Banks Caught in State/Federal Cannabis Conflict

Lawyers must counsel clients in the nascent industry of state-legalized cannabis that their routine business affairs violate federal law, a situation that new Attorney General William Barr calls “untenable.” It requires lawyers involved in the cannabis space to remain conscious of evolving law.

In 2009, Deputy AG David Ogden issued a memorandum to federal prosecutors in states that had passed medical marijuana laws. It said that federal resources should not focus on individuals in compliance with existing state laws providing for the medical use of marijuana. In 2013, Deputy AG James Cole published an update identifying eight enforcement priorities that were important to the federal government and would guide the DOJ’s enforcement of marijuana matters. It identified situations in which banks might run afoul of federal law, including providing services to a marijuana-related business knowing that it is diverting marijuana to a state where marijuana sales are illegal.

Former AG Sessions retracted both Ogden and Cole Memos in favor of a harder line; but nothing much changed because of an amendment to the federal spending bill, first approved in 2014 and every year thereafter, which prevents the DOJ from using federal funds to prosecute state-compliant medical marijuana operators in states that have legal cannabis programs. A 2016 Ninth Circuit interpretation strengthened the prohibition. In light of this amendment, even if the DOJ wants to prosecute state-compliant persons and businesses in the medical cannabis space, it has no funding.