Lead-Up To Legalization

With California’s newly legalized  recreational marijuana industry set to begin January 1 and projected to generate $7 billion annually by 2020, devising a banking system for all that money is a priority.  The problem is that banks, which are regulated by the federal government, won’t touch it for fear of being prosecuted criminally.

Last month, James Rufus Koren of the Los Angeles Times reported on ideas from California Treasurer John Chiang’s task force formed to study the issue.  These included a state-owned bank to handle the money, creation of “a multistate group to lobby Congress to ease federal regulations on cannabis,” and state-hired “armored car services to pick up tax payments from businesses.”

Earlier this week, Patrick McGreevy – also of the Los Angeles Times – reports that another potential solution to the federal/state law dilemma, this time out of the governor’s office, is a private collaboration of banks and credit unions working with a central “correspondent bank.” The plan is to meet federal banking regulators’ concerns in a way that protects the financial institutions from punishment.  Whether they feel comfortable enough to sign on remains to be seen.

And as my colleague, Professor Mike Vitiello, pointed out in an earlier blog post, even though marijuana will be legal in California, “use or possession of the drug in any form and in any amount remains illegal under federal law, regardless of state law.”  This reality shadows all efforts to identify “safe” banking practices that meet the needs of the producers and retailers, while also assuaging the concerns of the financial institutions considering diving into this newly legalized industry in California.

By: Mike Vitiello

In my previous post, I mentioned that many areas of marijuana law are complex and that I would discuss legal ethical issues that marijuana attorneys face. It is critical to remember that every use of marijuana violates federal law, even in states like California, where the state allows medical or recreational use. That can create problems for attorneys who work with their clients who are in the marijuana business.

While ethical rules governing attorneys vary from state to state, as a general matter, attorneys cannot engage in illegal activity. Ethical rules also prohibit attorneys from advising clients how to violate the law. This presents a dilemma for attorneys representing marijuana clients in states where marijuana is legal.

Previously, bar associations in some states indicated that an attorney advising a client on setting up a marijuana business would violate ethical rules because the business would violate federal law. More recently, however, the trend is away from that position. During the recently completed legislative session, the Legislature adopted AB 1159 that addresses some of the important questions in this area.

California is now like other states where attorneys can work with clients in the marijuana business as long as they advise them that the conduct violates federal law.

Another area that was addressed by AB 1159 was: what if an attorney uses medical or even recreational marijuana? Does that reflect badly on his or her moral character? Not anymore. The new law provides that use of marijuana is not evidence of a lack of good moral character. However, being under the influence of marijuana at work or in court might still be an ethical violation.

The area of the law that pertains to statements made by an attorney to the client or by the client to the attorney remains unclear, even after the passage of AB 1159, but you will have to listen to my podcast to hear how that area of the law is still unclear.




Under Prop 64, city and county governments will be able to ban almost all cannabis activity except for personal cultivation of up to six plants in an enclosed structure and consumption, both by an adult at least 21 years old. Otherwise,  local governments in California are free to restrict cannabis businesses from operating within its jurisdiction, levy restrictions it determines to be appropriate on what cannabis businesses it does allow, and prohibit outdoor personal cannabis cultivation. For example, a county may allow dispensaries, but prohibit on-site consumption, so that customers may not ingest the cannabis at the dispensary. Should a city or county opt to ban all cannabis businesses it will, however, forego the tax revenue from Prop 64.

In anticipation of cannabis sales going live in January 2018, most counties and other local governments in California have established ordinances determining how much cannabis activity will be allowed within their jurisdictions. For example, Placer County allows indoor and outdoor cultivation of up to six plants, but with some specific requirements. All outdoor cultivation must have fencing to make it not visible to the public or neighbors, and must be set back at least 100 feet from all property lines. Further, Placer County prohibits all commercial sale, manufacturing, delivery, and dispensaries of cannabis, allowing only delivery of medicinal products by a “primary caregiver” to a “qualified patient.” Similarly, Sacramento County does not allow cannabis businesses, including dispensaries, in its unincorporated areas. As another example, the City of Folsom prohibits all outdoor cultivation of cannabis plants. If a city within a county adopts a cannabis ordinance that embodies more restrictive policies than the county requires, the city’s more restrictive laws control within its boundaries.

It probably comes as no great surprise then that conflicts can arise between different cities and counties, since they are given such great leeway within the state to customize their cannabis restrictions. One issue that arises is the legality of cannabis delivery services that necessitate travel through a city or county that bans cannabis delivery, to get to and from areas that do not prohibit such activity. Local governments are able to regulate delivery services as part of their normal business restrictions of cannabis activities under Proposition 64. It has not yet been officially resolved whether local governments can entirely prohibit the presence of cannabis delivery vehicles within their jurisdictions, even if those vehicles are not delivering or picking up cannabis within the city or county at issue. Delivery services already exist for medical cannabis, and these businesses are ready to deliver recreational cannabis as well beginning in January 2018. Other issues are bound to arise as local governments build regulatory schemes.

Kendall Fisher is Editor in Chief of the University of the Pacific Law Review and law student student at McGeorge School of Law in Sacramento.




When California voters passed Prop 64 in the November 2016 election, they legalized the use and possession of recreational cannabis. This may sound simple, but the decriminalization and legalization of a previously illicit substance requires an intensive regulatory scheme. Prop 64 authorizes three main state agencies to promulgate cannabis regulations: The Bureau of Cannabis Control is in charge of licensing cannabis retailers, distributors, and microbusinesses; CalCannabis licenses and regulates cannabis cultivation; and the Manufactured Cannabis Safety Branch licenses and regulates the manufacturing and testing of cannabis.

The Bureau of Cannabis Control (the “Bureau”) is established within the California Department of Consumer Affairs. The Bureau is dedicated to regulating the cannabis industry, both recreational and medical, and is charged with overseeing other state departments that are given specific licensing duties in certain areas of the industry. The Bureau’s activities, as well as the activities of those departments under its supervision, are supported by the Marijuana Control Fund. In turn, the Marijuana Control Fund is supported by taxes levied on marijuana products and cultivation, as well as civil penalties for violations of marijuana regulations. These taxes go into the California Marijuana Tax Fund, which is kept separate from the state’s General Fund.

CalCannabis is set up within the California Department of Food and Agriculture. CalCannabis is the agency that regulates cannabis cultivators and importantly establishes a track-and-trace system for cannabis. It is in charge of giving licenses to cannabis growers. The track-and-trace system is essential to keeping California in line with the Cole and Ogden memos providing states some leeway with recreational cannabis, within federal guidelines outlined in the memos, as discussed in a previous post. CalCannabis will focus much of its regulatory power on ensuring that California-grown cannabis stays within the state and is not sold to underage individuals.

Finally, the Manufactured Cannabis Safety Branch (the “Branch”) is housed within the California Department of Public Health, and is charged with regulating and licensing manufacturers of cannabis products, like edibles and other THC-infused products. The Branch also regulates the transport, distribution, and storage of medical cannabis in California.

Since Prop 64’s passage in November 2016, these agencies have been working to establish a regulatory scheme comprehensive enough to meet a January 2018 “launch” date, when recreational cannabis sales are scheduled to go “live.” Even with these three agencies working hard to develop regulations in time, some issues remain unresolved – particularly the banking issue, to be covered in a later post. But for now, the Bureau of Cannabis Control, CalCannabis, and the Manufactured Cannabis Safety Branch are rapidly developing regulations to get the new recreational cannabis industry running for the new year.

Kendall Fisher is Editor in Chief of the University of the Pacific Law Review and law student student at McGeorge School of Law in Sacramento.

By: Mike Vitiello

Intro to Marijuana Law

Marijuana law is one of the fastest-growing areas of the law in most states throughout the country. California is no exception, particularly since the state’s voters passed Proposition 64 in the November 2016 election, legalizing recreational use of marijuana for adult users. Since then, the state has established new agencies, which in turn have promulgated many new rules to regulate recreational use of marijuana when sales go “live” in January 2018.

With this recent legitimization of marijuana use, the field of “marijuana law” has developed significantly since its previous days as essentially a niche of criminal defense. In states like Colorado, Washington, and now California that have legalized recreational marijuana, individuals in the marijuana business need legal advice on many aspects of the trade – from contract negotiation to licensing applications and insurance issues. Not only is the area developing for private marijuana law practice, but several of these state agencies are hiring as well, including the Bureau of Cannabis Control, the Department of Health, and CalCannabis Cultivation Licensing.

The emerging field of marijuana law is not without a few wrinkles, however. Most notable is the fact that marijuana remains a Schedule I drug under the Controlled Substances Act, meaning that use or possession of the drug in any form and in any amount remains illegal under federal law, regardless of state law. The Obama administration’s tolerance of state legalization can easily be reversed by the Trump administration. Given this balance, lawyers in the field of marijuana law can face professional responsibility issues as to how they advise their clients – a basic tenet of attorney ethics is never to advise one’s client to engage in a violation of the law.

Despite the uncertainty with the new administration’s approach to marijuana, the field prevents many opportunities for lawyers as the new legalization regime develops and becomes more established.




The Controlled Substances Act (CSA), signed into law by President Richard Nixon in 1970, is the main federal statute regulating possession and use of certain substances, such as heroin, LSD, and cocaine. The CSA has five “schedules” that rank these substances based on three main attributes: the drug’s potential for abuse, existence of a current medical use, and its potential for safe use under medical supervision. The Food and Drug Administration (“FDA”) and the Drug Enforcement Administration (DEA) make these determinations.

Schedule I is for substances that the FDA and DEA have determined to have a high potential for abuse, no currently accepted medical use, and a lack of safety for use under medical supervision. Schedule I drugs are the most tightly regulated of all five schedules. Any use, even simple possession, of any amount of a Schedule I substance is illegal and punishable under federal law. Cannabis is currently classified as a Schedule I drug in the CSA, along with heroin, peyote, and MDMA. Any possession or use of the substance, even if legal under state law, is illegal under federal law and punishable under the CSA.

There is substantial public support for marijuana’s medical use, indicated by 29 states in the country legalizing some form of medical or recreational marijuana. The CSA has not caught up to public sentiment, largely in part to the different processes between a state ballot initiative and rescheduling of a substance in the CSA. At the state level, citizens can generally make any change to the law by drafting an initiative, qualifying it the ballot, and passing it by the required vote at an election. By contrast, the CSA entails a more stringent process. Generally, in order for the DEA ad FDA to find a substance to just have medical treatment value – let alone make determinations regarding potential for abuse or potential for safe use under medical supervision – it must meet five conditions:

  1. The drug’s chemistry must be known and reproducible;
  2. There must be adequate safety studies;
  3. There must be adequate and well-controlled studies proving efficacy;
  4. The drug must be accepted by qualified experts; and
  5. The scientific evidence must be widely available.”[1]

One of the most prominent difficulties for cannabis in meeting these five conditions is that it is very difficult, if not impossible, to have two different samples of cannabis leaves with the exact same chemical makeup. This is due to the fact that it is harvested off of a natural plant. Further, different varieties of cannabis plants have different chemical makeups, creating even more variations. Therefore, under the CSA’s current structure and requirements, it is unlikely that cannabis can be rescheduled as a drug with potential medical value.

In response to this difficulty, members of Congress have introduced bills that would reschedule cannabis within the CSA. The most recent attempt at legislative rescheduling is House Resolution 2020, which would place cannabis in Schedule III (which lists drugs that have lower potential for abuse, currently accepted medical use, and low/moderate risk of dependence if abused). Possession and use of Schedule III drugs without a prescription is illegal, so rescheduling cannabis to this category would greatly restrict, if not outlaw entirely, its recreational use. H.R. 2020 was introduced by Rep. Matt Gaetz, a Florida Republican, in April 2017. Given the public sentiment overall in support of medical marijuana and a new wave of support in Congress, a legislative rescheduling may be possible, however it remains unlikely that cannabis will be rescheduled by the DEA and FDA.

[1] Jonathan P. Caulkins et al., Marijuana Legalization: What Everyone Needs to Know 84 (2d ed. 2016).

Kendall Fisher is Editor in Chief of the University of the Pacific Law Review and law student student at McGeorge School of Law in Sacramento.




This Lead Up to Legalization blog series will cover California’s foray into legalized recreational marijuana. We will cover issues leading up to our state’s January 2018 implementation, including the structure of Proposition 64, marijuana’s classification under the Controlled Substances Act, and many other issues that arise during the state’s transition.

At the time of this post, eight states have legalized marijuana for recreational adult use, and 29 states have some form of legalized medical marijuana. At the same time, cannabis remains a Schedule I drug under the federal Controlled Substances Act, meaning that any use or possession of the drug is illegal under federal law. How then can states legalize any form of marijuana, whether recreational or medical, without facing sanctions from the federal government?

The answer largely lies with two memos written by attorneys at the United States Department of Justice during the Obama administration. The memos provided states with the basic guidelines for legalizing marijuana. Essentially, if the states met the suggested elements in the memos, federal prosecutors were encouraged to direct their attention elsewhere. The first memo, written by Deputy Attorney General David Ogden in 2009, provided guidelines for states that had legalized marijuana for medical purposes. Ogden notes that the Justice Department’s main priorities focus on “the disruption of illegal drug manufacturing and trafficking networks,” but clarifies, “As a general matter, pursuit of these priorities should not focus federal resources…on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” Ogden provides several factors that would raise a red flag for federal prosecutors and invite prosecution, including: sales to minors, violence, and unlawful use of firearms associated with medical marijuana sales.

In 2013, Deputy Attorney General James Cole published a similar memo, this time regarding both medical and recreational marijuana. Like Ogden’s memo, the “Cole memo,” as it is commonly referenced, lists eight issues that states should account for in their marijuana regulations, or else risk triggering federal prosecution. These include, among others: preventing the distribution of marijuana to minors, diversion of marijuana to states that have not legalized the substance, and use or possession of marijuana on federal property. Cole sets up a similar federal-state balance as Ogden did, writing that states with strong marijuana regulatory systems that prevent the issues listed out in his memo are “less likely to threaten the federal priorities,” and therefore less likely to trigger federal prosecution.

Neither the Cole nor the Ogden memos constitute a guarantee or absolute shield against federal enforcement of the Controlled Substances Act. The memos themselves even contain such disclaimers.For example, the last sentence of the Cole memo reads, “Finally, nothing herein precludes investigation or prosecution, even in the absence of any one of the factors listed above, in particular circumstances where investigation and prosecution otherwise serves an important federal interest.” Even so, federal resources are currently unlikely to be used to prosecute individuals for personal marijuana use in legalized states.

Thus far into the current administration, the Justice Department has abided by these memos and allowed states to set up marijuana regulatory structures in compliance with the Cole and Ogden memos. However, the memos do not technically have the force of law. A new memo from the Trump administration’s Justice Department could reinstate federal prosecution without regard to the Cole and Ogden memos.

President Trump has made conflicting statements on his stance regarding state-legal marijuana. Thus, the future remains uncertain for these states.

The next post in this series will go over the federal Controlled Substances Act and how cannabis fits into that regime.

Kendall Fisher is Editor in Chief of the University of the Pacific Law Review and law student student at McGeorge School of Law in Sacramento.