The United States consists of one federal government, with a constitution and federal laws, and fifty separate states, each with its own constitution and state laws. The U.S. Constitution enumerates the areas in which the federal government can act (e.g., making treaties, declaring war, determining the standards for citizenship), and reserves all non-enumerated powers to the states. The conflict regarding MMJ comes from the fact that almost one-third of the states have legalized the medical use of marijuana, while Congress has labeled it a Schedule 1 drug under the federal Controlled Substances Act (21 U.S.C. § 812). These are drugs that Congress has determined (a) have a high potential for abuse; (b) have no currently accepted medical use in treatment; and (c) lack accepted safety under medical supervision. Marijuana shares this designation with, among other drugs, heroin, LSD and methamphetamine.

In 2005, the U.S. Supreme Court upheld the superiority of Congress over the states to regulate marijuana, under the Commerce Clause of the Constitution. Gonzales v. Raich, 545 U.S. 1 (2005). This resulted in the current situation where a person acting in compliance with state laws regarding the production, sale and use of MMJ can, nevertheless, be prosecuted under federal drug laws.

Perhaps the most persistent question about medical marijuana (MMJ) is whether users, growers, sellers and others risk arrest and prosecution by the federal authorities. As a result of a 2005 ruling by the U.S. Supreme Court, Gonzales v. Raich, 545 U.S. 1 (2005), a person acting in compliance with state laws regarding the production, sale and use of MMJ can be prosecuted under federal drug laws.

The Justice Department’s October 2009 “Ogden Memo” appeared to say that the Feds would not go after those in MMJ-legal states, but the June 2011 “Cole Memo” appeared to say the opposite. Reading them together, they say:

1. The United States Attorneys always have the right to enforce federal law relating to marijuana.

2. They are unlikely to prosecute people with cancer or other serious illnesses who use marijuana as part of a recommended treatment regimen consistent with applicable state law, or their caregivers.

3. Large commercial marijuana grow facilities do not fit the Feds’ idea of “caregivers,” i.e., individuals providing care to other individuals who have cancer or other serious illnesses.

Legitimate patients and their caregivers seem to have little to fear. The risk of federal prosecution will increase as: (a) a person or business strays farther from the sole patient/caregiver model, (b) a grow/dispensary operation increases in size, and (c) a business obtains a higher public profile.

While the enumeration of federal powers in our constitution, reserving the rest of the powers to the states, made sense in the nineteenth century, it has caused increasing problems in many areas as state lines become less relevant to a global economy. One such area is medical marijuana law. The federal Controlled Substance Act, adopted in 1970, created five schedules for controlled substances. Schedule 1 criteria:

(A) The drug or other substance has a high potential for abuse.
(B) The drug or other substance has no currently accepted medical use in treatment in the United States.
(C) There is a lack of accepted safety for use of the drug or other substance under medical supervision.

Thus, Schedule I is reserved for the most dangerous, and least medically-useful drugs, such as heroin, methamphetamine, lysergic acid diethylamide (LSD) and peyote. One can only assume that marijuana was added to this dangerous crowd of characters as a political reaction to its use by hippies in the 1960s, without regard to any medical or scientific fact. [As Yogi Berra would say, “Déjà vu all over again.”]

Regardless of how marijuana got there, its presence as a Schedule 1 drug ensures that the federal penalties for marijuana growers/sellers/users can be severe, despite the fact that Coloradans would refer to it as “legal medical marijuana.”

In spite of the medical marijuana legalization actions of 16 states and the District of Columbia recognizing certain medical benefits of the use of marijuana, requests to Washington to reconsider the classification of marijuana as a Schedule I drug have fallen on deaf ears. While this has been a disappointment to many, it cannot be much of a surprise. In today’s political climate, there seems to be little upside for most politicians in taking on this issue.

The hope, then, by many in the legal medical marijuana movement, is that the federal government will choose not to enforce the law, at least under some circumstances. An October 19, 2009 memorandum from the Justice Department to the United States Attorneys in those 16 states said, in essence, that the U.S. Attorneys should continue to prosecute “significant traffickers of illegal drugs, including marijuana,” but not “individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” The memo further stated that prosecution of those patients and caregivers “in clear and unambiguous compliance with existing state law . . . is unlikely to be an efficient use of limited federal resources.”

This memo was seen by many as a green light to pursue business opportunities in the medical marijuana industry. Later developments seem to cast some doubt on that conclusion. In the summer of 2010, Chris Bartkowicz, who had a large marijuana-growing operation in his basement, was filmed by a local television station bragging that he expected a profit of $100,000 to $400,000 and that his electricity bill was $3,694 per month. He now faces federal prosecution. A more recent memo from the Justice Department reasserts the federal government’s right to enforce U.S. drug laws, regardless of state medical marijuana regulations or state medical marijuana laws.

Many people are trying to read the tea leaves to determine what the Feds are really going to do. Personally, I do not know of any in the industry that are backing down from this implied threat. I also believe that should the federal government decide to crack down, it will make much more belligerent statements and give lots of warnings before busting people. [Reasoning: There are so many people who are breaking the federal law, the U.S. does not have anything close to the money or manpower to prosecute and imprison more than a handful. The most effective way of shutting down the industry, if they ever decide to try, is to scare people into voluntarily backing out.] In fact, this may be happening. Within the last couple of weeks, the industry is buzzing over reports that the federal government has notified at least 16 California landlords of dispensaries that if they continue to allow sales of marijuana from those locations, they will be subject to prosecution or seizure of the property.

If I were cynical (which I sometimes am), I would view the saber-rattling as being purely political, so that during the next presidential campaign the Obama administration can counter Republican charges of them being soft on drugs/crime—especially in states that have approved medical marijuana legalization or are considering medical marijuana legalization.

More likely, though, is that the memo stating that the federal government has the right to enforce its own laws was issued in response to a specific question asked of the Feds by somebody in the industry, and was not intended to be a message to the industry. Equally likely is that the notifications to the landlords of the California medical marijuana centers are targeted at those who have questionable status under state law. An MSNBC article [http://www.msnbc.msn.com/id/44806723/ns/us_news-crime_and_courts/] reported that the 12 centers in San Diego that were the target of the letters were the same ones that the city sued in September for operating illegally. This fact puts the Justice Department’s letters to the landlords in line with the sentiment of the October 19, 2009 memo, that only those who are not in clear and unambiguous compliance with state medical marijuana laws need to worry about federal prosecution.

As far as the potential ramifications on medical marijuana in Colorado, nothing changes. Until the federal law changes, it remains illegal on a federal level, and those in the industry remain at the mercy of federal prosecutors, who have the power to enforce the federal laws or look the other way.

“Caveat Emptor”—“Buyer Beware.” Or, in this case, buyers, sellers and growers beware. There’s the potential of the perfect storm around medical marijuana in Colorado. First, there’s the omnipresent threat of federal intrusion into medical marijuana Colorado law. Even if this is nothing more than an empty threat, it’s enough to rattle the confidence of those in the medical marijuana industry as cities and towns statewide follow through on the decisions made by their city councils or voters to restrict or ban medical marijuana establishments in their jurisdictions.

Then, there are the myriad new regulations that went into effect statewide July 1. Increasing administrative and reporting requirements mean less time to work in the business, more time spent on the business; less money spent for the business, more money spent on compliance. An unknown number of patients may stop purchasing medical marijuana from dispensaries, for reasons varying from what they believe is intrusive video surveillance to fear of revealing their medical decisions to a state government that may not be able to stop the information from being collected by the federal government.

Amid these turbulent waters and increasing medical marijuana laws, bans, threat of bans, and the like, it’s time for medical marijuana business owners to ask themselves some hard questions, including:

• How much have I invested, both monetarily and in terms of energy and time, to this point?
• How much more do I have to invest to be in compliance with “medical marijuana Colorado law?”
• How much are revenues being impacted by reduced demand for product in combination with increasing operating, administrative, and hardware costs?
• How much might I stand to benefit if a number of my competitors go out of business over all this?
• What is the likelihood that lawsuits and other legal actions will undo or soften some the new medical marijuana regulations in place?
• What would I do if I stopped operating a medical marijuana business?
• Taking all of the above into account, do I want to continue operating a business that—in theory at least—offers a highly profitable business model even in a down economy, or take my chances in some other uncertain venture that may be much more susceptible to the economic downturn?

It’s going to be an interesting ride.

It is unclear whether medical marijuana in Colorado will be more vulnerable to, or more protected from, federal scrutiny because of recent passage of new medical marijuana laws in the state. A recent article detailing California’s concerns around medical marijuana regulations contrasts the two states:

• Colorado has statewide regulation in addition to municipal ordinances; California has no statewide regulation. So, in essence, medical marijuana in Colorado already is subject to two levels of government regulation—local and statewide. Federal oversight would be a third. Given limited federal resources to prosecute medical marijuana growers and dispensaries, it follows logically that California would be a better candidate for crackdowns.

• Now, with the just-enacted set of Colorado regulations mandating such strict requirements as licensing of marijuana industry workers, the feds likely would view the state as a lower priority.

That said, however, Colorado remains at the pinnacle of national attention when it comes both to the issues of “legal medical marijuana” and medical marijuana regulations. In light of the fact that Colorado has the most developed set of laws and regulations and, therefore, is serving as a potential model for other states, it is possible that it could draw federal attention to itself. The Justice Department could easily conclude that targeting Colorado as a big fish could be the most effective way of sending a chilling, strong message to the rest of the country.

Thus far, all seems to be quiet on the federal front vis-a-vis Colorado. A recent Denver Post article states in part, “When Colorado U.S. Attorney John Walsh wrote to state officials last month about the state’s medical-marijuana rules, the warning could not have been clearer. ‘The department would consider civil actions and criminal prosecution regarding those who set up marijuana growing facilities and dispensaries,’ Walsh wrote.

“If that happened, it would throw into disarray Colorado’s medical-marijuana industry, which, after all, operates in obvious violation of federal law. But a close examination of court cases in Colorado over the past three years reveals that federal prosecutors spend few resources pursuing marijuana crimes of any kind. That was true both before Colorado’s medical-marijuana boom began and since. In 2008, 2009 and 2010, officials pursued fewer than 10 marijuana-specific cases in each year, out of hundreds of criminal prosecutions.”

Given all of the important criminal problems this country is facing and the fight over where to apply the extremely limited financial resources at our disposal, it is difficult to imagine a big push by the Justice Department against those in compliance with state laws.

New medical marijuana laws in Colorado, effective July 1, mean that Colorado is subject to the most regulation in the nation. New state regulations include:

• “Seed to sale” video camera tracking of every transaction involving production or sale of medical marijuana; and making these videos available to all law enforcement, including the Drug Enforcement Administration (DEA) upon request. No warrant or notification to patients about release of their information is required;

• Mandatory inspection of a patient’s marijuana registry card every time they purchase medical marijuana;

• Medical Marijuana Center (MMC) employees are required to provide extensive personal and financial information to the Colorado Department of Revenue, and to submit to a criminal background investigation—including photographs and fingerprints;

• Mandatory 7 p.m. closing time for medical marijuana shop sales.