Topics: Barack Obama

Pot industry feels burned by Obama

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Steve Contorno,Barack Obama,California,Colorado,Washington,Marijuana,Drug Legalization,Justice Department

The legalization of marijuana in Washington and Colorado has forced the Obama administration to begin treating the nascent industry as a legitimate business. But even as the Justice Department grants tacit approval of the drug and vows to ease the flow of capital to legal sellers, marijuana activists remain skeptical of the federal government.

“I don't trust that this administration carries out anything that it says,” said Dale Gieringer, director of the California branch of the National Organization for the Reform of Marijuana Laws. “They're big on words and not on execution. One crosses one's fingers and hopes they do the best they can, but the record is not perfect.”

It’s a strange dynamic that a liberal president — whose exploits as a pot-smoking high schooler are well documented — is so inherently distrusted by marijuana activists. But growers have been burned by this administration before, particularly in California, where marijuana reform has faced a federal clampdown on businesses legalized by local governments.

The latest directive from the Department of Justice instructs federal agents not to target licensed dispensaries of marijuana, reversing a 2011 decree. Instead, the feds will rely on states to police themselves while putting the spotlight on eight potential abuses: sale to minors, involvement of organized crime, exportation to states where marijuana remains illegal, creating a front for other illegal activities, use of guns and violence, drugged driving, growing weed on public lands, and possession on federal property.

But pot businesses are still having problems operating as legitimate businesses because of federal financial regulations.

At a recent congressional hearing, Democratic lawmakers lamented that banks won’t lend money or provide credit cards and bank accounts for marijuana dispensaries for fear of federal prosecution. Investors who want to get in on the ground floor of what could be a booming industry remain on the sidelines with similar concerns. Many entrepreneurs must operate strictly in cash.

The Justice Department said it is working with banks to eliminate repercussions for financing pot growers.

“Obviously there is a public safety concern when businesses have a lot of cash sitting around,” Deputy Attorney General James Cole testified. “There is a tendency that there is guns associated with that, so it's important to deal with that kind of issue.”

Current laws also prevent dispensaries from claiming business deductions on tax returns. A historically aggressive Internal Revenue Service is unlikely to turn a blind eye to that rule unless Congress changes it.

In California, growers have seen federal agents seize land from property owners who lease storefront space for marijuana dispensaries.

And while 20 states and the District of Columbia allow medical marijuana, federal law still does not recognize that cannabis has medicinal benefits. That has significantly restricted marijuana research in universities and the private sector.

There’s no guarantee, either, that the administration won’t change direction again. And unless Congress intervenes, the rules can be rewritten with a new White House in 2017.

“There has been real malfeasance under this attorney general and this administration,” Gieringer said. “Maybe they will clear it up now or maybe they will backslide.”

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