Thursday, September 19, 2013

Parsing the Cole Memo

Parsing the Cole Memo


  The August 28 memo of Asst. A-G Cole stating the conditions under which the DoJ will refrain from taking action against state marijuana laws provides the criteria which any new statute must meet, both in insulating new marijuana laws, but in structuring those laws to protect their citizens from federal prosecution.  Since several states are now discussing following the lead of Colorado and Washington in legalizing marijuana on the state level, understanding that memo is essential for their actions.  This memo will briefly discuss the implementation of those eight criteria.[1]

  The criteria, restated in brief are:

1.    Prevention of access by minors;

2.    Prevention of DUI;

3.    Prevention of participation by organized criminal gangs and cartels;

4.    Prevention of trafficking of marijuana to other states;

5.    Prevention of the use of violence and firearms in marijuana transactions;

6.    No allowance of other controlled substances;

7.    No possession on federal property;

8.    No growth or preparation on federal property.

These criteria create most, but not all, of the constraints imposed on drafting a new law.  This memo discusses how to comply with them.  However, drafters must change a mindset acquired through decades of working under a Prohibition scheme.  Until now, marijuana has been assumed to be contraband, legislation permitting its otherwise forbidden possession must be tightly drawn, and that all those engaged in its commerce are criminals (actual or potential) and must be under constant supervision.  Under the new guidelines, legislators can be more relaxed.  They may assume that those engaged with marijuana are lawful business people who conduct themselves accordingly and legislation should be drawn to regulate normal commerce, setting the borders for that behavior, not strict containment more proper for controlling nascent criminals.

Access by minors: Access by minors should be approached on both the demand and supply sides.  A minimum age for purchase (I prefer 18 instead of 21, see my earlier “Marijuana and the Young”) combined with requirement of an ID for purchase should be enough control on demand.

  Several techniques are possible on the supply side.  The simplest would be to copy the cigarette market and ban vending machines and self-service retail displays.  Methods of licensing up-chain suppliers and inventory controls are possible.  A portion of tax revenue could be devoted to science-based drug education.  Criminal penalties for sales to minors could be imposed.  The real problem here is selecting from a broad menu.

   A major consideration should be that no minor should be involved in the criminal justice system for possession or use of marijuana.  DUI and commercial quantity sales by those over 16 would probably be exceptions to this principle.

DUI: The current DUI statute will probably pass muster.  I, personally, would like to require the state to research and develop scientifically verified measurements for impaired driving performance, both biochemical and behavioral (and I don’t mean just randomly set blood, urine, or breath levels of metabolites).  Behavioral methods should be based on experimentally derived protocols, administered through scored checklists and recorded on video.  Dash cams are almost universal in patrol cars now.  I would devote a portion of any marijuana tax and license revenue to the project and stipulate that the new tests replace current ones in no more than five years.

Criminal gangs and Cartels This criterion is the most puzzling one.  If the federal standards – CSA, RICO, CCE – are used, the Gulf Cartel and Harborside dispensaries with thousands of patients and millions in revenue are indistinguishable.  A common sense definition would suggest three distinguishing characteristics: the criminal organization regularly engages in crimes other than drug transactions; they deal in drugs other than marijuana; and they often resort to violence.  With that assumption, the best way to satisfy this condition is to use a moderate licensing scheme from seed to sale.

  Licensing should include both the people engaged in the enterprise and the premises on which marijuana is grown or propagated.  Licensing should be relatively simple and inexpensive.  Onerous licensing will encourage avoidance and illegal enterprises.  Enterprise and employee licensing should require a criminal background check and proof of state residency.  It should include all owners and investors as well as operators.  An argument can be made that low-level employees need not meet those licensing requirements.  Any site on which marijuana is grown or propagated should be licensed in the name of a licensed operator, and that license should include the location and size of the property, proof of the operator’s ownership or lease, and permission for the state to enter and inspect.

  Inventory control, accounting, and reporting from seed to retail sale should be required.

  Hemp licensing should be less stringent.  The license should be limited to a specific location, be accompanied by a purchase agreement to buy all seeds from a producer whose seeds have been certified to be below a specified THC level by a recognized independent tester, and grant permission for the state to enter and collect sample for testing during the growing season.  Each year at harvest, the license holder should have to submit a THC test of the harvested crop.

Interstate Trafficking:  This may be the easiest standard to comply with.  The licensing and inventory controls outlined above together with a provision criminalizing out of state sales should be enough.  A quantity limit on individual retail sales (maybe 4 ounces) would also help with this issue.

Violence and firearms:  The act of legalization itself will accomplish this goal (remember the Capone to Budweiser transition?).  Perhaps an additional penalty on the use of firearms in any crime involving the commerce in marijuana could be added, but that would mainly be symbolic since armed robbery is already a serious felony.

Note that all three of the above criteria could be met more easily if, as A-G Holder has suggested, federal banking regulation is modified to allow routine banking by licit marijuana businesses.  A requirement that all commercial marijuana transaction be bank moderated or by electronic transfers would both eliminate the targets for robbery and provide audit trails to insure compliance.

Other controlled substances:  This standard primarily calls for inaction.  All indications, including results in The Netherlands and Portugal, are that separating the markets for marijuana and hard drugs weakens the sale of hard drugs.  The need is to be sure that new legislation does not, directly or by implication, relax laws controlling other drugs.

Possession on federal property: This is the most confusing of the Cole criteria for two reasons and the one over which the states have little control.  It is confusing because of the wide range in types of federal property and because the evidence shows that no real problem exists. 

Property ranges from the vast tracts managed by the Bureau of Land Management and the forest service, to National Parks – from Yosemite and Yellowstone to single buildings in urban centers, to military reservations, to post offices and courthouses.  Is Cole talking about thousands gathering for Burning Man or a postage stamp buyer who incidentally has an eighth-ounce in his pocket?

Data show that, since 2009, the Park Service has issued slightly over 27,000 citations for possession spread over the millions of park visitors.  This number is so small as to suggest no problem exists.

Be that as it may, state laws can have little or no effect on the issue.  It will remain a federal problem.

Production on federal property:  The problem of destructive outlaw growers on federal land will be solved simply by the act of state legalization.  Outlaw growers in remote locations cannot compete with overt legal growers because of their inherent inefficiencies and structurally higher costs.  Competition will quickly drive them out of business.  Further, a thoroughly, but lightly, regulated legal structure, as outlined above, will prevent their illegal production from having access to market.

Other Considerations

  In addition to the Cole criteria, some general considerations arise.

Taxation: Should any taxes beyond the general sales tax be imposed on marijuana, and if so, at what levels of the production-distribution-sales chain?  Should local governments be allowed to impose their own taxes?  Should any proceeds of taxes or licensing fees be dedicated to the costs of administering this law, to education about marijuana, to treatment or rehabilitation of problem users, or to any other special users?  What about medical users (see below)?

  Tax rates (which should be set on percentage bases, not flat dollar amounts) must be low enough to prevent black markets from being created by those wanting to profit through tax evasion.  Tax considerations must be based on the realization that marijuana as a legal commodity will sell for prices significantly lower than as contraband.  A conservative estimate is that it will sell for less than 10% of the current price.

Medical Users: Will people using marijuana need any special regulations under a scheme of general legality?  One possibility is that sales to one bearing a signed recommendation from a licensed health professional (or an ID based on such recommendation) be exempt from sales tax, just like other medications are.

Extracts and Derivatives: Do derivatives like hashish, resin, oils, elixirs, e-cigarette capsules, etc. require special considerations or limitations? Labelling?

Edibles: Do food products containing marijuana or derivatives come under normal food processing and marketing regulation?  Do they need additional regulation?

Hemp: Does the production of large-scale hemp, which is not psychoactive, need a different, probably less restrictive, regulatory scheme?


  The Cole memorandum actually sets out an outline for a practical, enforceable marijuana statute. This memo sets out methods to determine how to make a proposed marijuana statute conform to the Cole memo and, hopefully, induce federal abstention if it is enacted.  Now the states must start to structure the laws themselves.


[1] This essay is based on a memorandum I prepared for an informal group drafting a proposed bill to be presented to the Texas legislature in the 2015 regular session.

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