Interstate Marijuana Commerce Could Put California At ‘Significant Legal Risk’ Of Federal Action, Attorney General Says

The attorney general of California has determined that the state could put itself and its employees at “significant legal risk” of federal enforcement action if it were to authorize interstate marijuana commerce.

In a legal opinion sent to state cannabis regulators on Tuesday, Attorney General Rob Bonta (D) said his office understands there are complex legal considerations—and that there are “strong arguments” state officials could make to contest liability if they were federally prosecuted—but that he cannot disregard the potential for legal risk.

The opinion comes in response to a request earlier this year from the California Department of Cannabis Control (DCC), seeking the attorney general’s assessment of potential liability for permitting interstate commerce under a law Gov. Gavin Newsom (D) signed last year.

While DCC argued in its request that the state would not find itself at substantial legal risk for allowing the activity, the attorney general’s opinion says it cannot rule out that possibility given the threat of federal preemption under the Controlled Substances Act (CSA) that strictly prohibits cannabis.

The law Newsom signed stipulated that the governor would be authorized to enter into interstate commerce agreements with other legal states if federal law or guidance changed, or if the state attorney general ruled out the possibility of “significant legal risk.”

The opinion acknowledges that there are differing legal interpretations as it concerns federal preemption “in the cannabis context,” and there’s a lack of court precedent on the issue of interstate marijuana commerce.

It adds that the “law is also unsettled as to whether state officials could be federally prosecuted for implementing state law in this area.”

The opinion is based on a strictly conservative interpretation of any possible “risk,” and the matter of federal preemption under the CSA, among other considerations, led the office to a default judgement of “significant legal risk.”

Further, while the federal government has generally allowed states to implement their own marijuana laws without interference, the opinion says “it remains possible that the federal government might view interstate cannabis distribution as posing a greater threat to federal priorities than existing intrastate activities.”

A DCC spokesperson said in a statement to Marijuana Moment on Wednesday that they “appreciate the Attorney General’s conclusion that the arguments supporting interstate agreements are ‘strong,’”

“Unfortunately, even strong arguments cannot put novel questions beyond all debate,” they said. “If you are looking for certainty, you will not find it in cannabis.”

“But if you are looking for leadership, you will continue to find it here. California has long been at the forefront of efforts to legalize and regulate cannabis, even in the face of legal and political uncertainty,” the department added. “And although California’s cannabis industry has long been at the heart of an unregulated interstate market, we will continue—under Governor Newsom’s leadership—to search for ways to bring that market into a regulated framework that protects the public.”

The attorney general’s office reached its conclusion after more than a year of review, which involved soliciting input from local governments and stakeholders, including several that asserted there was no substantial legal risk.

California isn’t the only state that’s contemplated the possibility of interstate marijuana commerce in recent years.

Oregon and Washington State have also passed laws allowing officials to enter into cross-border cannabis trade agreements with other states, although those state laws both require some form of federal reform or guidance to proceed.

Adam Smith, founder of the nonprofit Alliance for Sensible Markets, told Marijuana Moment that they “applaud and appreciate Governor Newsom’s effort to meet the requirements of the CA law to move forward towards state-regulated commerce between legal markets.”

“Fixing the economics of legal cannabis is imperative to saving thousands of small farms and businesses and moving millions of patients and consumers into safe, regulated, and cost-competitive markets,” he said. “And while we deeply disagree with both the methods and legal analysis in the AG’s opinion, the CA law, like the OR/WA laws, provide a direct path to commerce via an indication of tolerance from the US DOJ. We call on the three west coast governors to seek that tolerant guidance now.”

Matthew Lee, general counsel to DCC, previously discussed the issue during a webinar hosted by the Alliance for Sensible Markets, at which he made the case that the there is already an interstate cannabis market that’s been effectively established in the U.S. But so far it’s been unregulated, forcing operators to make the choice between staying legal—but keeping products within a single market—or engaging in illicit activity by selling across state lines.

On a separate but related legal question, a federal circuit court ruling in Maine last year affirmed a lower court’s ruling that state marijuana laws with residency requirements for cannabis businesses violate the U.S. Commerce Clause, part of the Constitution meant to prevent states from enforcing policies that unduly restrict interstate commerce.

Also last year, an Oregon marijuana business filed a lawsuit in another federal court, declaring that the state’s current ban on cannabis exports and imports to and from other states violates the Constitution.

Other states where cannabis is legal have considered passing similar legislation to allow cross-border trade. New Jersey’s Senate president introduced an interstate marijuana commerce bill last year. And a legislative committee in Maine rejected similar legislation, but the chair said the matter could be revisited through another vehicle.

While the federal government hasn’t weighed in on state-sanctioned interstate marijuana commerce, U.S. Attorney General Merrick Garland said earlier this year that the Justice Department is “still working on a marijuana policy.”

To that end, the U.S. Department of Health and Human Services (HHS) has recommended moving marijuana from Schedule I to Schedule III of the CSA, and the Drug Enforcement Administration (DEA) is in the process of completing its review before making a final determination.

Moving cannabis to Schedule III could have a wide range of policy impacts, but it’s unclear what, if anything, it would mean for the possibility of interstate cannabis commerce given that marijuana would remain federally illegal even if it’s reclassified as such.

Read the full California AG opinion on interstate cannabis commerce below:

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