Fear and paranoia ripped the cannabis industry on Thursday after news broke that U.S. Attorney General Jeff Sessions rescinded Obama-era policies that allowed the recreational marijuana industry to flourish in six states. Without the policies in place, federal prosecutors can technically go after state-law-abiding marijuana companies, which casts uncertainty and doubt across the industry.
In a statement released Thursday morning, Sessions announced that he rolled back the Cole Memo from 2013, which issued guidance to U.S. attorneys to not prosecute state-law-abiding companies as long as they steered clear of federal priorities like not selling pot to kids and not being involved in organized crime.
Marijuana entrepreneurs say the news was not surprising, since Sessions is known for being staunchly opposed to marijuana legalization. However, since the move empowers U.S. attorneys to enforce the federal ban on cannabis, it did put entrepreneurs like Mike Ray on edge.
"It's unnerving," says Ray, the founder and CEO of California-based marijuana vape pen manufacturer Bloom Farms. "This is creating confusion for state-legal businesses. Some will go on with business as usual, some will be more cautious, others might walk away."
This new threat of a crackdown will have negative repercussions on marijuana business financing. John Hudak, deputy director of the Center for Effective Public Management at the Brookings Institution, says it's likely that investors will base risk assessments on the new guidance from the Justice Department.
"It's hard to imagine that this won't affect investor decisions," says Hudak. "Capital available for cannabis companies could dry up."
Banks that serve the industry could also become skittish. Sally Vander Veer, the president of Medicine Man, a multimillion-dollar Colorado-based cannabis grower and dispensary chain, says the marijuana industry already has a tenuous relationship with banks. Medicine Man has solid relationships with two local banks, but she says banks and credit unions might not think it's worth the effort or risk to serve smaller businesses in the industry.
"This keeps me up at night," says Vander Veer. "All this does is handcuff us from creating more jobs and generating tax revenue for our state."
There are industry experts who caution there's no need for cannabis companies to panic. Henry Wykowski, a San Francisco cannabis attorney who has represented some of the largest legal marijuana companies, says state-law-abiding companies should not behave any differently. Wykowski points out that the Cole Memo was not actually legally binding and contained language that stated the federal government reserves the right to prosecute any marijuana business because the drug is banned under the Controlled Substances Act.
"The Sessions memo doesn't change anything," says Wykowski confidently. "I told my clients that if they continue to comply with state law, they should be OK."
Some marijuana entrepreneurs even think there could be a silver lining. Bloom Farms' Ray says the outpouring of support from other elected officials is promising. Since the news broke this morning, senators, governors, and U.S. attorneys from states where adult-use cannabis is legal issued statements condemning Sessions's move.
Senator Cory Gardner (R-Colorado), via a statement on Twitter, said Sessions "trampled on the will of the voters" in Colorado and other states where recreational marijuana is legal.
"I am prepared to take all steps necessary, including holding DOJ nominees, until the attorney general lives up to the commitment he made to me [to not rescind the Cole Memo] prior to his confirmation," Gardner wrote.
Ray says an unintended consequence of Sessions's aggressive move is that it could finally spur a change in federal law. On Thursday, Senator Cory Booker (D-New Jersey), who introduced the Marijuana Justice Act to legalize marijuana federally in August, took to the Senate floor to speak against Sessions and urged Congress to reform marijuana laws. "The Cole Memo acted as a safety net for the industry, when we really needed something more solid," says Ray. "What we need is Congress to remove marijuana from the Controlled Substances Act. Hopefully this will spur Congress to fix it."