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Federal Action against Medicinal Cannabis Businesses Continues

Just over one year ago, on October 7, 2011, 4 US attorneys in California held a news conference to warn medicinal cannabis dispensaries to shut down their operations or be served with criminal charges.1 The months following this announcement have been characterized by medicinal cannabis advocates as an all-out assault of federal powers extending into California, Colorado, Washington, and other states where medicinal cannabis (Cannabis spp., Cannabaceae) has been legalized — shocking and angering many who interpreted a 2008 campaign statement by President Barack Obama as a promise that he would leave this industry alone.

Several states’ US Attorneys, who are part of the Department of Justice (DOJ), have been taking action by sending letters to landlords who own property where dispensaries are located, warning of asset forfeiture proceedings if tenants are not evicted.2 They are also posting forfeiture notices onsite at some businesses. The DOJ defines asset forfeiture as an “initiative that removes the tools of crime from criminal organizations, deprives wrongdoers of the proceeds of crimes, recovers property that may be used to compensate victims, and deters crime.”3 Forfeiture statutes enable the federal government to seize property if it can prove that the property was used for criminal purposes or is the result of criminal activities. Some businesses in Colorado, meanwhile, are being ordered to shut down based on Title 21, Section 860 of the Controlled Substances Act, which states that controlled substance manufacturers and distributors cannot be located within a 1,000 feet of a school or college.4

Many businesses that received warning letters during the last year, including dispensaries and medicinal cannabis cultivation operations, have shut down and more have closed voluntarily out of fear — to the tune of about 400 businesses in California, a reported 57 in Colorado,4 and dozens more in other states with legalized medicinal cannabis.2 In July of 2012, one of the country’s largest and best known dispensaries — Harborside Health Clinic in Oakland and San Jose, California — received a forfeiture letter. It is currently appealing the order in federal court, though every similar appeal thus far has been rejected.5 The City of Oakland also has filed a lawsuit against the federal government on Harborside’s behalf.6 As of press time, Harborside was still open but trying to fight eviction by its landlords, who want the business to leave the property, as well as claims from the Internal Revenue Service that it must stop deducting wages and other expenses from its income taxes according to section 280e of the federal tax code that “prohibits companies from deducting most expenses if they are ‘trafficking in controlled substances.’”7

“State-based medical cannabis business[es] have been severely traumatized by the Obama Administration’s actions,” said Kris Hermes, media specialist of the nonprofit Americans for Safe Access. “Some have gone underground. Most won’t conduct interviews or make public comments for fear of reprisal. Some are also now reluctant to register with city or state governments. Many dispensary operators who have been shut down as a result of federal threats have reopened as delivery services with no fixed address or easy way for the authorities to identify them” (email, August 27 and September 3, 2012).

One of the major impacts of this federal crackdown are the jobs lost as dispensaries close, said Amanda Reiman, PhD, California policy manager of the Drug Policy Alliance. “Berkeley Patients Group, one of the oldest and most respected facilities in [California] was forced to close in May and lay off over 60 people,” said Dr. Reiman, “and if Harborside has to close, they will be laying off over 100 people” (email, September 19, 2012).

Are the federal government’s actions legal? No, according to attorney Robert Corry of Denver-based Corry & Associates, which represents many medicinal cannabis businesses.

“The Federal Government’s actions are unconstitutional under the US Constitution Commerce Clause and the Tenth Amendment, which provides for a limited federal government of limited powers, and provides that the People retain the power within the several states,” said Corry (email, September 3, 2012). 

Others say that the federal government is acting within the law. Richard Meyer, special agent and public information officer for the US Drug Enforcement Administration’s (DEA) San Francisco office, said in 2004:

“According to the United States Constitution there is a supremacy clause, which says that in case of conflict, federal law precedes state law.”8

And Seattle attorney Deborah Jacobs wrote in Forbes on September 12, 2012, “Marijuana is a controlled substance under the Federal Controlled Substances Act. Growing, distributing and possessing marijuana in any capacity, other than as part of a federally authorized research program, is a violation of federal law… All of the [state] legislation is preempted by federal legislation, making the activities a federal crime.”9

The Obama Promise

The federal action has caused a mix of shock, disappointment, and feelings of betrayal toward the administration of President Obama, who famously said during his 2008 campaign about the state-based medicinal cannabis industry:

“What I’m not going to be doing is using Justice Department resources to try to circumvent state laws on this issue simply because I want folks to be investigating violent crimes and potential terrorism. We’ve got a lot of things for our law enforcement officers to deal with.”10

Obama also told the media that doctors and patients using medicinal cannabis would not be bothered because “there really is no difference between that and a doctor prescribing morphine or anything else.”10 When Obama was elected as the 44th President of the United States, his Attorney General Eric Holder followed suit and announced in 2009, “It will not be a priority to use federal resources to prosecute patients with serious illnesses or their caregivers who are complying with state laws on medical marijuana.”11

Many people in states with legalized medicinal cannabis used these statements as a basis for growing their industry. But the Obama administration’s policy always has been somewhat unclear. In fact, Obama said in the same interview quoted above that he had some concerns about medicinal cannabis businesses: “I think there are legitimate concerns in not wanting to allow people to grow their own or start setting up mom and pop shops because at that point it becomes fairly difficult to regulate.”10 And according to the Washington Post, Holder said “federal prosecutors should focus only on cases involving higher-level drug traffickers, money launderers, or people who use the state laws as a cover.”11

In April 2012, well into the current federal crackdown, the president sought to explain his administration’s actions in an interview with Rolling Stone:

What I specifically said was that we were not going to prioritize prosecutions of persons who are using medical marijuana. I never made a commitment that somehow we were going to give carte blanche to large-scale producers and operators of marijuana — and the reason is because it’s against federal law. I can’t nullify congressional law. I can’t ask the Justice Department to say, ‘Ignore completely a federal law that’s on the books.’ What I can say is, ‘Use your prosecutorial discretion and properly prioritize your resources to go after things that are really doing folks damage.

The only tension that’s come up — and this gets hyped up a lot — is a murky area where you have large-scale, commercial operations that may supply medical marijuana users, but in some cases may also be supplying recreational users. In that situation, we put the Justice Department in a very difficult place if we’re telling them, ‘This is supposed to be against the law, but we want you to turn the other way.’ That’s not something we’re going to do.12

Based on these statements, it would appear that the federal government is taking action against dispensaries and businesses that are noncompliant with even state laws, i.e., providing cannabis to non-medical users.13 And authorities have claimed that they are focusing on cannabis businesses within 1,000 feet of a school or park frequented by children.1

All sources interviewed for this story, however, unequivocally said that the shutdowns are random and are affecting honest and legitimate businesses. John Davis, chief executive of Northwest Patient Resource Center in Seattle, has been analyzing data on cannabis businesses in the Western district of Washington, including letters from federal authorities and locations of targeted and non-targeted businesses.

“In looking at [the data], there are many locations that did not receive letters that, in my opinion, had an inappropriate proximity to schools,” said Davis. “Around half of those that received letters were businesses that I know and they were attempting to do things right. I believe the actions taken are intended to have a chilling effect on the industry, to cool the market and make it less inviting both to entrepreneurs and property owners” (oral communication, email, September 17, 2012).

Hermes of ASA also said that the federal government is targeting a variety of dispensaries with no clear method.

“There is no real pattern except to intimidate,” said Hermes. “The federal government may make claims that certain facilities are making a profit, but no evidence of that has been supplied and many if not most of the locations are in full compliance with local and state laws. The feds may focus on areas with more dispensaries, but this is not always the case. For example, the feds have threatened and successfully shut down more than 200 dispensaries in San Diego, but for whatever reason they haven’t focused as much attention on Los Angeles, which has far more facilities.”

There has been some speculation in the industry that federal authorities are targeting states controlled by fewer regulations.14 Many more raids and shutdowns have occurred in California versus Colorado, which requires dispensaries to be licensed and comply with all local zoning codes, and dispensary operators to oversee 70% of cultivation of the business’s cannabis.15 California has no such state regulations.

“Yes, most [shutdowns] are occurring in California but I think the only reason for this is the fact that California has the largest medical marijuana industry,” said Aaron Smith, executive director of the National Cannabis Industry Association. “It seems that the federal government is prioritizing enforcement action against some of the most well-respected and well-regulated facilities in the industry” (email, August 31, 2012).

Hermes also disagreed with this theory.

“This interpretation of the federal government’s tactics completely miss[es] the aim of the attacks.

Colorado has not been immune from federal attacks. Montana and Washington tried to pass dispensary licensing laws, but legislators were threatened by US Attorneys for trying to implement such schemes, derailing those laws. There are more than 50 municipalities in California that have adopted dispensary ordinances, a far cry from an unlicensed environment.”

And, apparently going against Obama’s persistent vow to not target actual patients, Hermes stressed that the administration’s action against dispensaries “has been devastating” to patients.

“The vast majority of the hundreds of thousands of patients across the country rely on centralized distribution to safely and legally obtain their medical cannabis,” said Hermes. “Without such a supply, patients are being forced to either go without a medication that is legal under state law, or they now need to travel long distances to a still-operating facility, or they have to get it from the illicit market, thereby putting themselves in harm’s way and complicating the job of law enforcement. This is especially relevant because the Obama Administration goes to great pains to underscore that it is not targeting sick patients. Unfortunately, it’s sick patients who are most widely and adversely affected.”

Dr. Reiman of Drug Policy Alliance pointed out that the federal crackdown is driving businesses back underground, which she said, “Jeopardizes the safety and well-being of not only patients, but the community as a whole.”

“I don’t know how people expect patients to have safe access if businesses aren’t able to run,” said Davis of Seattle’s Northwest Patient Resource Center. “The only way to get a legitimate source of medicine is through a business.”

Medical Marijuana Business Daily, an online news site, has suggested that President Obama is allowing these actions to happen in order to avoid election-year “accusations that he allowed the medical marijuana industry to grow out of control under his watch.”15 Davis indicated that perhaps the Obama administration feels little connection or responsibility to the situation by basically claiming, “It’s not us; it is the US Attorneys,” who are brought in by presidents but answer to their own localities, and often have their own political futures in mind.

Legislation and Strategies for Industry

In April 2012, senators and representatives from California, Colorado, New Mexico, Maine, and Washington sent an open letter to the federal government, calling for an end to the interference and arguing that states are trying to help ill patients and are entitled to “depart from federal policy and chart their own course on the issue of medical marijuana” based upon the United States’ “federalist system of government.”17

Some federal lawmakers are taking it one step further, proposing national legislation in Congress that would address the current situation. In 2011, HR 2306 Ending Federal Marijuana Prohibition Act was introduced, followed by the Truth in Trials Act in July 2012, and later Representative Barbara Lee’s (D-CA) introduction of HR 6335, the States’ Medical Marijuana Property Rights Protection Act, on August 2, 2012.2,18

The 2012 presidential election season, however, made it unlikely that such controversial legislation received any attention. So what can state cannabis businesses do in the meantime? Though many cannabis businesses are shutting down their operations, Davis — one of the few business owners who speaks to the media — said his Northwest Patient Research Center will “keep doing what we’re doing.”

“Not only is it a business, but a great deal of my life is tied to it,” he said. “I serve these people. There is a sense of responsibility that comes with it. I want people to know what’s going on. I don’t want it to be us hiding in the shadows. Can the DEA close me? Absolutely. Tomorrow if they like. Until then, I’m going to stay open.”

“It’s vital that operators in the industry maintain the highest of ethical standards and maintain best business practices in every area,” said Smith of trade organization NCIA. “However, there will be no guarantee that they won’t end up in the federal crosshairs since we’re seeing some of the most well-run facilities being unfairly targeted. The most important thing these businesses can do is get involved with the fight to change draconian federal law.”

Dr. Reiman said that cannabis reform organizations are going to propose to the federal authorities that they “freeze all actions against licensed medical cannabis businesses until an independent review can determine whether they are indeed in compliance with state law.” Meanwhile, hundreds of medicinal cannabis patients, industry members, and supporters in several states are organizing large protests of the federal crackdown.

As for the presidential election this November, Colorado attorney Corry said he is “encouraging cannabis voters this fall to vote ‘ABO,’ Anybody But Obama.” Davis disagrees with this strategy.

“Is Romney going to be better on it? Hell no,” he said. “I believe [Obama will] be reelected and I hope that in a second term, he will have a little more political capital to do something about it. This industry will survive. It will move on. It fills a need within society.”


—Lindsay Stafford Mader


1. Medina J. U.S. attorneys in California set crackdown on marijuana. New York Times. October 7, 2011. Available at: Accessed August 16, 2012.

2. Congresswoman introduces bill to protect landlords of compliant medical marijuana businesses [press release]. Americans for Safe Access: Washington, DC. August 3, 2012. Available at: Accessed August 16, 2012.

3. Weber R. Introduction. Asset Forfeiture. United States Department of Justice Executive Office for United States Attorneys. Washington, DC. 2007; 55(6).

4. Medical marijuana crackdown in Colorado: 10 more dispensaries near schools forced to shut down. Huffington Post. September 19, 2012. Available at: Accessed September 19, 2012.

5. Ross A. Court rulings bode ill for medicinal pot. San Francisco Chronicle. July 30, 2012. Available at: Accessed August 16, 2012.

6.         Romney L. Oakland sues U.S. to stop medical marijuana property seizures. Los Angeles Times. October 10, 2012.

7. Friedersdorf C. How the tax code could destroy medical marijuana. The Atlantic. October 4, 2011. Available at: Accessed September 21, 2012.

8. What has federal law enforcement said about medical marijuana? Available at: Accessed September 17, 2012.

9. Jacobs D. On medical marijuana, federal law leaves states in purple haze. Forbes: Personal Finance. September 12, 2012. Available at: Accessed September 17, 2012.

10. Barack Obama interview [video]. Mail Tribune News YouTube. Video by Nelson G, Pennell B. March 22, 2008. Available at: Accessed August 27, 2012.

11. Johnson C. US eases stance on medical marijuana. The Washington Post. October 20, 2009. Available at: Accessed August 27, 2012.

12. Wenner J. Ready for the fight: Rolling Stone interview with Barack Obama. Rolling Stone. April 25, 2012. Available at: Accessed September 17, 2012.

13. Owners of marijuana dispensaries plead guilty to drug distribution charges, admit selling marijuana in violation of federal and state law [press release]. Seattle, Washington; United States Attorney Jenny A. Durkan Western District Of Washington. August 20, 2012. Available at: Accessed September 17, 2012.

14. Stafford L. The growing industry of medicinal cannabis analysis. HerbalGram. 2012;94:21-23. The American Botanical Council.

15. State laws. NORML website. Available at: Accessed September 17, 2012.

16. Feds raid 2 California dispensaries, order 66 other MMJ businesses to close. Medical Marijuana Business Daily. August 22, 2012. Available at: Accessed September 18, 2012.

17. Graves L. Lawmakers in 5 states tell feds to back off medical marijuana. Huffington Post. April 2, 2012. Available at: Accessed August 27, 2012.

18. Pangburn DJ. With Ron Paul and Barney Frank retiring, who will lead pro-marijuana bill? Death and Taxes magazine. September 5, 2012. Available at: Accessed September 18, 2012.