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Is State Legal Marijuana Actually a Violation of Federal Law?

Updated: Jun 16, 2022

Cannabis has been unlawful on the federal level since the 1930’s. It began with the Marihuana Tax Act of 1937, Pub.L. 75–238, 50 Stat. 551, enacted August 2, 1937. This Act, using the tax power of the federal government, taxed and made possession of cannabis unlawful.

The Marihuana Tax Act was found unconstitutional by the Supreme Court in Leary v. United States, 395 U.S. 6 (1969) as the Act required a taxpayer to self-incriminate in order to pay the tax.

In response, Congress created the Controlled Substances Act, 21 U.S.C. §801, et seq. (“CSA”) “Marijuana” is listed as a Schedule I drug, the use, possession, or sale of which is unlawful. See, e.g., 21 U.S.C. §841.

State legalization of cannabis is silent in the CSA, however.

The power to adopt the CSA was challenged in Gonzales v. Raich, 545 U.S. 1 (2005). The Petitioner (Raich) argued that Congress has exceeded its power under the commerce clause enacting the statute. The Ninth Circuit agreed and entered an injunction against the federal government disallowing enforcement of the CSA. Raich v. Ashcroft, 352 F3d 1222 (9th Cir. 2003). The federal government appealed to the Supreme Court. The Court reversed the Ninth Circuit. It stated that Congress can regulate purely intrastate activity that is not itself "commercial," Gonzales v. Raich, 545 U.S. at 18.

The question that was left outstanding, however, is whether Congress intended to displace contrary state law on the subject. The question thus moves from the Commerce Clause to the Supremacy Clause.

The federal government has been consistent that state legal cannabis violates federal law. This is why banks avoid banking cannabis business (the bank do not want to support illegal business). Section 280E of the Tax Code, which disallows all deductions and credits to unlawful drug traffickers is regularly applied by the IRS against state-legal cannabis business. As a result, as stated by Judge Carlos F. Lucero of the Tenth Circuit, the federal government and the states are engaged in a “huge federalism dispute.”

As a result, a new front in the battle against the federal government overriding state authority legalize and regulate cannabis. There has been only one circuit thus far to opine on the issue of supremacy and preemption on state legal cannabis. It is the Tenth Circuit in Standing Akimbo v. United States, 955 F.3d 1146 (10th Cir. 2020). The decision went against Standing Akimbo and is currently being petitioned for certiorari with the Supreme Court. The following as a background of the ruling and the argument being presented to the Supreme Court in the Petition.

All conceded that the Petitioners were in compliance state law. Thus, the sole question (related to preemption) is whether Colorado legal and regulated sales of cannabis violates federal drug laws. This is only true if the state law falls to the federal law under the Supremacy Clause. The Tenth Circuit so held.

The Tenth Circuit (I believe incorrectly) held that federal law supersedes Colorado law when it comes to state legal cannabis sales. The Panel stated: “[T]he CSA reigns supreme. See Gonzales v. Raich, 545 U.S. 1, 29 (2005) . . . “[S]tate legalization of marijuana cannot overcome federal law.” Feinberg v. Comm’r, 916 F.3d 1330, 1338 n.3 (10th Cir. 2019)[additional citations omitted]. So, despite legally operating under Colorado law, “the Taxpayers are subject to greater federal tax liability” because of their federally unlawful activities.

The following is the argument filed in the Supreme Court that Colorado law fails to the federal law. Standing Akimbo is arguing that Colorado law is not preempted by the federal law.

A. Supremacy is Analyzed under the Preemption Doctrine.

Preemption is the doctrine arising from the Supremacy Clause which determines whether a particular federal law supersedes a particular state law – whether it “reigns supreme”. Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996). Congress’s ability to preempt state law emanates from the Supremacy Clause of the United States Constitution. English v. Gen. Elec. Co., 496 U.S. 72, 78 (1990).

However, the Supremacy Clause “is not an independent grant of legislative power to Congress”. Instead, it simply provides “a rule of decision”, i.e., which law controls. Murphy v. NCAA, 138 S. Ct. 1461, 1479 (2018). It specifies that federal law is supreme “in case of a conflict with state law”. Id. at 1479 (Emphasis added). However, “[i]f it does not [conflict], state law governs”. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979).

The doctrine is more fully supported by the Tenth Amendment to the Constitution whereby, [t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”.

All forms of preemption operate in the same manner. “Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers rights or imposes restrictions that conflict with the federal law; and therefore, the federal law takes precedence and the state law is preempted”. Murphy, 138 S. Ct. at 1480.

The party that asserts preemption, in this case the IRS, bears a heavy burden to show that preemption was the “clear and manifest purpose of Congress.” See Wyeth v. Levine, 555 U.S. 555, 565-569 (2009). There is no presumption of preemption.

There is, however, a presumption against preemption. Courts must “start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Medtronic, 518 U.S. at 485. Again, this concept is consistent with the Tenth Amendment.

Federal law supersedes state law only if Congress intended such an outcome. Medtronic, 518 U.S. at 485-86 (congressional purpose is “the ultimate touchstone”). Courts must determine Congress's intent “from the language of the pre-emption statute and the 'statutory framework' surrounding it.” Id. at 486 (citation omitted).

Courts are cautioned to “not be guided by a single sentence or member of a sentence, but [to] look to the provisions of the whole law, and to its object and policy.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 51, (1987) (internal quotation marks and citations omitted).

Importantly, “[w]hen the text of a pre-emption clause is susceptible of more than one plausible reading, courts ordinarily ‘accept the reading that disfavors preemption.’” Altria Group, Inc. v. Good, 555 U.S. 70, 77 (2008) (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)).

Under principles of federalism and Tenth Amendment, a federal criminal statute will not prohibit an expressly state-legal act unless “explicitly” directed by Congress. Bond v. United States, 572 U.S. 844, 858 (2014).

Local criminal activity has “traditionally been the responsibility of the States.” Bond v. United States, 572 U.S. 844, 865 (2014). It is assumed that that “Congress normally preserves ‘the constitutional balance between the National Government and the States.’” Bond v. United States, 572 U.S. at 862. Thus, “unless Congress conveys its purpose clearly, it will not be deemed to have significantly changed the federal-state balance”. United States v. Bass, 404 U.S. 336, 349 (1971).

This leads to the well-established principle that “‘it is incumbent upon the federal courts to be certain of Congress’ intent before finding that federal law overrides’” the “usual constitutional balance of federal and state powers.” Bond, at 845.

“In traditionally sensitive areas, such as legislation affecting the federal balance, the requirement of clear statement assures that the legislature has in fact faced, and intended to bring into issue, the critical matters involved in the judicial decision.”

Bass, 404 U.S. at 349.

The federal government claims that the Court in Gonzales v. Raich, 545 U.S. 1 (2005) preempted all state laws regarding cannabis. This is not correct. The holding was simply that Congress has the power under the Commerce Clause to regulate intrastate sales of unregulated marijuana – not that it exercised the power and preempted state law. Preemption was not even discussed. Nor was federal regulation of express legalization by a state which imposes a strong regulatory and oversight system discussed or contemplated. The question presented here will be one of first impression for this Court.

B. Congress Did Not Intend to Prohibit Colorado State-Legal Marijuana.

Section 841 of the CSA purportedly makes the expressly state-legal acts of the Petitioners unlawful. Hence, the Tenth Circuit determined the Petitioners were engaged in “unlawful trafficking”.

However, the preemption statute of the CSA indicates to the contrary: The CSA preemption statute is as follows:

“Application of State Law"

“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.”

21 U.S.C. §903

Section 903 must be construed in accordance with the presumption against preemption. Clearly, reading the statute as a whole, Congress did not intend to occupy the entire field to the exclusion of the States. There is nothing in the statute that explicitly prohibits conduct which has been made expressly legal under state law. See, Hillsborough Cty. v. Automated Med. Labs., Inc., 471 U.S. 707, 718 (1985)(Court follows “presumption that state and local regulation related to matters of health and safety can normally coexist with federal regulations . . .”).

Absent the explicit direction by Congress prohibiting that which is expressly legal under Colorado law, Congress did not override Colorado state legal cannabis distribution laws in favor of the CSA. As a result, Colorado law controls. Aronson, supra. Colorado expressly state-legal and regulated cannabis sales are not “prohibited” under federal law.

Gonzales v. Raich, does not change this result. The Court stated that “failure to regulate the intrastate manufacture and possession of marijuana would leave a gaping hole in the Controlled Substances Act”. 545 U.S. at 22. The Court was referencing unregulated personal-consumption marijuana as it existed at the time in California. Colorado both legalized and extensively regulates sales of state-legal cannabis. See generally, C.R.S. §44-10-101, et seq.; see also, John Hudak, Colorado's Rollout of Legal Marijuana Is Succeeding: A Report on the State's Implementation of Legalization, 65 Case W. Res. L. Rev. 649 (2015). Thirty-seven states and the District of Columbia have followed suit. As Tenth Circuit Judge Carlos Lucero stated this has created a “huge federalism dispute”. Feinberg v. Commissioner, 18-9005, oral argument beginning at 13:30.

Given the above, Colorado expressly legal and regulated sales are not prohibited by federal law.

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