Federal Marijuana Regulation: Why is Flexibility Critical in the Dawn of Legalization?

Jan 28, 2015   

January 28th, 2015

Attorneys Andrew Ittleman and Jessika Tuazon of Fuerst Ittleman David & Joseph published their article, “Federal Marijuana Regulation: Why is Flexibility Critical in the Dawn of Legalization?” in the December 2014 issue of the Food and Drug Law Institute’s Food and Drug Policy Forum. A copy of the article is available here.

In the article, Mr. Ittleman and Ms. Tuazon confront “the complex question of how the federal government should go about the process of ending its decades-old prohibition of cannabis and bring about a regulatory regime designed to address the wide array of risks and opportunities presented by legalization.” After describing the history of the federal government’s prohibition of marijuana, as well as the efforts of various states to legalize it in various forms, the article recommends that “rather than attempting to devise a statutory scheme for cannabis in an echo chamber, Congress should be carefully studying the successes and failures of the individual states’ efforts to regulate marijuana, as they are the perfect ‘social and economic experiments’ encouraged by traditional notions of federalism.” The article further suggests that instead of “starting from scratch in developing regulations for marijuana, the government could – and should – borrow elements from regulatory regimes already in place for analogous products.” The article also describes how existing federal agencies – including the FDA, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), and

the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) – could all be delegated jurisdiction by Congress to regulate marijuana, as all three agencies

are well suited to handle the added task of regulating and enforcing laws overseeing the manufacture, distribution, and sale of marijuana.

Most importantly, Mr. Ittleman and Ms. Tuazon recommend that in undertaking the regulation of marijuana, the federal government should proceed flexibly, giving due regard to the marijuana industries already developing in numerous jurisdictions in the United States, as well as regulatory regimes already in place for analogous articles, including alcohol and tobacco. The article concludes with the following recommendations:

First, we respectfully submit that Congress should carefully study the marijuana industries already developing in numerous jurisdictions in the United States, and should likewise invite the individual states to participate in Congress’s legislative process. Additionally, because of the value of the data currently being developed

in states which have legalized marijuana in one way or another, the federal government should support the states in their efforts to regulate marijuana by providing regulatory guidance and law enforcement resources as requested by the states. The federal government should also continue to loosen restrictions on banks and other federally regulated financial institutions wishing to do business with licensed marijuana related companies, as the all-cash business model of the typical dispensary will only lead to security risks and the tainting of the information needed by Congress when considering how to govern the interstate market for cannabis.

Second, we respectfully submit that in evaluating its own regulation of medicinal and recreational cannabis, the federal government should look to regulatory regimes already in place for analogous articles, including alcohol and tobacco. By doing so, the process of writing regulations for the marijuana industry can be far more economical, and will give the regulated industry better notice and more opportunity to comply.

Third, we should all appreciate the scope of the task at hand, and understand that there is much more at issue than simply rescheduling or “legalizing” cannabis. Once prohibition has ended, marijuana may be available nationwide in the form of buds, edibles, drinks, tinctures and concentrates, potentially for medicinal and recreational purposes, and every possible variation on the manufacturing, distribution and use will be subject to regulation. It is therefore critical that Congress proceed deliberately so as to avoid a gap between the end of prohibition and the beginning of regulation, and flexibly so as to take all of the various forms and uses of cannabis into consideration.

Finally, everyone participating in the process of ending the federal government’s prohibition of cannabis should appreciate the magnitude of the black market and understand that it will not disappear overnight following a rescheduling. It is the black market, perhaps above all else, that mandates that Congress proceed deliberately when legalizing cannabis, to ensure that all possible voices are heard and seriously considered. Indeed, if federal regulation of cannabis is overly restrictive, leading to higher costs or elimination of choice for consumers, consumers will revert to the same black markets they have used for the past 40 years. A black market for cannabis – even following a federal rescheduling – will trigger all of the “Cole Memo Priorities” currently sought to be quelled by the Obama administration, including the diversion of profits to criminal enterprises, access to cannabis by children, and other adverse health consequences. Congress should thus take care to end prohibition deliberately, comprehensively, and with due regard for every interested party.

Fuerst Ittleman David & Joseph provides comprehensive representation to highly regulated businesses, including clients operating in the financial services, biotechnology, and international trade industries, and frequently lectures on these subjects for industry trade groups. The firm has more recently been called upon to combine its Food and Drug and Anti-Money Laundering practice areas in assisting marijuana-related businesses achieve financial compliance.