Business

Is interstate trade actually legal?

By Alex Halperin
Aug 9, 2021
Pablo Garcia Saldana https://unsplash.com/@garciasaldana_?utm_source=unsplash&utm_medium=referral&utm_content=creditCopyText

In 2013, the U.S. Justice Department document known as the Cole Memo essentially OK’d the state legal cannabis industry on the condition that it adhered to eight guidelines. One of those guidelines is “Preventing the diversion of marijuana from states where it is legal under state law in some form to other states.”

The industry has generally interpreted this to mean that the federal government would not tolerate interstate cannabis commerce in any form. Now, more than three years after then-U.S. Attorney General Jeff Sessions (R) rescinded the Cole Memo, the industry and the states regulating it, still adhere to the rule.

However, a provocative new paper by Vanderbilt University law professor Robert Mikos argues “There is little (if any) evidence that the federal government objects to interstate commerce in cannabis or that it could do much to punish states that allowed interstate sales even if it did object.” 

  • Though it has not been challenged in court, Mikos argues that the ban on interstate commerce that “states now impose” likely violate the Constitution’s Dormant Commerce Clause which “establishes a strong default rule against state protectionism.”
  • In short, he’s suggesting that the current state market patchwork, where there is no legal interstate commerce, is more a way for states to protect their own homegrown jobs and industries, than something the feds demand.

If and when legal interstate commerce emerges, whether before or after federal legalization, it will have seismic consequences for the industry: 

  • According to Mikos, “a new breed of large, national cannabis firms concentrated in a handful of cannabis-friendly states is likely to dominate the cannabis market. This development could dampen the incentive for new states to legalize cannabis and further diminish minority participation in the cannabis industry. To address these concerns, congressional legislation may be necessary.”

Read the whole paper.