will has changed in Congress that the political will to back up the DOJ. I think that's why we don't have to worry much right now about it at least about the DOJ cracking down on this industry.

 

Aaron Freiwald: [00:31:37.36] And I would imagine too the more states that move in the direction that California started us in and develop a statewide economy that is you know a statewide marijuana economy and have therefore a really more and more deeply entrenched interest in this the more likely it is that if any action was taken by a president or Justice Department the more likely this Congress would step in to expand those protections.

 

Robert Mikos: [00:32:11.86] Yes certainly at this point we have more than a majority of states that have medical marijuana laws on the books and that may be why we have these they're called spending riders that forbid the DOJ from using any budgeted funds against the medical marijuana industry. But certainly we've got nine states plus the District of Columbia with recreational marijuana laws. Those include some red states as well as blue states. You've got Alaska for example that has a recreational marijuana law. The more states that jump on the bandwagon. And there are likely to be more this fall and certainly next year the more likely Congress is to take away power from the DOJ if the DOJ decides to use it.

 

Aaron Freiwald: [00:32:55.86] Do you have a sense or is this something you track which are the next states likely to join those nine in legalizing recreational marijuana is that something you have a finger on.

 

Robert Mikos: [00:33:08.41] Yes. So it follows an interesting pattern. So to date on Vermont is the only of those nine states only one of those nine states that has legalized recreational marijuana through a statute a simple statute passed by the legislature all the other eight plus the District of Columbia did so through a ballot referenda. So I think it's much more likely that we'll see recreational marijuana spread first in states that have easy access to ballot referenda. That was certainly true of medical marijuana laws the first states to adopt those were almost all states that had easy access to ballot referenda. It's going to take longer in other states that that don't have ballot referenda. Places like New York for example where they've got a medical marijuana law. The governor is very interested though in passing this but it may take a little bit more time in New York or other places to pass it through a statute because state legislators tend to be more conservative than the population at large. You've got a majority of the country close to 60 percent at this point that would support legalization for recreational use and majorities across most states as well not just nationally and yet at the state legislature. You are going to see a lot more trepidation and a lot more leery in some of this state legislatures would much rather have the voters handled this so they don't have to be bothered with it.

 

Aaron Freiwald: [00:34:47.26] Interesting.

 

Robert Mikos: [00:34:47.81] I think we'll see it first in those states like Michigan for example this fall but we may see it as well in states like New Jersey next year through a state legislature because you have in some pockets of the country and some states you do have state leaders who are very much in favor of legalization. But I would look first at those states that have easy access to the ballot initiative. I think those are the places where it will come first and then it’ll follow and in other states.

 

Aaron Freiwald: [00:35:16.91] Right. Well now you've mentioned a couple of times times we've been talking about something I want to follow up on with you which is this idea of states conducting marijuana business within that state. You mentioned that in the case that came up that you first got interested in this in the Gonzalez case. And I'm imagining that this has some relevance to this tension between the federal law that criminalizes marijuana in all these states that are now expanding their economies in this area. I remember when I was in Colorado a few years ago which was right around the time Colorado was legalizing for all uses a lot of discussion about what. OK so you're a business and now you're you're selling marijuana what do you do with the money. You know what bank do you deposit those funds in. How do you transact business only within a state and avoid interacting commercially with a state that may not have legalized marijuana in the same way or interact with the federal banking system that obviously doesn't recognize marijuana legally in the same way. Where are we in those areas and how how important is that limitation that states operate within their own state boundaries. How important still is that idea.

 

Robert Mikos: [00:36:49.39] Well I think it's still an important practical idea for sort of federal enforcement policy. So historically when the states have legalized this drug and they've legalized the possession and manufacturing distribution their laws only cover possession manufacture and distribution within the state. They don't allow people to take it outside the state. They don't allow people to bring it back into the state to import it or sell it from elsewhere. And partly that was based on concerns about how the federal government would respond. So even though you had Gonzalez versus Raich saying 'hey the federal government could if it wanted to prosecute someone in your state even if they never left the state even if they did no interstate commerce they can go ahead and prosecute them.' I think a lot of states realize that the Department of Justice tends to prioritize activities that cross state boundaries. So if you had Colorado openly selling the drug to people who lived in Nebraska and elsewhere you know shipping it out to those states I think you would have you would've been much more likely to see the DOJ step in and crack down. So I think states have volunteered to try to keep this drug within their own borders. They haven't been entirely successful at that. And because of the tax revenue they generate from out-of-state customers they can welcome sort of marijuana tourism but at least on the surface they're trying to keep this within the state less because of the legal reasons less because that's constitutionally significant and more because they believe that's less likely to trigger a response or crackdown from the DOJ. But there are still problems this industry faces because you know you have an industry that maybe  it's being left alone by the federal DOJ it's generating a lot of money and it's generating a lot of cash. And what do you do with that money. Well normally if you're a business you you take it to the bank you deposit it in the bank you pay your employees with checks drawn on a bank account. You draw a loan from the bank maybe a a line of credit from the bank. That's very tough to do for this industry because of the federal ban on all the money that this industry handles. It's considered the proceeds of illegal activity selling marijuana. Maybe you're not going to be prosecuted but all the money you make from that sale is still considered the proceeds of illegal activity. And that means any financial transaction involving those proceeds is defined as money laundering under federal law. The people who grow and sell the drug may say we don't care where we're already flouting the Controlled Substances Act or already selling a drug that the federal government forbids. But if you try to go to a bank and get them to be complicit in that illegal activity you know those prohibitions apply to banks as well. And tell them hey you know don't worry about it the federal government isn't gonna prosecute you. You can you can turn a blind eye to this. This violation and engage in money laundering with us. Much tougher to do that with financial institutions that are heavily regulated by the federal government more conservative by and large than people who are growing and selling marijuana in the country right now. So that's one of the tensions when the hassles that companies in this industry continue to face is the difficulty of getting access to banking because banks are so heavily regulated by the federal government. Even banks that are state chartered want to use financial systems that are controlled by the Federal Reserve and any of those banks that do that technically are violating federal law. They're engaged in money laundering. There are some that are willing to do that. The Treasury Department which is not the DOJ that the Treasury Department has its own guidance which is still in effect which says as long as you're careful about this as long as you screen your clients and make sure that they're complying with state law we're not going to punish you or we're unlikely to punish you some banks are are willing to take that guidance at face value willing to offer services but many marijuana dispensaries and marijuana growers just can't get access to banking services. So they're left as cash only businesses which creates all sorts of headaches for them.

 

Aaron Freiwald: [00:41:38.55] Well but again they might deal only in cash but then they have the cash they have to do something with it. So are states where the financial institutions are steering clear of these activities because of concerns not withstanding that Treasury Department guidance are they setting up alternative banking institutions to deal with with these funds.

 

Robert Mikos: [00:42:05.4] They're trying to but banking is one segment of the economy where it's almost impossible to escape the federal government. I mentioned one possibility that some states initially looked into was setting up a state chartered bank so under federal banking law you can either get a charter from the federal government or you can get a charter from the State Government. Some people thought well if it's a state chartered institution we're golden. We don't have to worry about these federal prohibitions. But that's not the case because if that state chartered institution wants to use for example an electronic payment system it's probably going to want to use the one that is operated by the National Federal Reserve and the Federal Reserve is a federal institution obviously and it has its own regulations about what sort of behavior its members should engage in. And those companies that are trying to use this electronic payment system. So there's really no one's been able to solve this particular barrier or get move around this particular barrier. Instead it's really the only way you can get banking services is to find a bank that's willing to flout federal law willing to trust in that Treasury Department guidance that was issued. There are other obstacles federal law creates that the states have been able to cleverly work around. But this isn't one of them.

 

Aaron Freiwald: [00:43:42.57] Well can you give us an example of some of a barrier that they have more openly managed to work around with if not this one.

 

Robert Mikos: [00:43:53.12] So there's a great one that was really the reason why these medical marijuana laws took off in the first place. So there were actually medical marijuana laws adopted by the states back in the 1970s including in places like Virginia. Virginia would say if you get a prescription from your doctor to use marijuana to treat glaucoma it's no longer an offence under state law to possess the drug. So Virginia of all places beat California to the punch by almost a couple of decades that was passed in the late 1970s. But those laws.

 

Aaron Freiwald: [00:44:34.76] They must've been high I don't know how that happened.

 

Robert Mikos: [00:44:38.21] It's interesting that you say and that's also the time the 70s was a time when a lot of states were adopting decriminalization. And so this was before the the Reagan sort of turn things around and the Reagan administration took a much harsher stance on lots of drugs including marijuana. But what the states know what the states realized soon after that that you know these laws are are futile because physicians aren't going to be willing to write a prescription for marijuana. And the reason for that is if they do that the Drug Enforcement Agency the federal DEA threatens to pull their authorization to write prescriptions for other drugs. So if you're a physician you get your license to practice medicine from the state from a state board but if you want to write a prescription for any controlled substance which includes things like oxycodone lots of things that physicians write prescriptions for. You have to get this license from the DEA and the DEA at the time said you know it violates our policies for you to be prescribing a drug that we consider to have no medical benefit that's forbidden outright. So no physician was willing to participate. So these laws were just nice symbolic measures but then California in 1996 came up with this idea of not requiring a prescription from a physician but just a recommendation. So all California wanted at that time in 1996 this is the Compassionate Use Act Prop 215. Is that all you had to get if you're a patient who suffers from one of these conditions specified you just need a physician to tell you maybe write it down on a sheet of paper maybe tell you orally that you might benefit from the use of marijuana. That's all that was required. And California thought this isn't a prescription so it's not controlled by the DEA physicians who issue this recommendation to a patient they can't be punished by the DEA. So they'll start to participate and the DEA thought well this is a spurious distinction you know recommendation prescriptions all the same. But the Ninth Circuit. A prominent federal Court of Appeals agreed with California. It said a recommendation is not a prescription. Physicians have a First Amendment right to have this open and frank conversation with the patient. The DEA can't punish them simply for talking to their patient about the possible medical benefits of a drug. They can't tell the patient where to get it. You can't aid and abet. You know some federal crime. But you merely want to recommend marijuana to a patient. You've got a constitutional right to do that. And that's why so so the states were able to work around this barrier that the DEA had constructed on physician participation. Every state since California. Every state today all those 31 medical marijuana states and the District of Columbia they only require a physicians recommendation to use marijuana rather than a prescription. So it's a good example of how the states were able to change their laws to get around a barrier that might be imposed by the federal government. They can do that for things like prescriptions and recommendations. Some barriers though or are much harder to work around like the banking one.

 

Aaron Freiwald: [00:48:12.4] Right. That just seems like that's going to take a lot longer to get figured out and maybe again maybe more and more states coming around so that the protections like you mentioned the Congress passed this protection for the medical marijuana industry maybe those protections have to be codified. Maybe Congress has to take action to strengthen that Treasury Department guidance so that banks can engage without the fear of some federal crackdown.

 

Robert Mikos: [00:48:46.13] And there are some proposals now on the table Senator Warren for example Elizabeth Warren of Massachusetts has proposed a Safe Banking Act that would change federal law and explicitly allow banks to deal with this particular industry. So there's a chance that Congress might pass things like that either for the medical marijuana industry or maybe the broader industry as well to deal with some of these problems that continue to face that the industry.

 

Aaron Freiwald: [00:49:18.63] I can't see them doing that in an election year but maybe next year they could get to that. Well Rob this has been a fantastic overview really and analysis of how far we've come in some of the things we can look forward to on this issue as other states get involved and develop their economies and face all of this and you're going to be raising a generation of lawyers to join what has become a really growing practice area right. I mean. I'm amazed when I see the number of lawyers involved in the practice of law in this area dealing with business dealing with these banking issues and everything else so it seems like it's only going to grow more so in the coming years when you think.

 

Robert Mikos: [00:50:11.26] I agree. There are firms that have large numbers of attorneys that are dedicated just to this area of law. You also see old school firms firms that have been around for a while developing practice areas to deal with marijuana law. And in part that's because you you have so many states that are jumping on board and you have as I mentioned before thousands of companies that are licensed to do business in those states and they need lots of legal advice. You also have lots of third parties though that are affected by this area of law whether or not they want to be companies like Wal-Mart for example if you're a Wal-Mart and you operate in a medical marijuana state well now you have to figure out do I have to accommodate an employee's medical marijuana use off the job or can I maintain my same anti-marijuana strict anti-marijuana drug policy that I have in other states like Idaho. So those are issues that lots of companies that have nothing to do with marijuana per say but they really need legal advice on. And so that's I think that's that's why lots of firms are starting to enter this space not just to serve the companies that are directly in the industry but it's to serve all those other companies the banks for example that are dealing with the industry to help them out and guide them through what is a very complicated area of law.

 

Aaron Freiwald: [00:51:44.8] Incredible it's reaching into every into every part of economic life. And that's so that's inevitable and you can consider that. Well Rob thank you again. Thanks for being on Good Law Bad Law and walking us through this fascinating conversation. Lots to look at and be interested in on this issue ahead. So really appreciate it. Thank you very much.

 

Robert Mikos: [00:52:09.4] Thanks for having me Aaron.