Former Deputy AG James Cole Wants Cannabis Regulated Like Alcohol

It had been almost five years since the Cole Memo was issued by former Deputy Attorney General James Cole, and just over six months since now-Attorney General Jeff Sessions issued his memo repealing it, when Cole took at stage in San Jose last week to deliver his keynote at the National Cannabis Industry Association’s (NCIA) Cannabis Business Summit.

In his opening remarks, NCIA Executive Director Aaron Smith, touted the mass-acceptance of cannabis, saying “The tide has shifted… when we are talking about medical cannabis we are within the margin of error of 100 percent support, we are consistently 90 or so percent support across poll after poll after poll.” When it came to adult use, Smith proclaimed that two-thirds of Americans “now support regulating the entire adult-use market, ending the failed policies of prohibition, and putting cannabis behind the regulated counter.” Smith also stressed the importance of passing the STATES Act, or the “even more sweeping legislation” introduced by Senate Majority Leader Chuck Schumer.

A Sea Change in 2012

Cole began his presentation with a brief history of the Ogden Memo, and his work to craft both the first and second Cole memos, in an effort to “correct” the Ogden Memo. He said under Ogden, operators assumed that “if you were in compliance with state law that’s all you needed and the Federal government wasn’t going to do anything.” Countless raids later, it became clear that was not the case.

Then the 2012 election happened, and cannabis was legalized in Colorado and Washington, leading to “a sea change.” While he said the vote “wasn’t completely surprising,” the Department of Justice had been focusing primarily on President Obama’s re-election, and it took them some time to do the research they needed to properly respond. That response came out as 2013’s Cole Memo, which built on the 2011 Cole Memo, and provided eight key policy points that states and cannabis businesses were to follow. To Cole, “this was a growing industry… and the estimation was that people are going to smoke marijuana,” he said. “We’re not going to stop this.” Rather than try to stop cannabis commerce, the DOJ decided to encourage regulation of the nascent industry. Cole said the choice was simple in deciding to “continue to say ‘Sorry it’s illegal,’” or “take the reality that’s been presented to us and try and figure out how best to improve public safety?

At the time, Cole said the view in the Justice Department was “that the regulations under medical marijuana were not robust.”

“People felt that under many states medical marijuana regimes if you went into a marijuana clinic and you said ‘Doctor every time I breathe in I feel like I have to breathe out,’ you could get a recommendation for marijuana,” he said.

Cole clarified that the goal of his 2013 memo was to encourage more robust regulations and to provide guidance to regulators and operators that if they addressed the eight priorities, the feds would “get out of your way.”

Federal Preemption or Sensible Policy?

Cole said his 2013 memo was a “rational and sensible way… to figure out how to deal with something that has been stigmatized for a long time.” He said an alternative to that sensible policy was to use the Supremacy Clause of the constitution to preempt state law, specifically to “preempt the regulatory scheme, because that would encourage the violation of federal law.” Since it is the Justice Department’s job to protect public safety, Cole said they decided to “help enhance and enforce the regulatory scheme” rather than preempt it, which would have subverted the will of the people and harmed public safety.

Unlike some of the decisions made under the current presidential administration, Cole said the decision to release the 2013 memo was well-thought out and the product of meetings where “the highest levels of our government” discussed the pros and cons, until it was thoroughly “hashed out.” While the Cole Memo had widespread support he said, “the DEA was categorically, ‘We don’t like it, [marijuana is] drugs, its Schedule I, it’s illegal and we want to prosecute.’” The Cole Memo was just the start.

“As soon as the Cole Memo was passed, I was asked ‘What is next?’” he said. “The first thing out of my mouth was banking. Now that we dealt with the regulatory phase of it, what are you going to do about all the money that is being generated?” Cole said the answer was clear, that it needed to go into banks so that this was not a cash-only business, which would make it harder to audit and a bigger target for armed robbery.

That is what led to the Treasury Department’s 2014 FinCEN Guidance, which, in absence of Congressional policy, is a major reason that there has been any success on banking for cannabis businesses. Cole said unfortunately, due to “issues with retail banking,” the guidance never really caught on and many cannabis businesses still do not have access to a bank.

“It’s one thing to issue a policy; it’s another thing to implement it,” he said.

A Quagmire in Congress

When asked about Sessions’s repeal of the Cole Memo, Cole said, “it was only a matter of time,” adding that, despite the repeal, he hasn’t seen any increase in prosecutions. The difference he said he has noticed is “much less certainty in the industry.”

“[Before the repeal there was] some level of certainty that the department had a single policy that really directed how it would approach marijuana and the marijuana businesses around the country,” he said, noting what businesses are left with now is, “93 U.S. attorneys who are all given their own individual discretion about what to do with a marijuana case.”

Even though those attorneys no longer have their hands tied by the memo, Cole said he doesn’t “expect many of those attorneys to do much due to the political reality that most voters support legalization.” He said his concern is that an attorney in a state that does not have legal cannabis will “find a hook to go after another state with legal marijuana.” Or instead of going after a state, an attorney could target “a business that is legal under the state law under which it is operating, and goes and prosecutes that business under federal law.” Cole said he views that sort of action as “really destabilizing to a very, very large industry,” and was clear that “may be the kind of thing that would get Congress to do something.”

But what would that something look like? What would be a suitable replacement for the Cole Memo? Instead of another memo, Cole said he “would rather see Congress actually take the bull by the horns…sit down, look at what the issues are in the problem, craft a piece of legislation that deals with those issues and move on.”

Both Cole and Smith are enthusiastic supporters of the STATES Act, with Cole saying, “I think the STATES Act gets you most of the way there because it allows the banking to take place and commerce to take place.” He did also touch on a couple key issues which the STATES Act would not address, namely the need for more medical research and the need to do something about the situation veterans face at the VA.

Unfortunately, it may be easier said than done to get something passed by Congress. According to Cole, “you have various committee chairs that are critical of this issue, who just don’t like the marijuana issue at all and they just don’t want to deal with it.” He specifically called out the chairs of the House Judiciary Committee and the House Financial Services Committee, Representative Jeb Hensarling and Representative Bob Goodlatte, as two anti-cannabis chairs who are retiring this year. He said those retirements are good news to the cannabis industry because, “regardless of whether the Congress shifts in the 2018 midterms there will be new chairs to both of those committees,” which will potentially allow for bills to move forward. Cole said he viewed the Rohrabacher-Blumenauer budget rider as another manifestation of this inability to pass legislation, “because they couldn’t implement some sort of change in our policy they tried to control what would normally be executive branch prerogatives.”

How We Do Medicine in the United States of America

Aside from veteran’s access to medical cannabis, the one other issue that Cole felt the STATES Act did not adequately address was the need for increased access to cannabis for medical research.

“Even if you make it legal for medical use in states it is still a Schedule I drug under the Controlled Substances Act,” said Cole noting as a result, “the ability to test it and do clinical trials on it is very difficult and very onerous and there have only been very few who have actually gone through the expense and the hassle to get there.”

In the absence of clinical research, we are left with anecdotal observations.

“Anecdotally is not good enough,” Cole said. “That’s not how we do medicine in the United States of America.”

In his keynote, Cole was also critical of some of the claims that have been made about cannabis.

“How we do medicine in the United States of America is we have a federal agency that says you have to test it, you have to make sure it is safe, and you have to make sure it actually does something, that it’s not just snake oil, and that people are going to get better from it and not get worse from it, and there needs to be science behind it,” he said.

Cole said he didn’t think that cannabis should just be regulated by the FDA as a drug, but advocated “picking apart its components” and regulating it “based on the type of use,” such as industrial uses, medicinal uses, or recreational uses. Without naming it, Cole mentioned Epidiolex, saying “The latest drug that has been approved by the FDA for juvenile epilepsy is a cannabinoid-based product that is not psychoactive.”

For Cole, it all came down to an issue of psychoactivity.

“You can have medicinal marijuana, that is truly medicinal, that is not psychoactive under the DEA regime just put it there like we put any medical drug and pharmaceutical that would come up through our system,” he said. “You can have the intoxicant aspect of it regulated like we’re regulating alcohol, another intoxicant, where we make sure that there are restrictions…[on] the use of an intoxicant.”

Does Cannabis Need to be Descheduled?

Despite advocating for “the intoxicant aspect” of cannabis to be regulated like alcohol, a substance that is not scheduled under the Controlled Substances Act (CSA), when asked about descheduling Cole was dodgy, and kept deferring to rescheduling. While the issue of rescheduling vs. descheduling is perhaps one of the most important cannabis issues, Cole and Smith did not heavily address the topic in their chat, and it wasn’t until the closed-session press Q&A where Cole opined on the matter.

When asked first asked about descheduling, and what it would mean for interstate commerce, he replied, “I don’t think just rescheduling alone will deal with the commerce aspect because it won’t impact the recreational marijuana business.”

“If you become a Schedule II drug … it can be prescribed, the revenue and the proceeds that come from the legitimate prescriptions of those drugs is no longer the proceeds of a criminal activity, but the recreational is still there and those would still be proceeds,” he said.

Cole had a fix for the definitional problem around the word “proceeds,” and his fix was the STATES Act, saying it “has a provision in it that says if… its marijuana, and you are complying with state law, it doesn’t violate the CSA anymore and it’s not proceeds under the money laundering statutes.”

After dodging the first question about descheduling, a second question was asked, in a successful attempt to get Cole to go on record about the issue.

“I don’t think you need to necessarily deschedule,” Cole said. “Lots of different pharmaceuticals are scheduled somewhere along the schedule hierarchy and I don’t have a problem with that, I think it is a good thing to make sure that the pharmaceuticals that are put out are safe and effective.” While his response was clear he advocates for pharmaceutical cannabis, he refrained from settling on a schedule, saying it should be rescheduled to “at least Schedule II.”

When asked Cole about his views on medicinal versus intoxicant cannabis and about the comparatively lax regulation around intoxicating pharmaceutical drugs, his reply betrayed a lack of understanding over how intoxication works.

“You have opioids that are certainly psychoactive,” said Cole. “When you deal with opioids and you take them without a prescription and take them beyond what you’re supposed to be taking, all of a sudden it becomes an intoxicant.”

Advice to the Industry

Cole offered some advice to the cannabis industry to help their lobbying efforts.

“I think as you try to change policy it’s not one message, it’s a message that’s going to be geared to the ears of the person who you are talking to at that point,” Cole said.

He went on to discuss the various stakeholder groups and what sort of arguments might resonate with them, the libertarians who care about personal freedom and state’s rights, the medical advocates “looking for a reason and a policy change to allow there to be the development of medicine,” those interested in the potential revenue, and the issue of 10th Amendment police powers. Cole was clear that none of these arguments are in conflict with the others, it isn’t about state’s rights versus prison reform, and it can be both.

Prisoner Re-Entry & Cannabis Equity

Smith ended the conversation by asking Cole about prisoner re-entry and efforts to address the racial imbalance in the ownership of cannabis businesses, which are predominantly owned by white people, while to this day, people of color continue to be arrested at higher rates than whites despite similar rates of cannabis use. Cole clearly articulated the problem.

“There is an overuse of the criminal justice system putting many, many people, way disproportionately people of color in prison for the use of marijuana and many times for non-violent use,” he said.

How big is the problem?

“So much of who we put in prison as a federal government is based on drugs,” said Cole, “over half the prison population.”

He also described his frustration over America lurching back and forth between progressive phases, “where we do things that I think are enlightened,” and recessive phases, where “we pull back.”

While he was working for the Justice Department, they had a program to incentivize employers to higher former prisoners, where they would provide a bond to employers to cover the perceived risk of hiring prisoners, according to Cole, “we never had to pay on those bonds.” Those sorts of programs are crucial for dealing with America’s “huge recidivism rate,” which was no surprise for Cole because he said “people come out of prison and nobody is going to hire them.”

“A lot of those programs were dismantled,” he said adding he’s Cole is hopeful, “it’s going to come back because it makes sense.” Cole took a holistic approach that worked to address the root causes that resulting in people ending up in prison, and said he hopes “as people start coming out of the prison system that we let them have a job.”

TELL US, what changes are you hopeful for in terms of the cannabis industry?