DOJ Says Marijuana Companies’ Lawsuit Challenging Prohibition ‘Would Frustrate’ Rescheduling Effort

In an appeals court case that targets the very core of U.S. cannabis prohibition, lawyers for the federal government warned this week that the legal challenge, if it succeeds, could risk upsetting the Biden administration’s planned move of marijuana from Schedule I to Schedule III of the Controlled Substances Act (CSA).

The government’s filing comes a month after plaintiffs in the case—including multi-state marijuana operator Verano Holdings Corp. and the Massachusetts-based cannabis businesses Canna Provisions and Wiseacre Farm—filed an opening brief arguing that Congress in recent decades has “dropped any assumption that federal control of state-regulated marijuana is necessary.”

“Congress has abandoned its goal of eradicating marijuana and has, in fact, expressly exempted it from federal enforcement in certain circumstances,” the companies’ opening brief said, pointing to policies embodied in a congressional budget rider that prevents federal funds from being used to interfere with state-legal medical marijuana as well as federal lawmakers’ decision to allow marijuana legalization to proceed in the District of Columbia.

In light of those actions, the plaintiffs’ filing says, “the CSA’s ban as applied to state-regulated marijuana cannot be upheld today.”

In a brief filed on Thursday in the U.S. Court of Appeals for the First Circuit, however, lawyers for the Department of Justice (DOJ) say there’s no legal precedent backing those arguments.

“Plaintiffs cite no authority for reasoning of this kind,” the filing asserts, “which disregards the interstate nature of the marijuana market and the extent to which their proposed constitutional limitations would undermine the operation of the Controlled Substances Act.”

The government further contends that a win for the plaintiffs would effectively render Congress powerless to regulate marijuana if it’s rescheduled.

“Plaintiffs’ position would also frustrate the Department’s proposal to place marijuana on Schedule III of the CSA,” the new brief says. “Under plaintiffs’ theory, Congress would lack congressional authority to regulate marijuana as a Schedule III drug for the same reasons that it could not regulate marijuana as a Schedule I drug.”

The government brief challenges the idea that Congress’s authority to regulate marijuana “would vary from state to state depending on the judgments of individual legislatures.”

DOJ lawyers flatly rejected the idea that the federal government should defer to state laws when determining whether to enforce federal cannabis prohibition.

“Plaintiffs’ Commerce Clause theory would preclude the United States from applying the Controlled Substances Act’s Schedule III requirements as long as a marijuana producer complies with the laws of the state in which it is located—a novel and erroneous theory of reverse preemption,” the brief says.

Of course, there is some historical precedent for modulating the federal government’s enforcement of cannabis prohibition based on individual state marijuana laws. A congressional budget rider that’s been renewed numerous times in recent years, for example, prohibits federal interference with commercial medical marijuana activity—but only if a state has a legal medical marijuana program and the activity complies with state rules.

Similarly, past DOJ guidance has advised federal prosecutors not to target cannabis programs or participants if they were legal at the state level and adhered to specific policy priorities.

Neither of those two limitations on federal prosecution applied in states without legal marijuana.

The latest filing is the next step in a courtroom battle begun last October, when plaintiffs represented by the prestigious law firm Boies Schiller Flexner LLP claimed that perpetuating federal prohibition in state markets is unconstitutional. In addition to Verano Holdings, Canna Provisions and Wiseacre Farm, Treevit CEO Gyasi Sellers is also a named plantiff.

Litigator David Boies—whose list of prior clients includes the Justice Department, former Vice President Al Gore and plaintiffs in the case that led to the invalidation of California’s ban on same-sex marriage—is leading the suit.

This summer, a district judge dismissed the challenge, ruling that while there were “persuasive reasons for a reexamination” of the current scheduling of cannabis and that the plaintiffs had standing to bring the suit, the court’s hands were effectively tied by the Raich decision upholding the government’s authority to regulate substances even within state borders.

The dismissal didn’t come as a particular surprise to attorneys for the marijuana companies, who had generally indicated that they expected the case to move up to higher courts, including, eventually, the Supreme Court. Days after the district court’s ruling, attorneys filed notice of their appeal.

At the time, Josh Schiller, a lawyer on the case, called the district court decision “thoughtful” and said that “on appeal we will continue to press our case that the federal government lacks any rational basis for banning state-regulated marijuana.”

Central to the case is the degree to which in-state cannabis activity affects interstate commerce. Lawyers for the government, for example, have previously argued that cannabis legalization attracts out-of-state tourists.

DOJ argued in a filing in April that “it is rational to conclude that the regulated marijuana industry in Massachusetts fuels a different kind of marijuana-related interstate commerce: marijuana tourism.”

“As the Supreme Court held decades ago, Congress has the authority to regulate businesses that cater to tourists from out of state, even if the businesses’ transactions occur wholly in-state,” DOJ said in the brief.

Plaintiffs, meanwhile, contended the Constitution’s Commerce Clause should preclude DOJ from interfering in state-legal activity because it is regulated within a state’s borders.

Even while dismissing the case, the district court ruled that plaintiffs indeed had standing to bring the lawsuit.

“Plaintiffs have alleged they variously engage in the cultivation, manufacture, distribution, and possession of marijuana, wholly within Massachusetts and the CSA makes such activity a federal crime,” the decision says. “In the absence of any dispute regarding redressability, the court finds Plaintiffs have demonstrated that they have standing under Article III to challenge the portions of the CSA applicable to intrastate activities related to marijuana.”

“The court also finds Plaintiffs have shown there is a causal connection between their economic injuries and the CSA,” the judge said. “When credited, Plaintiffs’ detailed allegations about their financial injuries meet that burden. Though individual decisions by specific third parties are the final link in the causal chain, the economic injury actually flows from the multitude of similar decisions made by many third parties, all responding to the CSA.”

Nonetheless, the district court sided with the government in its motion to dismiss based on a failure to state a claim for relief.

“Given the scale of Plaintiffs’ operations, the court cannot find Congress lacks a rational basis for concluding Plaintiffs’ activities substantially affect interstate commerce without ignoring the Supreme Court’s broadly-worded holding” in Gonzales v. Raich, the court said.

It will now be up to the First Circuit to decide whether to uphold the lower court’s ruling or confront more directly whether broad federal cannabis prohibition is constitutional.

Read the federal government’s latest filing in the case, Canna Provisions v. Garland, below:

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