Is Sessions’ rescission of the Cole Memo really that big of a deal?

PayQwick

On January 4, 2018, Attorney General Jeff Sessions issued a memo (the “Sessions Memo”) rescinding the Cole Memo today. This will undoubtedly send shockwaves through the cannabis industry, but it shouldn’t.

Here are our takes:

  1. The Sessions Memo states, “In deciding which marijuana activities to prosecute under these laws [e.g., Controlled substances Act, Bank Secrecy Act, etc.) with the Department’s finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions…. Given the Department’s well-established general principles, previous nationwide guidance [e.g., the Cole Memo] is unnecessary and rescinded….” [Emphasis added.] Thus, local prosecutors still have prosecutorial discretion and many of the existing principles guiding federal prosecutors (See, Chapter 9-27.000 of the U.S. Attorneys’ Manual) point toward not prosecuting cannabis businesses that are operating in compliance with state law and not implicating any of the 8 enforcement priorities listed in the now rescinded Cole Memo. At least two U.S. Attorneys General (Bob Troyer of Colorado[1] and Kurt Alme of Montana[2]) have issued public statements to this effect.
  2.  DOJ remains de-funded from pursuing cannabis businesses under the Rohrabacher-Blumenauer amendment.
  3. We expect FinCEN (the Financial Crimes Network of the Department of Treasury) will update its guidelines to banks and credit unions currently serving or seeking to serve the cannabis industry. One of the pillars of the FinCEN Guidance centered on a bank’s Know Your Customer (KYC) obligations under the Bank Secrecy Act. These KYC requirements remain unchanged notwithstanding rescission of the Cole Memo. Therefore, we think FinCEN will update its guidelines to specifically include the 8 enforcement priorities listed in the now rescinded Cole Memo. That said, we expect Sessions’ announcement will have a chilling effect on banks who were not yet but considering offering banking services to the cannabis business.
  4. His announcement will have a chilling effect on some investors who had not yet but were considering investing in cannabis businesses. At a minimum, investors will take a deeper dive into the owners’ backgrounds and the operations/compliance status of their investment opportunities.
  5. Senators and House Members from states where cannabis is legal have reacted very negatively to Sessions’ decision. This may finally motivate congress to act at the federal level.  See, this article in Politico: https://www.politico.com/magazine/story/2018/01/06/jeff-sessions-marijuana-legalization-congress-216251 .
  6. Public opinion remains overwhelmingly in favor of legalized cannabis, so getting grand jury indictments and jury verdicts will be difficult for all but the most egregious cannabis crimes, e.g., those involving the 8 enforcement priorities in the now rescinded Cole Memo. Moreover, any local U.S. Attorney General with future political aspirations could damage their election chances by prosecuting legal cannabis businesses.
  7. We anticipate Session may issue his own memo regarding cannabis. Incidentally, the task force Sessions convened last summer recommended he keep the Cole Memo in place.

[1] U.S. Attorney Bob Troyer of the District of Colorado issued the following statement regarding marijuana prosecutions:

“Today the Attorney General rescinded the Cole Memo on marijuana prosecutions, and directed that federal marijuana prosecution decisions be governed by the same principles that have long governed all of our prosecution decisions.  The United States Attorney’s Office in Colorado has already been guided by these principles in marijuana prosecutions — focusing in particular on identifying and prosecuting those who create the greatest safety threats to our communities around the state.  We will, consistent with the Attorney General’s latest guidance, continue to take this approach in all of our work with our law enforcement partners throughout Colorado.”

[2] U.S. Attorney Kurt Alme of the District of Montana issued the following statement regarding marijuana prosecutions:

“Yesterday, the Attorney General rescinded the Cole Memo on marijuana prosecutions and directed that federal marijuana prosecution decisions be governed by the same principles that govern all federal prosecution decisions. The United States Attorney’s Office in Montana is guided by these principles in marijuana prosecutions — focusing in particular on identifying and prosecuting those who create the greatest safety threats to our citizens and communities. Consistent with the Attorney General’s latest guidance, we will continue to take this approach in all of our work with our law enforcement partners throughout Montana.”