Jan 24, 2024 - News

Massachusetts cannabis companies lead legal fight against national prohibition

A cultivator works in a grow room at Canna Provisions in Sheffield in 2021.

Canna Provisions' grow room in Sheffield in 2021. Photo: Craig F. Walker/The Boston Globe via Getty Images

Massachusetts companies are leading the legal fight to end the national prohibition on cannabis, but the Biden administration stands in their way.

Why it matters: Prohibition has left state-regulated cannabis companies shut out from bank loans, federal tax credits and other business opportunities, owners say.

Catch up fast: A group of Massachusetts cannabis companies sued the feds in October in Springfield federal court, arguing the national law banning cannabis intrudes on state powers.

  • They're being represented by Boies Schiller, the firm that represented Al Gore in litigation over the 2000 presidential election, the failed blood testing startup Theranos and disgraced film producer Harvey Weinstein.

The latest: U.S. attorneys asked the judge to dismiss the lawsuit yesterday.

  • The federal government argued in part that cannabis companies have no standing to sue the Department of Justice because it hasn't directly harmed them — for example, by arresting or prosecuting the business owners.

State of play: 38 states have legalized medical cannabis.

  • 24 states have legalized adult-use cannabis.
  • Massachusetts' cannabis sale regulations are among the most stringent and include seed-to-sale tracking, says Josh Schiller, the businesses' attorney.

Zoom in: Despite following the state's regulations, dispensaries like Canna Provisions have been denied service at most banks, 401(k) providers, insurance plans and other businesses for fear of facing federal penalties, says CEO Meg Sanders.

  • The cannabis-friendly banks and vendors that do offer services tend to charge more and have their own limitations.

Threat level: Five years after the first dispensaries opened, cashiers can only accept cash or debit cards.

  • Owners say those restrictions not only inconvenience customers, but also expose the businesses to criminals targeting cash-heavy stores.

What they're saying: "We're just tired of being treated like second-class businesses," Sanders tells Axios.

  • The feds effectively say, "we're not a real business, and they're going to penalize us and all these things that come with that."

The other side: Federal attorneys say that the Controlled Substances Act can't violate the business owners' right to due process because "courts have consistently, and correctly, held that no fundamental right exists to distribute, possess or use marijuana."

  • They also argued they can't be held responsible for banks and other vendors' decisions to deny services to cannabis companies over a vague risk of federal enforcement.
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