The Washington Post

Federal memo on marijuana leaves many questions for Washington state

For some laboring in Washington state’s fledgling marijuana industry, last week’s announcement by the U.S. Justice Department was a policy shift more nuanced than bold, more a flashing caution signal than a green light.

The department’s long-awaited statement on legalized marijuana in Washington and Colorado — the first two states to approve recreational use — offered neither outright support nor opposition. Instead, the four-page memo to federal prosecutors set boundaries on what the feds would tolerate from the two states creating recreational markets for adults.

At the same time, the memo made it clear that all marijuana remains illegal under federal law.

While the federal directive might eventually lead to profound changes in marijuana policy across the country, things on the ground in Washington state haven’t changed dramatically — yet.

Final rules will be proposed Wednesday by state officials for a system that will allow adults to buy an ounce of marijuana in regulated stores. Those rules already contain many of the safeguards the federal government is seeking: Don’t sell or market to minors, don’t evade taxes, don’t divert marijuana to other states.

But obstacles remain.

Nothing in the federal memo compels resistant Washington cities to allow marijuana merchants within their borders.

And the reluctance of federally insured banks to touch marijuana money is still a major impediment, leaving a multibillion-dollar industry to deal only in cash.

“I’m not ready to put the rosy glasses on just yet,” said attorney Hilary Bricken, whose firm specializes in advising marijuana entrepreneurs.

The biggest change, according to Jonathan Caulkins, a state consultant, is that the federal government signaled that large, for-profit operations are welcome, as long as they adhere to the Justice Department’s policy guidelines.

The new federal policy implies major changes for the state’s medical-marijuana system as well. Bricken reads the memo as saying that the same eight safeguards the federal government wants in the recreational system would also apply to the state’s largely unregulated, untaxed medical system.

Jenny Durkan, Western Washington’s top federal prosecutor, issued a statement after the Justice Department memo was released, saying that the continued existence of unregulated, for-profit medical-marijuana operations is “not tenable” and violates both state and federal law.

“If I’m a medical-marijuana stakeholder, I am very worried about how the feds are going to treat my industry,” Bricken said.

Alison Holcomb, chief author of the state’s legal-marijuana law, agreed that changes are coming to medical marijuana next year when the legislature convenes. Taxes, business licensing and patient-authorization rules are likely to be debated, Holcomb said.

Gov. Jay Inslee (D) concurred, saying the medical system needs to be “better regulated and more transparent.”

The most critical area the Justice Department failed to address is banking and financial services.

A solution would be an administrative order directing the Treasury Department to stop requiring regulatory reports when a bank handles what it thinks is marijuana money.

That alone would clear the way for banking by legal marijuana merchants, said Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C.

A Justice Department official confirmed that U.S. Attorney General Eric H. Holder Jr. told Inslee Thursday that banking would be the next area the Justice Department would look at.

Another looming roadblock is that cities have tried through zoning or other means to ban marijuana merchants.

“The attitude in most locations is, ‘We don’t want to be trailblazers. Let’s see what happens in Seattle,’” said John Davis, chief executive of two Seattle medical-marijuana dispensaries.

Bricken expects many cities to stick with their arguments that the federal grants they receive require them to comply with all federal laws, including the prohibition on marijuana. But she believes their chances of “prevailing in court are much weaker now.”

Candice Bock at the Association of Washington Cities sees the Justice Department memo as a step toward removing some of the uncertainty that hangs over cities. But it hardly answers all of their questions, she said, such as how many retail stores the state Liquor Control Board would license in a given city.

“I’m not sure it’s going to have a dramatic impact at this point on what cities are doing,” Bock said. “It’s just one more piece of the puzzle. There are still a lot of missing pieces.”

— The Seattle Times



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