Feds decide on hands-off policy to state's pot market

Staff writerAugust 29, 2013 

Breathe a big sigh of relief, wannabe state-licensed pot sellers.

Watch out, unregulated stores that sell weed for medicinal use.

For nine months, ever since Washington and Colorado voters legalized the recreational use of marijuana, the states have had one eye on the federal government, which still considers pot illegal. Would the Obama administration spoil the party?

They received their answer Thursday, in surprising detail. U.S. Attorney General Eric Holder told the two states' governors he would not sue to stop their laws, at least for now. And his agency advised its agents and prosecutors to take a hands-off approach -- as long as states keep a tight lid on their marijuana industries.

“Today, following a phone call with Attorney General Holder, we are confident we will be able to move forward in the state of Washington with our voter-approved marijuana initiative,” Gov. Jay Inslee told reporters.

Inslee lauded fellow Democrats Holder and President Barack Obama for their “courage” and said the decision is a sign Washington is on the right track in developing regulations.

Without tight controls, the Justice Department made clear, all bets are off. And the state’s medical marijuana market is very much unregulated.

That system, with roots in a 1998 voter initiative, may face renewed scrutiny in Western Washington from U.S. Attorney Jenny Durkan. She declared in a statement Thursday: “The continued operation and proliferation of unregulated, for-profit entities outside of the state's regulatory and licensing scheme is not tenable and violates both state and federal law.”

Inslee on Thursday called for a licensing and regulation scheme for medical operations, saying such a proposal is in the works.


Thursday’s directive isn’t the first time the Justice Department has given deference to state laws on pot. But in the past, responding to medical-marijuana laws, the department has said it would avoid prosecuting patients who follow state law but would go after for-profit and large operations, among others.

Thursday’s four-page memo from Deputy Attorney General James Cole, however, advised prosecutors not to solely “consider the size or commercial nature of a marijuana operation alone,” but to focus on “whether the operation is demonstrably in compliance with a strong and effective state regulatory system.”

The “primary question,” Cole wrote, is whether the operation is causing:

  • Use by minors.
  • Diversion of the drug out of state. 
  • Diversion to criminal enterprises and gangs.
  • Violence.
  • Driving under the influence of marijuana.
  • Cover for other illegal drug sales or illegal activity.
  • Growing pot on public lands.
  • Possession of pot on federal property.




Regulators with the state Liquor Control Board said it has those very goals in mind as it writes rules for the new industry.

The board plans to take applications in November and December for licenses to grow, process and sell marijuana. It will consider its latest and strictest version of rules next week, including limits on production quantities.

“I think that’s the whole reason why we got the memo we did,” Liquor Control Board director Rick Garza said, “...We’re looking at limiting the amount of production in the state and limiting the producers to how much they can grow, and I think that’s important.”

Garza said other restrictions may also have influenced the federal decision, pointing to the initiative’s ban on minors in retail stores, his agency’s further attempts to keep the drug away from children, and the criminal background checks that will be required of applicants.


Those who want to apply for licenses, like Angel Swanson, now have one less short-term worry.

“This is what we’ve been waiting to hear,” said Swanson, co-owner of a pair of medicinal-cannabis access points in unincorporated Pierce County, on Thursday.

“Now that they’ve released the statement, I would think for all of us there’s a huge sigh of relief,” she said.

“This is comforting for all those people who maybe hadn’t put all the resources that they want to into potentially getting a license, because of fear,” said Phil Wayt, a lobbyist who represents potential growers and processors.

But the Justice Department’s policy could change at any time, and a new presidential administration taking office in 2017 might set new policy.

“Anybody that takes this as a green light to do anything is an idiot. The law has not changed,” said Doug Hiatt, a medical-marijuana advocate and attorney who opposed Initiative 502.

The Justice Department is not signing a formal agreement with states, as advocated by one expert, UCLA professor Mark Kleiman, as a way to lock in federal policy. Enforcement will be at prosecutors’ discretion, Kleiman said.

Nor does the decision address federal laws that keep businesses from having access to bank accounts.

Pot sellers -- and perhaps even state tax collectors -- will still have a hard time figuring out where to put their money. Cash-only businesses could be more prone to robberies.

Inslee said he would be proposing potential solutions to the federal government on the banking front, saying Holder “expressed a willingness to consider our ideas.”

And Scott Jarvis, head of the state Department of Financial Institutions, said he expects “discussions will accelerate on the banking issue.”

U.S. Rep. Denny Heck, D-Olympia, has proposed changes to banking laws that would allow access by legitimate marijuana businesses.

Even if the federal government doesn’t stand in the way of the new system, local governments are another matter. City and county officials will have a say through local zoning and business licenses, although the liquor board said it will license businesses in locations regardless of local bans. Disputes could land in court.

Still, Swanson is hopeful the new directive will solve some of the lingering problems.

“I think that for all of us who are trying so hard on the ground, this should help us get bank accounts, get city licenses. Now there’s no more of this ‘we’ll wait for the feds.’ I think they went as far as they could go without legalizing it. I think that’s great. It took them long enough.“

The federal decision follows nine months of waiting.

Inslee and state Attorney General Bob Ferguson met with Holder in January after taking office. Inslee said he has also talked by phone with Holder and that the state has been giving roughly weekly updates to the federal government on regulations. Ferguson, a Democrat, had been preparing to defend the initiative in court if necessary.

A letter in June to Holder from Washington Democrats in Congress advocated a hands-off approach. U.S. Sens. Maria Cantwell and Patty Murray and Reps. Suzan DelBene of Medina, Heck, Derek Kilmer of Gig Harbor, Jim McDermott of Seattle and Adam Smith of Bellevue signed the letter.


Advocates of legalization cheered the move, calling it a historic step toward ending marijuana prohibition across the United States.

Retired Seattle police chief Norm Stamper said DOJ’s move had the potential "to be a major advancement in the history of drug reform" and would put more marijuana business in the hands of legitimate businesses and away from criminal organizations.

"For me, this means my fellow officers will be able to focus on their real job of preventing and solving violent crime, increasing their ability to do that job," he said.

Opponents of legalization said the move would lead to a flood of negative consequences.

"We can look forward to more drugged driving accidents, more school dropouts and poorer health outcomes as a new big marijuana industry targeting kids and minorities emerges to fuel the flames," said Patrick Kennedy, a former Democratic congressman from Rhode Island and co-founder of Project SAM (Smart Approaches to Marijuana), a national alliance that opposes legalization.

-Staff writers C.R. Roberts and Rob Hotakainen contributed to this report.

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