What if we told you the United States Supreme Court would legalize medical marijuana? That the unlikely hero of the story was Clarence Thomas? And that he would work with the most liberal justices to make it happen. Sometimes you don’t know how high you can get until you really try. On the next 30 for 30: Highly Legal.
Hear us out, and no, we haven’t been using the product as we write this.
And while we’ve expressed some optimism that the House of Representatives may pass a comprehensive legalization bill, any such legislation seems dead on arrival in the closely divided and more conservative Senate.
Enter the High Court.
In legal jargon, the Court rationalized that Congress had “enacted comprehensive legislation to regulate the interstate market in a fungible commodity” and that “exemption” for local use could undermine this “comprehensive” regime. The Court stressed that Congress had decided “to prohibit entirely the possession or use of [marijuana]” and had “designate[d] marijuana as contraband for any purpose.” Prohibiting any intrastate use was thus, according to the Court, “‘necessary and proper’” to avoid a “gaping hole” in Congress’s “closed regulatory system.”
Translated to non-legal jargon: The Controlled Substances Act (and in particular, the prohibition on marijuana) was part of a comprehensive regime to ensure that marijuana would be illegal nationwide, and any exception to that rule threatened to defeat the entire purpose of the act. Maybe that was true, maybe not. But no reasonable person can dispute that federal marijuana policy has changed since 2005.
Two years ago, the Court declined to hear a case — Standing Akimbo, LLC v. United States — about 26 U.S.C. § 280E. Title 26, better known as the Internal Revenue Code, deals entirely with taxes and governs many Americans’ favorite federal agency — the IRS. Section 280E deals specifically with businesses that traffic in controlled substances prohibited by federal or state law. In theory, the law is meant to prevent illegal drug traffickers from claiming common tax deductions for business expenses. In practice, it creates massive tax burdens on state-legal cannabis operations. Standing Akimbo challenged the notion that such state-legal cannabis operations should be treated the same as illegal drug traffickers.
In short, the case was about whether a business that operates legally in Colorado should be saddled by excessive federal taxes simply because it was subject to unenforced federal laws.
In conjunction with the Court’s refusal to hear the case, Justice Thomas issued a non-binding statement in which he questioned whether the rationale of the Raich decision still held true. For starters, he noted:
As the Court explained:
Justice Thomas concluded:
Hear us out, and no, we haven’t been using the product as we write this.
Congress Is Unlikely to Legalize Marijuana Any Time Soon
If you’ve been paying attention, you know that the current Congress is unlikely to legalize marijuana. Sure, late last year President Biden announced what he described as steps to “end” the federal government’s “failed approach” to marijuana. Specifically, he (1) issued mass pardons for federal convictions of simple marijuana possession and encouraged governors to do the same for state-level marijuana offenses, and (2) ordered Secretary of Health and Human Services Xavier Becerra “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.” We’ve expressed skepticism that the pre-election announcement was more of a political than substantive move by the president and is unlikely to yield an immediate change to the federal legal status of marijuana.And while we’ve expressed some optimism that the House of Representatives may pass a comprehensive legalization bill, any such legislation seems dead on arrival in the closely divided and more conservative Senate.
Enter the High Court.
Supreme Court Previously Upheld the Prohibition on Marijuana
Nearly 20 years ago, that very issue came before the U.S. Supreme Court. In Gonzales v. Raich, 545 U. S. 1, 5 (2005), the Court held that Congress’ power to regulate interstate commerce authorized it “to prohibit the local cultivation and use of marijuana.”In legal jargon, the Court rationalized that Congress had “enacted comprehensive legislation to regulate the interstate market in a fungible commodity” and that “exemption” for local use could undermine this “comprehensive” regime. The Court stressed that Congress had decided “to prohibit entirely the possession or use of [marijuana]” and had “designate[d] marijuana as contraband for any purpose.” Prohibiting any intrastate use was thus, according to the Court, “‘necessary and proper’” to avoid a “gaping hole” in Congress’s “closed regulatory system.”
Translated to non-legal jargon: The Controlled Substances Act (and in particular, the prohibition on marijuana) was part of a comprehensive regime to ensure that marijuana would be illegal nationwide, and any exception to that rule threatened to defeat the entire purpose of the act. Maybe that was true, maybe not. But no reasonable person can dispute that federal marijuana policy has changed since 2005.
Two years ago, the Court declined to hear a case — Standing Akimbo, LLC v. United States — about 26 U.S.C. § 280E. Title 26, better known as the Internal Revenue Code, deals entirely with taxes and governs many Americans’ favorite federal agency — the IRS. Section 280E deals specifically with businesses that traffic in controlled substances prohibited by federal or state law. In theory, the law is meant to prevent illegal drug traffickers from claiming common tax deductions for business expenses. In practice, it creates massive tax burdens on state-legal cannabis operations. Standing Akimbo challenged the notion that such state-legal cannabis operations should be treated the same as illegal drug traffickers.
In short, the case was about whether a business that operates legally in Colorado should be saddled by excessive federal taxes simply because it was subject to unenforced federal laws.
In conjunction with the Court’s refusal to hear the case, Justice Thomas issued a non-binding statement in which he questioned whether the rationale of the Raich decision still held true. For starters, he noted:
Despite what you think of federal marijuana policy or Justice Thomas, he ain’t wrong.Whatever the merits of Raich when it was decided, federal policies of the past 16 years have greatly undermined its reasoning. Once comprehensive, the Federal Government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.
The Facts of the Standing Akimbo Case
The petitioners operated a medical-marijuana dispensary in Colorado, as state law permitted.As the Court explained:
Put simply, Justice Thomas expressed concern that “[t]his contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary.”At issue in the case was a provision of the Tax Code that allows most businesses to calculate their taxable income by subtracting from their gross revenue the cost of goods sold and other ordinary and necessary business expenses, such as rent and employee salaries. But because of a public-policy provision in the Tax Code, companies that deal in controlled substances prohibited by federal law may subtract only the cost of goods sold, not the other ordinary and necessary business expenses. See 26 U. S. C. §280E.
Under that rule, a business that is still in the red after it pays its workers and keeps the lights on might nonetheless owe substantial federal income tax. As things currently stand, the Internal Revenue Service is investigating whether petitioners deducted business expenses in violation of §280E, and petitioners are trying to prevent disclosure of relevant records held by the State. In other words, petitioners have found that the Government’s willingness to often look the other way on marijuana is more episodic than coherent. This disjuncture between the Government’s recent laissez-faire policies on marijuana and the actual operation of specific laws is not limited to the tax context. Many marijuana-related businesses operate entirely in cash because federal law prohibits certain financial institutions from knowingly accepting deposits from or providing other bank services to businesses that violate federal law. Cash-based operations are understandably enticing to burglars and robbers. But, if marijuana-related businesses, in recognition of this, hire armed guards for protection, the owners and the guards might run afoul of a federal law that imposes harsh penalties for using a firearm in furtherance of a drug trafficking crime. A marijuana user similarly can find himself a federal felon if he just possesses a firearm. Or petitioners and similar businesses may find themselves on the wrong side of a civil suit under the Racketeer Influenced and Corrupt Organizations Act.
Justice Thomas’s Problem with Raich in the Current Landscape
Justice Thomas then laid out all of the ways that marijuana is no longer the subject of a comprehensive nationwide prohibition and the various mixed signals sent by the federal government in recent years:- In 2009 and 2013, the Department of Justice issued memoranda outlining a policy against intruding on state legalization schemes or prosecuting certain individuals who comply with state law.
- In 2009, Congress enabled the District of Columbia’s government to decriminalize medical marijuana under a local ordinance.
- In every fiscal year since 2015, Congress has prohibited the Department of Justice from “spending funds to prevent states’ implementation of their own medical marijuana laws.”
- Nearly 40 states allow medicinal marijuana use, and approximately 22 of those states (and D.C.) also allow recreational use.
Justice Thomas concluded:
Yet, as petitioners recently discovered, legality under state law and the absence of federal criminal enforcement do not ensure equal treatment.
…
The federal government’s current approach to marijuana bears little resemblance to the watertight nationwide prohibition that a closely divided Court found necessary to justify the government’s blanket prohibition in Raich.