On April 3, 2017 the governors of four states with legalized recreational marijuana—Alaska, Colorado, Oregon and Washington—sent a letter to Attorney General Jeff Sessions. They asked that the Trump administration “engage” with them before making any changes to the existing federal regulatory and enforcement systems. Their particular concern was potential revision to the “Cole Memo,” an Obama-era policy that attempted to strike a balance between federal interests and state sovereignty in the growing legalization of marijuana. The governors said the Cole Memo provided guidance to the foundation of state regulatory systems and was “vital to maintaining control over marijuana in our states.” They warned that overhauling it could produce unintended consequences such as diverting “existing marijuana product into the black market and increase dangerous activity in both our states and our neighboring states.”
On July 24, 2017, Attorney General Sessions replied individually to the governors who signed the April 3rd letter. You can review copies of the letters sent to Governor Brown of Oregon and Governor Inslee of Washington. Each letter pointed to documents from the respective states that raised serious questions about the efficacy of marijuana “regulatory structures” in that state. He then directed their attention to the concluding paragraph of the memo that said it “does not alter in any way the Department’s authority to enforce federal law, including federal laws relating to marijuana, regardless of stat law.”
Among the specific concerns for Oregon Sessions highlighted was that only 30% of the marijuana market in Oregon was compliant with state marijuana laws. There was a “pervasive illicit cannabis cultivation in the state,” which was trafficked out-of-state. Law enforcement was said to be unable to keep pace with out-of-state diversion. “The reality of legalization is that it has provided an effective means to launder cannabis products and proceeds.” Individuals were said to be exploiting legal mechanisms to obscure their products’ origin and their true profits.
Among the concerns he highlighted for Washington was the lack of regulation and oversight of the medical marijuana market has “unintentionally” led to a growth of the black market. “Since legalization in 2012, Washington State marijuana has been found to have been destined for 43 different states.” The recreational marijuana market is incompletely regulated. One of the leading regulatory violations has been the failure to use and/or maintain the traceability of marijuana products.
Writing for The Washington Post, Christopher Ingraham said the Sessions’ letter indicated he remained deeply skeptical of efforts to legalize recreational marijuana. But for now, Justice Department actions will be dictated by the Cole Memo. Federal non-interference seems to hinge on whether there is evidence of a public health or safety threat. John Hudak, a drug policy expert with the Brookings Institution, said the Sessions letter is an important indicator that Sessions is serious about enforcing marijuana law under the Cole Memo. He also expressed concerns with the accuracy of the data Sessions cited. He said reports compiled by law enforcement authorities were “notorious for cherry-picking data and failing to put data into context.” He suggested the Attorney General was drawing conclusions on incomplete data or data taken out of context.
Reporting for the Associated Press, Andrew Selsky said Governor Brown responded to Attorney General Sessions, noting the document he cited to her on Oregon marijuana problems was invalid and had incorrect data and conclusions. She went on to say new laws, including the tracking of all marijuana grown for legal sale, will help cut down on diversion into the black market. She added that she had recently signed legislation making it easier to prosecute the unlawful import and export of marijuana products. A Washington state official similarly said Sessions made claims about the situation in the state of Washington that were “outdated, incorrect, or based on incomplete information.”
Pause for a moment here. There isn’t denial that diversion occurs, just that the data the reports were based on was incorrect, outdated, incomplete. The thinking seems to be that more legalization will lessen the black market problem. Oregon Congressman Earl Blumenauer said: “”The more that we go down the path of legalization, regulation and taxation, diversion becomes less and less of a problem.” But is this just wishful thinking, rhetoric expressed to encourage the ongoing march towards nationwide legalization?
In a different article, Selsky noted the movement in several states, including Oregon, Colorado and California to implement tracking systems for marijuana and marijuana products. “The tracking system is the most important tool a state has,” according to Michael Crabtree. But as the systems rely on user honesty, they aren’t fool-proof. ““We have seen numerous examples of people ‘forgetting’ to tag plants.”
In California, recreational pot sales become legal in January of 2018. The Emerald Triangle area of northern California is the largest cannabis-producing region in the U.S. It is estimated to produce 60% of America’s marijuana. Although growers have been cultivating marijuana in the area since the 1960s during San Francisco’s Summer of Love, the industry really took off when Proposition 215 legalized medical marijuana in 1996.
Senator Mike McGuire, who represents the Emerald Triangle region, thought California’s tracking program would help limit the cannabis black market. But implementing a fully operational legal market in California could take years. “In the first 24 months, we’re going to have a good idea who is in the regulated market and who is in the black market.”
Anthony Taylor is a licensed marijuana processor and lobbyist. But as far back as the 1970s, he was growing cannabis illegally in an area east of Portland. He said it is easier to grow marijuana illegally these days because authorities don’t have the resources to uncover every operation. Growers who risk selling outside the state can earn thousands of dollars per pound, according to Taylor.
The Los Angeles Times reported that Hezekiah Allen, the executive director of the California Grower’s Association, warned that California growers are in for a “painful downsizing curve” when new laws go into effect in January of 2018. “We are producing too much.” He estimated the state cannabis growers produce eight times the amount of marijuana the citizen’s of the state can consume. He expects that some growers will stay in the black market and continue to illegally send marijuana to other states. Some growers may stop growing cannabis, but he expects others simply just won’t apply for state permits.
Lori Ajax, chief of California’s Bureau of Medical Cannabis Regulation said: “For right now, our goal is to get folks into the regulated market, as many as possible.” But, “There are some people who will never come into the regulated market.”
A Denver Grand Jury indicted 62 people and 12 businesses for operating the largest illegal marijuana uncovered in Colorado since Colorado legalized recreational marijuana in 2012. The drug bust, known as Operation Toker Poker, executed almost 150 search warrants at 33 homes and 18 warehouses and storage units in Denver. Seizures included 2,600 illegally cultivated marijuana plants and 4,000 pounds of marijuana. The ring operated from 2012 to 2016 and brought in an estimated $200,000 a month. The operation produced more than 100 pounds of cannabis monthly and shipped it to Kansas, Texas, Nebraska, Ohio, Oklahoma and other states.
The DEA and State Patrols for Kansas and Nebraska participated in the investigation. Barbara Roach, special agent in charge of the DEA’s Denver field office, said since 2014 there has been an influx of organized criminal groups coming to Colorado in order to produce marijuana to sell in other states. “The marijuana black market has increased exponentially since state legalization.” Colorado Attorney General Cynthia Coffman said: “The black market for marijuana has not gone away since recreational marijuana was legalized in our state, and in fact continues to flourish.”
Andrew Freedman, a cannabis regulation consultant, said he is hopeful that state legislation passed in 2017 will make it more difficult for criminal to grow quantities of marijuana for the so-called “gray market,” while using a legal interest in the business as a cover. “
I do think the experiment is under the microscope, . . . Anything negative that happens will be a national story. This was a weakness in our system, and I’m hopeful the legislation shores up that weakness, but it is something the story will be judged on.
So it seems the expectation that ongoing legalization of recreational marijuana will make diversion less of a problem is wishful thinking. It may even be rhetoric to calm the fears of individuals who are unsure about where they stand on the issue. What does seem clear from the information above is that legalizing recreational marijuana in Colorado hasn’t made diversion go away; and officials seem to think it has been “flourishing.” At least one California official expects state regulation will not be followed by all the instate cannabis growers when the new laws go into effect. Even cannabis supporters acknowledge there will be a time lag of perhaps years before the regulatory machinery can get a handle on illegal cannabis growers.