Weed Companies Are Gearing Up to Sue the Feds Over Cannabis Prohibition
The Supreme Court may soon be forced to rule on several states' rights issues about intrastate cannabis commerce and federal taxes.
Published on June 1, 2022

A team of cannabis industry insiders are planning to sue the US government to challenge the constitutionality of federal restrictions on state-legal weed businesses.

According to recent rumors on social media, several leading cannabis industry multi-state operators (MSOs) and trade organizations are planning to file two lawsuits in federal court. One of these suits will reportedly challenge the constitutionality of an IRS rule that prevents weed companies from taking business tax deductions, while the other will challenge federal laws blocking intrastate cannabis commerce.

Abner Kurtin, CEO of Ascend Wellness Holdings, recently confirmed that these rumors are completely true. Ascend is the only company that has confirmed its involvement at this point, but Kurtin said that Curaleaf, TerrAscend, and at least four other major MSOs are in talks to join the lawsuit. The American Trade Association of Cannabis and Hemp (ATACH) is also reportedly involved in the plans as well.

The coalition has retained the services of Boies Schiller Flexner LLP, a law firm that helped overturn California's same-sex marriage ban and lists the US Justice Department and former Vice President Al Gore among its clients. Kurtin told Marijuana Moment that the group is planning to file the two lawsuits “in the next couple of months,” but the individual companies still need to sign the necessary legal agreements before the litigation can proceed.

Michael Bronstein, president of ATACH, did not confirm that his organization would be directly involved in the suit, but did tell Marijuana Moment that “ATACH continues to evaluate and explore potential legal options.” Bronstein also added that his organization “firmly believes that the Controlled Substances Act and 280E provision of the Internal Revenue Code are being misapplied to legal businesses and merits constitutional protections.”

The first of these lawsuits will attempt to overturn the federal ban on intrastate cannabis commerce. The Controlled Substances Act (CSA) currently prohibits companies from selling or transporting cannabis from one state to another, even between two adjoining adult-use states. The lawsuit will apparently argue that this prohibition is a violation of the Commerce Clause of the US Constitution, which limits the feds' authority to interfere with commerce between individual states.

The second lawsuit will challenge the constitutionality of 280E, an IRS code that prohibits companies or individuals dealing in federally-prohibited drugs from claiming standard tax deductions. Nearly any US company can write off the costs of rent, insurance, equipment, office supplies, and practically anything else as deductions to their total taxes. But since cannabis is still federally illegal, weed businesses are not able to take any deductions on their federal taxes.

Both of these lawsuits essentially hinge on states' rights to enact and enforce their own laws. For this reason, the plaintiffs are hoping that the cases will eventually make their way to the US Supreme Court. The country's highest court has made several rulings in favor of states' rights in the past several years, and the draft decision to overturn Roe v. Wade is another example of a willingness to allow each individual state to create its own abortion laws without federal oversight.

Industry stakeholders are hoping that the Supreme Court will apply this same logic to federal cannabis laws and strike down restrictions that make it hard for state-legal weed companies to do business. Kurtin also expressed some hope that the lawsuit may finally encourage Congress to resolve these issues directly, rather than progressing with litigation that could challenge the overall constitutionality of prohibition. 

“Hopefully, this will be another factor [so] that the Senate says, ‘you know, we’ve gotta get off our ass or we’re gonna lose this issue to the courts',” said Kurtin to Marijuana Moment. But even if this doesn't happen, the CEO is confident that the court case will succeed. “I think the fact that one of the leading constitutional law firms in the United States is willing and eager to take this case speaks volumes to the seriousness of the action and the potential likelihood of success.”

Chris Moore
Chris Moore is a New York-based writer who has written for Mass Appeal while also mixing records and producing electronic music.
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