The Cole Memo was a policy memo created during the Obama administration that mostly protected marijuana-legal states from federal scrutiny. Now the Trump administration, via U.S. Attorney General Jeff Sessions, has decided to rescind that guidance. Many observers across the political spectrum concur that the decision will heighten uncertainty in an industry seeking stability.
James Cole (now a partner at the white shoe law firm Sidley Austin in Washington, DC) was the deputy attorney general in 2013 and wrote the memo, which instructed U.S. attorneys to focus on drug cartels and cross-border trafficking, not marijuana outlets complying with state regulatory schemes.
In a recent interview, Cole noted that his original memo was moving things in the right direction. With 29 states and DC now allowing medical and/or recreational use of marijuana, the voters seem to have spoken. California legislators are particularly flummoxed by the direction taken by the White House.
Here are the opinions from a collection of industry experts discussing Sessions’ reversal of Cole’s memorandum. The opinions cover investment strategies, regulatory compliance, disintermediation and yes blockchain.
Jeffrey Zucker, Co-Founder and President of Green Lion Partners, a Denver-based business strategy firm focused on early stage development amongst firms in the cannabis industry:
“The decision to rescind the Cole Memo won’t go unnoticed by cannabis entrepreneurs. While I think this decision will be merely a road block for the industry long term, it’s sure to cause some upheaval initially. I expect an immediate increase in difficulty in securing funding from investors, many of whom are spooked by this decision. However, this move has already pushed the cannabis conversation forward at the federal level, which will hopefully lead to cannabis being removed from the scheduled substances list and revert to a state issue. At that point, I expect institutional capital to pour into the industry and investment dollars to be more readily available to entrepreneurs.”
Bryan Meltzer, Partner at Feuerstein Kulick LLP, a cannabis law firm providing legal services to companies, funds, investors and lenders in the space:
“While the DOJ’s rescission of the Cole Memo now gives U.S. attorneys prosecutorial discretion in their jurisdiction, the more immediate effect of the announcement will likely be to chill investment and make already difficult banking in the space even more difficult. The silver lining, however, may be that without the Cole Memo to hide behind, Congress may be forced to finally pass some of the bipartisan common-sense reforms that have already been proposed, such as the extension of the Rohrabacher-Farr Amendment, which de-funds the Department of Justice from prosecuting patients and businesses that are compliant with their state’s medical marijuana program, the expansion of the Rohrabacher-Farr protection to adult-use programs, the adoption of a bank safe harbor that permits banks to bank compliant businesses in the space, and the reform of 280E, which treats compliant cannabis businesses differently from all other businesses by prohibiting them from deducting normal business expenses from their taxes.”
Frank Lane, President of CFN Media Group, the leading creative agency and media network dedicated to legal cannabis:
“The Sessions memo shouldn’t have come as too much of a surprise given the Attorney General’s historical stance on marijuana, but it certainly adds a bit of uncertainty to the market. The upshot is that it could force members of both political parties to come together and finally draft some federal level regulations rather than relying on a patchwork of state regulations. This could be a net benefit to the industry over the long-term.”
Nathaniel Gurien, CEO of FinCann, a Manhattan-based company bringing compliant banking and payment solutions to the legal cannabis industry:
“Given that much of the marijuana industry’s confidence of law enforcement forbearance is based on the perception of (as opposed to actual) risk, AG Sessions’ rescission of the Cole and Ogden Memos will likely have at least a temporary chilling effect, particularly on new investment and banking.
On the other hand, a positive outcome might be to drive marijuana-related businesses to higher levels of accountability and compliance, keeping them above the fray of targeted enforcement as well as overall more sustainable in the long term.
Of more tangible effect is the expected renewal of the Rohrabacher-Blumenauer budget amendment (which prohibits use of federal funds for DOJ enforcement of federal marijuana laws against state-sanctioned medical marijuana licensees) and now following Jeff Sessions’ unpopular move of rescinding the Cole Memo, many federal lawmakers have spoken out in favor of states’ rights and an unintended consequence may be a renewed interest in an amendment proposed by U.S. Representatives Jared Polis (D-CO) and Tom McClintock (R-CA) which would extend Rohrabacher-Blumenauer protections to include adult-use as well as medical.”
Wil Ralston, President of SinglePoint, a publicly-traded cannabis and technology holding company specializing in acquisitions of small to mid-sized companies with an emphasis on mobile technologies and emerging markets:
“Entrepreneurs seeking opportunities in the cannabis industry are still pushing full speed ahead. As an entrepreneur, you’re always analyzing the risk:reward of your decision-making; as of right now, the potential success that can be realized in the cannabis industry is such that entrepreneurs will likely continue to find their way, even through the reversal of the Cole Memo. We’ve already seen quite a bit of pushback to Sessions’ reversal of the memo, from the general public to government officials, and in the absence of a seriously damaging development, entrepreneurs will keep running towards the cannabis industry, not away from it.”
Arnaud Dumas de Rauly, Chief Strategy Officer for The Blinc Group, a distribution-centric vapor and cannabis incubator:
“Jeff Sessions’ memorandum for all U.S. attorneys represents a threat to cannabis businesses, entrepreneurs, and startups alike, as it brings confusion to an already nascent industry. Since the announcement last week, we’ve already spoken to numerous investors that aren’t necessarily experts in the field but are now concerned about backing industry players. On the other hand, there might be one positive side-effect: current businesses will be forced to be more rigorous with their operations, cash-flow, and compliance strategies.”
Leslie Bocskor, President of Electrum Partners, an advisory services firm specializing in medical and recreational cannabis and ancillary businesses:
“My take is that the sleeper technology for the cannabis industry will be blockchain and cryptocurrency. Whereas many think crypto is a solution for transactions, and it may be, my take is a little different. Since cannabis is the red-headed step child of the venture and early stage finance world, due to the federal illegality, we will see cryptocurrency ‘tokenomics’ (not my word, Thomas Carter of Dealbox; www.dlbx.io) be used to disintermediate the venture capital world, first in cannabis companies and then beyond. Using cryptocurrencies with registered compliant offerings to speed up and simplify the capital formation process will be the news we read about one year from now, having been done successfully for cannabis companies first.”
Travis Tharp, COO of CanCore of CanCore Concepts, Inc., which specializes in medical cannabis manufacturing consulting services:
“One of our goals this year has been to consolidate onto systems that can handle scale. We have recently consolidated our CRM and ordering systems onto LeafLink. They have been extremely responsive to development request and feature additions. They have been a great early partner for us as we build to serve our manufacturing partners across different geographies.”