THE LANDSCAPE OF FEDERAL MARIJUANA PROSECUTION

Among the many risks associated with business operations in the medical marijuana industry is the threat of federal civil asset forfeiture and the possibility of seizure by the U.S. Department of Justice for violation of the Controlled Substances Act (CSA).[1]

In each fiscal year since 2015, Congress has included provisions in its appropriations acts that prohibit the Department of Justice and the Drug Enforcement Administration from using federal funds with respect to states that have legalized medical marijuana, including Oklahoma, “to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”[2] While such activity remains criminal under federal law, many federal courts have interpreted the appropriations rider, often referred to as the “Rohrabacher-Farr amendment,” to prohibit investigation and prosecution of the CSA in relation to the use, possession and distribution of medicinal cannabis that is in compliance with state law. Alternatively, where the activity is not authorized under state medical marijuana law, there are no barriers to the expenditure of federal funds in the investigation and prosecution of CSA violations or in bringing civil asset forfeiture actions. Nothing prohibits the DOJ and the DEA from prosecuting recreational marijuana activities, even in states where recreational marijuana is legal; however, there are political barriers to such prosecutions that the executive branch has presumably been largely unwilling to cross.

In 2013, U.S. Deputy Attorney General James M. Cole issued a memorandum directing the DOJ to limit its priorities to, inter alia, “[p]reventing the diversion of marijuana from states where it is legal under state law in some form to other states” and “[p]reventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity.”[3] While the Cole Memorandum was rescinded in 2018 by U.S. Attorney General Jeff Sessions, political backlash to that move has largely resulted in a de facto policy of the DOJ to limit its prosecutorial discretion to respect state marijuana laws, both medical and recreational.[4] Thus, the focus of federal enforcement of the CSA is on activities that are not compliant with state marijuana laws. Where courts have diverged is the level of state compliance that must be shown.

In United States v. McIntosh, the 9th Circuit Court of Appeals found that five co-defendants accused of CSA violations in its operations of four marijuana dispensaries in Los Angeles had standing to enjoin the DOJ from expending federal funds in their prosecution in violation of the medical marijuana appropriations rider. The defendants were charged with conspiracy to manufacture, possession with intent to distribute and actually distribute more than a thousand marijuana plants in violation of 21 U.S.C. §846, 841(a)(1) and 841(b)(1)(A). The government also sought forfeiture of assets. The 9th Circuit held that the defendants had Article III standing to challenge the government’s authority to bring the charges because they could demonstrate concrete, particularized harm from the exercise of federal authority and because private parties are permitted to invoke federalism and separation-of-powers constraints, where “government acts in excess of its lawful powers.”[5] Since the defendants contended that the DOJ lacked the authority to expend funds to prosecute violations of the CSA pursuant to the appropriations rider and that their actions were in compliance with the state medical marijuana laws, the 9th Circuit remanded the matter back to the district court with instructions to conduct an evidentiary hearing on the defendants’ compliance with state medical marijuana laws.[6] In so doing, the 9th Circuit determined the defendants would need to demonstrate that they “strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana.”[7]

The 1st Circuit is the only other federal appeals court to have considered the issue as of this publication. In United States v. Bilodeau, the court held that as long as the Rohrabacher-Farr amendment extended through appropriations bills, “the DOJ may not spend funds to bring prosecutions if doing so prevents a state from giving practical effect to its medical marijuana laws.”[8] Since the harm alleged by the DOJ’s prosecution was in the expenditure of federal funds in itself and was not limited to the harm of a potential guilty verdict, the appellate court found the matter was ripe for appeal.[9] The court declined to adopt the government’s argument for a “strict compliance” reading of the appropriations rider because while it would provide clarity for exactly when an ultra vires government expenditure would be said to have occurred, it would also have an untenable market-chilling effect. This would thwart the purpose of Maine’s medical marijuana laws, reasoning that “the potential for technical noncompliance is real enough that no person through any reasonable effort could always assure strict compliance.” The court gave the example of “a caregiver whose twelve nonflowering marijuana plants comported with the [act’s] limit immediately would have fallen out of compliance when just one of the caregiver’s unlimited number of seedlings grew beyond twelve inches in height or diameter.”[10] In other words, a strict compliance interpretation would render the Rohrbacher-Farr amendment practically meaningless.

However, the Bilodeau court also declined to adopt the defendant’s interpretation that would bar any federal prosecutions where the defendant simply possesses a state license to partake in medical marijuana activity, determining that “Congress surely did not intend for the rider to provide a safe harbor to all caregivers with facially valid documents without regard for blatantly illegitimate activity in which those caregivers may be engaged and which the state has itself identified as falling outside its medical marijuana regime.”[11] Instead, the court adopted an “in-between” approach and looked directly at the conduct at issue, finding that sufficient evidence was presented proving the defendants did, in fact, violate Maine medical marijuana law because, even though they were licensed, they sold marijuana to persons whom they knew were not qualifying patients.[12] Ultimately, it was clear the government would need to show more than a mere technical violation of Maine medical marijuana law, but the exact parameters of the requirement remained to be determined on a case-by-case basis.

The 1st Circuit considered the issue again two years later in United States v. Sirois and applied a substantial compliance test to the conduct at issue. However, the application of this test was by agreement of the parties, as the government was confident that evidence would satisfy even that more forgiving standard. The defendants were licensed caregivers who were allegedly acting as a collective in violation of Maine law, 22 M.R.S.A. §24300-D.[13] The defendants did not dispute the evidence supporting the charges that they physically assisted each other in the act of cultivation, distribution and possession of medical cannabis but argued that any violation of the Maine statutes was “technical.”^[14] The court rejected that argument and found there was competent evidence that the cannabis products the defendants cultivated and sold ended up on the black market, as opposed to licensed patients. One of the defendants, Alisa Sirois, also did not dispute the evidence but argued that since she was a licensed caregiver and her license was reinstated after a temporary suspension, she was in substantial compliance with the act.[15] The court rejected that argument and denied her request for injunctive relief. A petition for certiorari was filed Feb. 14, but the U.S. Supreme Court declined to take up the question.

ASSET FORFEITURE AND THE INNOCENT OWNER DEFENSE

Against this backdrop, Oklahoma medical marijuana dispensaries, growers and even patients[16] must determine how to best guard against federal criminal charges and property forfeitures. Obviously, the best way to avoid these risks is to conform one’s own conduct to the requirements of Oklahoma state law and the Oklahoma Medical Marijuana Authority (OMMA) regulatory code; however, even the best efforts at ensuring compliance cannot completely guarantee that no action will be brought – especially for third parties who do not have direct knowledge or control over the way the grower or dispensary’s business is conducted. The Civil Asset Forfeiture Reform Act[17] allows the government to proceed in rem against the property itself. While the government must prove the nexus between a piece of property and the criminal activity, the burden is less than for proving the crime itself – a mere preponderance of the evidence and not beyond a reasonable doubt.[18] While there are Fourth Amendment restrictions on what the government can seize, the actual evidence substantiating the property’s nexus to criminal activity can be gathered after the filing of the complaint,[19] allowing it to effectively “seize first and ask questions later.” As shown earlier, it does not necessarily matter that the operators are licensed, nor whether the product is diverted to illicit recreational use or purely dispensed to licensed patients. Any deviation from the regulatory requirements of OMMA could potentially result in a civil forfeiture of property, whether or not there are any associated criminal charges against anyone.

Once property has been seized, a claimant then has the burden to prove either that the activity was not criminal or that they are an “innocent owner,” in that they “(i) did not know of the conduct giving rise to the forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.”[20] In other words, the property itself is guilty until an owner proves it is innocent. Compounding this problem is the fact that medical marijuana businesses often have to deal in cash due to the legal and regulatory risks associated with banking businesses that deal with a Schedule I controlled dangerous substance,^[21] and simply being in possession of a large amount of cash can be cause for the government to initiate a forfeiture.^[22] For landlords, transporters, banks, partners, suppliers and others, this makes doing business with a medical marijuana operation risky, as failing to comply with any state law or regulation promulgated by OMMA could potentially result in forfeiture of property or loan payment obligations for violation of the Controlled Substances Act, whether or not they have any knowledge of the alleged noncompliance. Moreover, as an affirmative defense, “it is not incumbent upon the government to prove that the owner had knowledge of the illegal activity. Rather, ‘it is the claimant’s responsibility to prove the absence of actual knowledge.’”[23] A simple denial is also not sufficient to meet this burden – “for example, where the defendant’s alleged ignorance amounts to willful blindness, or where the owner’s claims of ignorance are inconsistent with the uncontested facts.”[24]

BUSINESS SOLUTIONS

Obviously, for businesses engaging directly in the possession, transportation, cultivation and sale of medical marijuana, the best practice will be to comply as strictly as possible with the statutory and regulatory requirements of the state. For third parties only involved with those operations indirectly but who derive profits from those enterprises, some measure of due diligence should be exercised to ensure the operation is licensed and compliant with state requirements. Commercial landlords who rent real property used for the cultivation, sale and distribution of medical marijuana should ensure that lease agreements contain provisions explicitly setting out the marijuana-related activities that are permitted on the property and those that are not. Specifically, the agreement should require the lessee to comply with all state and local regulatory requirements and expressly forbid the diversion of cannabis products for illicit and recreational use.

It is also advisable to include lease provisions that specifically state that any use of the property for failure to comply with laws and regulations will be grounds for termination. While criminal activity is already a basis for eviction under Oklahoma law,[25] noncompliance with state regulations is not necessarily criminal in itself but can remove the protections of state law and the Rohrabacher-Farr appropriations rider, permitting federal enforcement of the CSA. Lease agreements should contain curing provisions to allow the lessee to correct any technical acts of noncompliance within a certain period of time. It is also important to take immediate action to institute forcible entry and detainer actions upon notice of any explicit intentional criminal activity. These safeguards will help ensure that the “innocent owner” defense is protected by showing that “upon learning of the conduct giving rise to the future, [the claimant] did all that could be expected under the circumstances to terminate such use of the property.”[26] The Civil Asset Forfeiture Reform Act also provides specific criteria evidencing the application of the innocent owner defense, such as that the claimant:

• Gave timely notice to an appropriate law enforcement agency of information that led the person to know the conduct giving rise to a forfeiture would occur or has occurred; and
• In a timely fashion, revoked or made a good faith attempt to revoke permission for those engaging in such conduct to use the property or took reasonable actions in consultation with a law enforcement agency to discourage or prevent the illegal use of the property.[27]

While it is still unclear what extent of state compliance must be shown in order to avoid federal criminal prosecution and civil forfeiture of assets, “an ounce of prevention is worth a pound of cure,”[28] and operators would be well-advised to do as much due diligence as circumstances allow.

LEGAL SOLUTIONS

Following a federal civil asset forfeiture relating to a medical marijuana operation, it is always worth considering whether the expenditure of federal funds in the investigation and litigation is in violation of the Rohrabacher-Farr appropriations rider. While this issue has yet to be decided in the 10th Circuit, an argument could be made that the rider prohibits the expenditure of federal funds even in the face of admitted noncompliance with state medical marijuana laws and regulations. In some sense, the rider allows state authorities to “occupy the field” of medical marijuana distribution, possession and cultivation, including licensure revocations and prosecution of criminal charges for noncompliance. This interpretation would also be in accord with the 10th Amendment reservation of “powers not delegated to the United States by the Constitution, nor prohibited by it to the States” and the exhortation that state governments have control over “the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.”[29]

It could further be argued that the federal government lacks jurisdiction to enforce the CSA for medical marijuana-related activities. The CSA also states:

No provision of this subchapter shall be construed as indicating an intent on the part of the Congress to occupy the field in which that provision operates, including criminal penalties, to the exclusion of any State law on the same subject matter which would otherwise be within the authority of the State, unless there is a positive conflict between that provision of this subchapter and that State law so that the two cannot consistently stand together.[30]

There is thus an argument to be made that Congress, in passing the appropriations rider, ceded federal jurisdiction over all medical marijuana activities to state regulators and law enforcement agencies, including the implementation of the state’s regime for civil and criminal penalties for statutory and regulatory noncompliance. Congress likely did not intend for the DOJ or the DEA to micromanage or commandeer state medical marijuana regulators and police technical violations of state licensing requirements. While this interpretation is admittedly on the far end of the spectrum, it would achieve the public policy goals of allowing a state to govern its own affairs and eliminate the uncertainty surrounding what degree of compliance is required to avoid federal penalties. Under this view, the possession of a valid license to possess, cultivate, distribute and sell medical marijuana should be a complete bar to the expenditure of federal funds in either a criminal or civil forfeiture action. In the absence of a valid license, proof that the cannabis products involved were only distributed to licensed users and were not diverted to recreational use should similarly constitute a bar to federal action.

At the other extreme, a strict compliance test would provide the same degree of certainty regarding the type of conduct that can expose one to federal criminal liability; however, it would also have the effect of “turn[ing] each and every infraction into a basis for federal criminal prosecution ... in a manner likely to deter the degree of participation in [the state’s] market that the state seeks to achieve.”[31] A middle-ground rule of substantial compliance or a simple case-by-case analysis would avoid both of these extremes but would also result in a continued lack of clarity regarding what level of compliance should be considered “substantial” or “sufficient” for the application of the expenditure prohibition.

Whichever interpretation the 10th Circuit chooses to adopt – if the issue ever even reaches their consideration – it will always be beneficial to litigants to consider the possibility that federal expenditures in enforcement of the CSA or in seeking civil asset forfeiture could run afoul of the congressional appropriations rider. In the absence of facts supporting this argument, litigants must resort to the innocent owner defense where applicable and Eighth Amendment considerations as to whether or not the property seized constitutes an “excessive fine” for the criminal conduct alleged.

LEGISLATIVE SOLUTIONS

There are many actions Congress can take to resolve these conflicts and provide further protections and assurances to innocent owners. One would be to pass the Fifth Amendment Integrity Restoration (FAIR) Act of 2023, which:

• “requires counsel for an indigent property owner whose primary residence is the subject of a civil forfeiture hearing regardless of whether the owner requests counsel,
• raises the evidentiary standard from preponderance of the evidence to clear and convincing evidence, and
• sets forth factors courts must consider in determining whether a forfeiture of property used to facilitate the commission of an offense is excessive.”[32]

By strengthening protections for property owners across the board, the FAIR Act would have the added benefit of alleviating the uncertainty surrounding the medical marijuana market and would protect third parties affiliated indirectly with medical marijuana sales, cultivation and distribution. However, it would not completely resolve the uncertainty of having to rely on the legal and regulatory compliance of a licensee (or purported licensee) to protect property from being seized in a forfeiture and then having to undergo the expenses of litigating defenses.

Another solution would be to pass the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, which would explicitly recognize state cannabis laws by amending the Controlled Substances Act to provide that it “shall not apply to any person acting in compliance with State law relating to the manufacturer, production, possession, distribution, dispensation, administration, or delivery of marihuana.”[33] The bill would also prohibit civil asset forfeitures where compliance with state law is shown; however, it would still be open for interpretation whether strict compliance or substantial compliance standards should apply. Regardless, the passage of this legislation would mean that medical marijuana businesses need not rely on Congress continuing to extend the yearly appropriations rider and would effectively make the rider’s protection against federal prosecution permanent.

CONCLUSION

The only complete solution to the conflicts outlined above would be a total descheduling and decriminalization of marijuana at the federal level. However, as this appears highly unlikely for the foreseeable future, it is incumbent upon medical marijuana licensees and commercial property owners to use all available means to ensure that assets are not used in furtherance of illicit activities and that regulatory compliance is maintained.

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ABOUT THE AUTHOR

Orion A. Strand is an associate attorney with the firm of McAtee & Woods in Oklahoma City and focuses his practice on first party insurance defense, personal injury and general commercial litigation.

 

 

 

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ENDNOTES

[1] 18 U.S.C. §981 et seq.

[2] Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, §538, 128 Stat. 2130, 2217 (2014).

[3] James M. Cole, “Guidance Regarding Marijuana Enforcement,” Aug. 29, 2013.

[4] Lisa N. Sacco, et al., “The Federal Status of Marijuana and the Policy Gap with the States,” Congressional Research Service (updated May 2, 2024); Kyle Jaeger, “One Year After Jeff Sessions Rescinded a Federal Marijuana Memo, The Sky Hasn’t Fallen,” Marijuana Moment (Jan. 4, 2019), http://bit.ly/4jcbcp9.

[5] United States v. McIntosh, 833 F.3d 1163, 1174 (9th Cir. 2016) (quoting Bond v. United States, 564 U.S. 211, 220-24, 131 S.Ct. 2355, 2011).

[6] Id. at 1179.

[7] Id.

[8] United States v. Bilodeau, 24 F.4th 705, 713 (1st Cir. 2022).

[9] Id. at 712.

[10] Id. at 713.

[11] Id. at 714.

[12] Id. at 715.

[13] United States v. Sirois, 119 F.4th 143, 147 (1st Cir. 2024) (cert. denied 24-875, 2025 WL 951161 (U.S. Mar. 31, 2025).

[14] Id. at 153.

[15] Id. at 159.

[16] See von Hofe v. U.S., 492 F.3d 175 (2nd Cir. 2007) (action for civil forfeiture of primary residence allegedly used to grow marijuana).

[17] 18 U.S.C. §981 et seq.

[18] 18 U.S.C. §983 (c)(2).

[19] Id.

[20] 18 U.S.C. §983(d)((2)(A)(i)-(ii).

[21] See Congressional Research Service, “Marijuana Banking: Legal Issues and the SAFE(R) Banking Acts,” LSB11076, www.congress.gov/crs-product/LSB11076 (Nov. 15, 2023).

[22] See, e.g., United States v. $92,203.00 in U.S. Currency, 537 F.3d 504 (5th Cir. 2008); United States v. $149,442.43 in U.S. Currency, 965 F.2d 868 (10th Cir. 1992).

[23] United States v. 16328 South 43rd East Ave., Bixby, Tulsa County, Okla., 275 F.3d 1281, 1284-1285 (quoting United States v. Four Million, Two Hundred Fifty-Five Thousand, 762 F.2d 895, 907 (11th Cir. 1985) (internal quotations omitted, emphasis in original)).

[24] Id., (quoting United States v. One Parcel of Prop. Located at 755 Forest Rd., 985 F.2d 70, 72-73 (2d Cir.1993) (internal quotations omitted)).

[25] 41 O.S. §127(8).

[26] 18 U.S.C. §983(d)(2)(A)(ii).

[27] 18 U.S.C. §983(d)(2)(B)(i)(I-II).

[28] Benjamin Franklin, Pennsylvania Gazette, (Feb. 4, 1735).

[29] James Madison, Federal Papers No. 45, The Alleged Danger from the Powers of the Union to the State Governments Considered (Jan. 26, 1788).

[30] 21 U.S.C. §903.

[31] United States v. Bilodeau, 24 F.4th 705, 714 (1st Cir. 2022).

[32] Summary: H.R. 1525 – 118th Congress (2023-2024) available at https://bit.ly/4j4wYM9.

[33] S. 3032, §710(d) 115th Congress, 2d Session (introduced June 7, 2018).