Twenty states plus the District of Columbia now allow the sale of medical marijuana, while Colorado and Washington have legalized the drug for recreational use. Yet federal law still prohibits the possession, use, and sale of marijuana for any reason. This dichotomy explains why some banks are reluctant to accept the big cash deposits that pot purveyors generate—even if the cash is legal under state law.
U.S. Attorney General Eric Holder has promised to issue guidelines to make it easier for marijuana sellers who are operating in accordance with their state laws to use the banking system. Large amounts of cash “just kind of lying around with no place for it to be appropriately deposited,” Holder mused, “is something that would worry me, from a law enforcement perspective.”
The fact is, Holder encouraged those bundles of unbanked cash to be assembled in the first place. Last year he said the Department of Justice wouldn’t seek to overturn the Colorado and Washington measures or interfere with the 20 states that allow medical marijuana, leaving it to local authorities to enforce marijuana laws.
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All of which raises the question: When did it become acceptable for the country’s top law enforcement officer to decide which federal statutes to enforce and which to ignore? Even those who agree with the broader policy of marijuana legalization should be left uneasy by open defiance of the rule of law.
Under the 1970 Controlled Substances Act, marijuana is classified as a Schedule I drug, which means it has high potential for abuse, serves no medical purpose, and isn’t safe even under a doctor’s supervision. As recently as 2005, the U.S. Supreme Court ruled that, even in states that allow medical marijuana sales, sellers and users can be prosecuted.
Whether or not a law is outmoded or unpopular, the attorney general doesn’t have the authority to ignore it. Holder’s pronouncement caused a surge of cash to flow from the black-market weed business into the regular economy. His guidelines presumably will make it possible for banks to accept those transactions—without fear of reprisal. But some banks won’t go along. Banks are subject to federal banking laws, including the anti-money-laundering statute, which discourages large deposits of cash by requiring reams of paperwork to document where it came from. When regulators don’t enforce the rules, lawmakers haul them in, Holder’s blind eye notwithstanding.
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What’s more, in states that allow marijuana sales, a whole new pot economy has grown up, complete with cannapreneurs and even private equity financiers. A future president could wipe out the industry by strictly enforcing the law. With 22 states openly in defiance of the federal statute, Congress should decide whether to keep the national ban or turn the question of marijuana decriminalization over to the states. What shouldn’t be an option is for the Department of Justice to look the other way.
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To read Lanhee Chen on weighing Obamacare alternatives and Pankaj Mishra on the limits of Modi mania in India, go to: Bloomberg.com/view.