Cannabis Musings - May 28, 2025

Another step in the Canna Provisions journey.

Friends – if you’re going to be in Denver for the International Cannabis Bar Association’s Cannabis Law Institute on June 12-13, don’t miss me talking alongside Ati Khatri, Counsel at Kilpatrick Townsend, and Richard Cheng, Managing Member at Ritter Spencer Cheng, about cannabis banking and finance. For sure there will be at least one joke about SAFE(R) Banking….

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We’ve talked about the Canna Provisions case that’s been making its way through the courts, including how it potentially implicated 280E challenges and refunds, first amendment rights, and the failed dream of a Cole Memo 2.0. Also referred to as the “Boies Case”, because the law firm Boies, Schiller & Flexner is representing the plaintiffs, this is the one that’s trying to overturn in part a Supreme Court case that said that the Controlled Substances Act (you know – the one that says that cannabis is federally illegal) is constitutional both for interstate and intrastate commerce. The case is backed by a number of multistate operators, and the law firm is about as pedigreed and qualified as you can get to bring this particular case.

Unsurprisingly, the case lost its initial argument in federal district court (the trial court), and, just yesterday, the U.S. Court of Appeals for the First Circuit just yesterday released an opinion rejecting the appeal. This also isn’t terribly surprising, because it’s unorthodox for a federal appellate court to overturn a Supreme Court case. Here’s how to think about that - say that your parents said you couldn’t go out partying on Friday night. But then, your older sibling says that it’s totally cool. Sure, there’s a chance your parents, once they find out, will change their minds, but, most likely, they’re gonna yell chap nit! (“not so fast!”), reminding you who’s boss.

As we’ve discussed, this is all a play to get the Supreme Court to take up the case, arguing that the prevailing precedent in Gonzales v. Raich no longer really applies to intrastate cannabis commerce (cultivation, manufacturing, distribution, etc.) like it did back in 2005 when that case was decided. We’ve also discussed that the chances of getting the Supreme Court to hear the appeal (SCOTUS picks what appeals it chooses to hear) are statistically low. It’s a tall order, and there’s a fair debate over whether the effort is worth it or not, but for policy wonks and law nerds, this is pure, unadulterated chocolate gelt.

To me, the main reason this is a hard case to win is that it’s essentially making a policy argument (a purported change in facts), while the government (the defense) has a fairly low bar to meet. The plaintiffs are arguing that things have changed in 20 years. As I explained previously:

At heart, the plaintiffs are arguing that, with Rohrbacher-Farr, together with Congress’ rulemaking regarding cannabis in Washington, D.C., Congress is now distinguishing between interstate and intrastate cannabis commerce, something it didn’t do when the Supreme Court first ruled on the issue.

The First Circuit didn’t buy this argument, rejecting the plaintiffs’ attempt to separate out today’s cannabis regulation as not being an “essential part” of the Controlled Substances Act’s goals.

The juicier part of the opinion, at least from a legal wonk perspective, discusses our old friend, the dormant commerce clause, a court-created doctrine that states can’t impose an “undue burden” on interstate commerce. Arguably, state laws prohibiting the transport of cannabis across state lines boldly violate this doctrine, but it’s not totally clear if cannabis, being quite illegal (federally), can enjoy the protection of this arcane concept that gives first year law students the night sweats. (Interestingly, there’s a split among the federal appellate circuits on that issue, which would make it ripe for the Supreme Court’s take….).

The low bar that the government needed to meet, in order to justify Congress’ regulation of cannabis under the CSA, is whether there’s a “rational basis” to conclude that the plaintiffs’ intrastate cannabis commerce “substantially affect[s] interstate commerce” (emphasis added) if it were not regulated. I’ll tell you that the rational basis standard is the easiest standard to meet. So, knowing that, I think you can guess how the First Circuit ruled.

in rejecting the "exemption" sought in that case, the Court in Raich relied on the conclusion that Congress could rationally conclude that a "vast quantity of marijuana" that a state permits to be lawfully used within its borders, subject to its regulation, would not remain "hermetically sealed off from the larger interstate marijuana market."

I think this is probably right, although it’s a little unfair. It doesn’t really distinguish between what state-licensed cannabis operators are doing versus the unlicensed market. State-licensed actors, assuming they’re fully compliant with state law, work very hard to indeed keep cannabis “hermetically sealed off” from other states. The whole system is set up that way (for better and for worse) in order to not allow for interstate commerce of those licensed products.

And yet, the court doesn’t want to make that distinction, in part because it’s not totally true – the argument isn’t really helped by recent media reports of licensed products making their way into other markets (mystifyingly referred to as “inversion”). But, even ignoring that fact, drawing that distinction would push the appellate court towards finding a basis for overturning Raich (namely, that Congress doesn’t have a rational basis, which is in and of itself a tall order), which, again, it was never really going to do anyway.

Finally, there’s a fun little discussion about whether there’s a constitutional (due process) right to engage in cannabis commerce, because that’s what the Founding Fathers did:

the appellants first point to historical practices in the original colonies prior to the founding. They argue that "[e]ach of the thirteen original colonies enacted" laws concerning marijuana -- "then known simply as 'hemp'" -- some of which "encouraged (or even required)" colonists to grow marijuana.

Unsurprisingly, the court didn’t buy this argument, saying that this would create “a fundamental right to grow and sell any product that founding era laws encouraged residents of that time to grow and sell,” but there’s a logic to the plaintiffs raising what otherwise seems to be a bit of a detour.” To me, Canna Provisions is aimed squarely at Justice Thomas, who wrote in a 2021 dissenting from a denial of appeal that, “[w]hatever the merits of Raich when it was decided, federal policies of the past 16 years have greatly undermined its reasoning.” This history lesson is part of that strategy.

SCOTUS has been shifting its analysis of constitutional rights, now looking at whether a right that’s not specifically written into the constitution is “deeply rooted in [our] history and tradition” (the reasoning for overturning Roe v. Wade in Dobbs). Indeed, Justice Thomas embraces this theory of rights in his concurring opinion in Dobbs, suggesting that all unenumerated due process rights (basically, the ones that SCOTUS has read into the constitution over the years) should be reconsidered through this framework. So, Canna Provisions is attempting to couch a constitutional right to grow, process, etc. cannabis in our nation’s history in order to get Thomas to bite. (It also helps that Thomas really doesn’t like Congress having broad regulatory power under the dormant commerce clause.) Very clever.

The next step is for the plaintiffs to decide whether to file certiorari, asking the Supreme Court to review an appeal of the First Circuit’s decision. I’m guessing that’s certain to be filed, because it’s always been the endgame. Then, it’s a waiting game to see if the Supreme Court grants review, and who knows whether it’ll happen.

Mit mazel ken men alles (“With luck, everything is possible.”)

Be seeing you.

© 2025 Marc Hauser. 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. The foregoing represents my own views and not those of Jardín or anyone else who hires me.