A coalition of U.S. cannabis operators and investors, including some of the largest multistate operators, filed a lawsuit against U.S. Attorney General Merrick Garland, alleging that the federal government has no basis for enforcing the Controlled Substances Act against intrastate, state-regulated cannabis operations.
According to the statement, the coalition seeks to urge the federal government to not enforce the CSA in a manner that interferes with the intrastate cultivation, manufacture, possession, and distribution of cannabis, pursuant to state law.
“The federal criminalization of safe, regulated marijuana commerce in states where it is legal unfairly burdens legal operations and expands the production and sale of illegal marijuana that is unregulated, can be unsafe, and is likely to find its way to other states,” said David Boies, chairman of Boies Schiller Flexner LLP.
“Federal criminalization also denies small, legal marijuana businesses access to SBA loans, investors, benefits for their employees, and normal banking regulations (which among other things, forces them to rely on cash transactions with all of the dangers to them, and to the community, that result) – as well as burdening them with discriminatory taxes,” Boies added.
The lawsuit asserts that the “federal government lack the authority to regulate purely intrastate commerce,” which is how all state-level markets operate.
Law firm Lesser, Newman, Aleo & Nasser LLP joined Boies Schiller Flexner in filing the lawsuit in the United States District Court for the District of Massachusetts, Western Division. Plaintiffs include:
- Gyasi Sellers, CEO and founder of Treevit
- Canna Provisions
- Wiseacre Farm
- Verano Holdings (OTCQX: VRNOF)
In addition, foundational supporters of the suit include:
- Ascend Wellness Holdings (OTCQX: AAWH)
- TerrAscend (TSX: TSND)
- Green Thumb Industries (OTCQX: GTBIF)
- Eminence Capital
- Poseidon Investment Management
In 2005, the Supreme Court rejected a challenge to the Controlled Substance Act’s cannabis prohibitions in the case Gonzales v. Raich. The Court concluded that the federal goal to “eradicate” commerce in cannabis, combined with the assumption in 2005 that intrastate marijuana could not be differentiated from interstate cannabis, justified the Controlled Substances Act’s prohibitions on intrastate cannabis.
Fast forward to 2023 and 38 states, including Washington D.C., have medical or adult-use cannabis programs with significant regulatory oversight.
“While reforms such as the SAFER Banking Act and rescheduling cannabis under the Controlled Substances Act would improve certain aspects of this broken and antiquated system, they will not solve the fundamental issue,” Verano President Darren Weiss said.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
The statement noted that the lawsuit seeks to confirm the rights of Massachusetts and other states to regulate cannabis within their borders and to confirm the corresponding limits on the federal government’s power to regulate commerce.
“The federal government’s power to regulate commerce is based on the Interstate Commerce Clause of the Constitution,” the lawsuit reads. “The law at issue in this suit, the Controlled Substances Act, exceeds that limited authority: It bars the production, distribution, and possession of marijuana, regardless of whether those activities cross state lines or, as in the case of Plaintiffs’ cannabis businesses, are intrastate.”
As the cannabis industry grows, operators face challenges that other regulated industries don’t.
“We want to be treated equally, on an even playing field with any other small business in Massachusetts,” said Meg Sanders, CEO and co-founder of Canna Provisions, which has two retail dispensaries in western Massachusetts.