Cannabis Musings - May 2, 2023
Is it a good idea to sue the Federal government over cannabis?
Friends – welcome to Cannabis Musings, Substack edition. If you’re coming to this through Twitter or LinkedIn, make sure to subscribe here.
A question I get from time to time is whether the federal government should be sued over 280E (the section of the federal tax code that doesn’t allow cannabis operators to take most operating deductions), the Controlled Substances Act (CSA), cannabis scheduling, whatever, on constitutional grounds.
My first response is to remind them that they’re asking the wrong person because I’m no longer practicing law. My second response is to then remind them that, even if I were still practicing law, I wouldn’t be giving legal advice on a question like that because I wasn’t a litigator. My third response is then usually something like “Sure, anyone can file a lawsuit, but it’s almost certainly an expensively bad idea, and, by the way, that’s not legal advice.”
Why do I say that? Well, because it’s been tried before. Lots of times. With no success (apologies if you don’t have Westlaw access). The DEA has a clear statutory basis for maintaining the schedule of controlled substances. 280E is fairly well-settled as law (if you haven’t read the Tax Court opinion that compelled Congress to add Section 280E to the tax code in the first place, I highly recommend it – it’s objectively funny).
In other words, given so much very one-sided precedent, is it really all that likely that a federal court is nonetheless going to strike down, on constitutional grounds, any of these laws/rules, or would a lawsuit simply be an exercise in funding a litigator’s kid’s college tuition? Es vet helfen vi a toiten bonkes!
Well, that was at least until Monday.
On Monday, SCOTUSBlog and others reported that the Supreme Court granted cert (meaning it’s agreed to hear the appeal) on a new challenge to the Chevron doctrine, a legal principle stemming from Chevron v. NRDC, 467 U.S. 837. (1984), a U.S. Supreme Court case, that says that courts must defer to government agencies in interpreting ambiguous statutes so long as the interpretation is reasonable (whatever that means). Given the current makeup of the Supreme Court, there’s a non-zero chance the Chevron doctrine gets changed or scrapped. If that were to happen, then courts would have more freedom to question, and overturn, regulatory decisions made by federal agencies like the Drug Enforcement Agency and the Internal Revenue Service.
So, if Chevron gets mekhule, would a new challenge to the CSA or 280E or something else be possible? Again, see my first two responses above. Beyond that? Well, none of the cases rely on the Chevron doctrine or its concept, so maybe it’d be nothing. And yet I wouldn’t underestimate the power of a clever constitutional law litigator who’s got a kid to put thru college to devise a novel challenge to the federal administrative state on behalf of the cannabis industry.
Be seeing you!
Hauser Advisory provides advice and strategy on business lifecycle events and cannabis industry navigation, tapping into a deep, national network and twenty-five years of dealmaking and capital markets experience.
© 2023 Marc Hauser and Hauser Advisory. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. Subscribe to Cannabis Musings here.