Can Regulation Save California's Medical Pot Industry?

February 05, 2012

Jacob Sullum, Reason

This week the backers of a California ballot initiative aimed at regulating the medical marijuana business are expected to get the approvals they need to start collecting signatures. The pdf'>Medical Marijuana Regulation, Control, and Taxation Act (PDF) would let patients and their "designated primary caregivers" form "collectives, cooperatives and other business entities in order collectively or cooperatively to cultivate, acquire, process, possess, transport, test, sell and distribute marijuana for medical purposes." The initiative would create a Bureau of Medical Marijuana Enforcement within the California Department of Consumer Affairs to oversee these entities, collecting application fees from them and issuing "mandatory registrations" that would shield them from criminal penalties under state law. In addition to the fees, the initiative would impose a special 2.5 percent sales tax, on top of the existing sales taxes (7.25 percent state plus up to 2.5 percent local). It would allow cities and counties to collect their own medical marijuana taxes of up to 2.5 percent and "enact reasonable zoning regulations and other restrictions applicable to the cultivation and distribution of medical marijuana based on local needs." But the initiative says there has to be at least one dispensary per 50,000 residents, and jurisdictions with populations above that threshold could ban dispensaries only with voter approval.

The initiative's supporters, which include Americans for Safe Access as well as various growers and retailers, hope this system, which is similar to Colorado's but with less of a role for local regulation, will discourage federal interference by clarifying the rules for supplying medical marijuana. But as The Sacramento Bee notes, Colorado's regulations have not stopped that state's U.S. attorney, John Walsh, from threatening dispensaries that comply with state law. Although Walsh's threats so far have been aimed at dispensaries within 1,000 feet of a school, at least some of them are following state and local regulations. Walsh emphasizes that "the Department of Justice has the authority to enforce the federal law where appropriate even when such activities may be permitted under state law." I have been trying to get his office to clarify whether that means compliance with state law makes no difference to Walsh, but his spokesman, Jeff Dorschner, has not returned my calls. At this point it is not at all clear that Attorney General Eric Holder's assurances regarding medical marijuana suppliers who follow state law amount to anything in practice. The Bee's story reflects that uncertainty:

University of Denver law professor Sam Kamin said the federal actions are likely a surgical strike, not a broad assault. But he said "if the feds don't respect" Colorado's regulatory program, "they're not going to respect the watered-down version that we see (in the measure proposed) in California."

Democratic Assemblyman Tom Ammiano said he met recently with his region's top U.S. prosecutor, Melinda Haag of San Francisco. He said she "wasn't very encouraging" that an initiative – or legislation – could inoculate California's pot industry against federal actions.

Another possible problem with the California initiative is that it seems to conflict with the state appeals court ruling that overturned Long Beach's licensing system for dispensaries. Last October the 2nd District Court of Appeal said Long Beach violated the federal Controlled Substances Act because it went "beyond decriminalization into authorization." Specifically, the court cited the city's application fees and its awarding of permits via a lottery. The Medical Marijuana Regulation, Control, and Taxation Act does not call for a lottery, but it does establish application fees, and its "mandatory registrations" seem to be a euphemism for permits, since dispensaries could not legally operate without them. Then again, the California Supreme Court recently agreed to hear the Long Beach case, and it may overturn the 2nd Circuit's decision.

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