A group of Massachusetts cannabis businesses filed a lawsuit on October 27, 2023, challenging the constitutionality of the federal prohibition on marijuana. The lawsuit was filed in the U.S. District Court for the District of Massachusetts, Western Division, and names U.S. Attorney General Merrick Garland as the sole defendant.

The plaintiffs, who are represented by the powerhouse law firm of David Boies, argue that the Controlled Substances Act (CSA), which prohibits the cultivation, manufacturing, sale, and possession of intrastate marijuana, is an unconstitutional ban. They allege that the CSA deprives cannabis companies of their rights under the Fifth Amendment by introducing “unwarranted and unlawful federal government intrusion” into their businesses and by depriving them of liberty without due process.

The lawsuit also argues that the CSA violates the Tenth Amendment, which reserves certain powers to the states. The plaintiffs contend that the federal government has no authority to regulate intrastate marijuana commerce, and that the CSA’s prohibition of such commerce is an overreach of federal power.

The lawsuit comes at a time when the legal landscape for state-regulated marijuana markets is changing rapidly. As of October 2023, 19 states and the District of Columbia have legalized recreational marijuana, and 38 states have legalized medical marijuana. However, marijuana remains illegal under federal law, which creates a number of challenges for state-legal cannabis businesses.

One of the biggest challenges is that state-legal cannabis businesses cannot access traditional banking services. This is because banks are regulated by the federal government, and they are at risk of federal prosecution if they accept deposits from or provide loans to cannabis businesses. This lack of access to banking services makes it difficult for cannabis businesses to operate and grow.

Another challenge is that state-legal cannabis businesses are subject to punitive federal tax rates. The IRS treats marijuana as a Schedule I drug, which is the highest category of controlled substance. This means that cannabis businesses are taxed at a rate of 280%, which is significantly higher than the tax rate for other businesses.

The lawsuit filed by the Massachusetts cannabis businesses is a significant challenge to the federal prohibition on marijuana. If the plaintiffs are successful, it could have a major impact on the state-legal cannabis industry. It could also lead to a broader reconsideration of the federal government’s drug laws.

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On Thursday, a consortium of Massachusetts-based cannabis enterprises launched a lawsuit against the U.S. Attorney General Merrick Garland. The enterprises, represented by the renowned attorney David Boies, are pushing back against the federal prohibition on marijuana, arguing that it’s an unconstitutional violation of state sovereignty. The plaintiffs in the case are a diverse group of stakeholders in the cannabis industry. They include Canna Provisions, a cannabis retailer; Gyasi Sellers, a cannabis delivery proprietor; Wiseacre Farm, and Verano Holdings, a multistate operator. All these entities are challenging not just the federal prohibition on marijuana but also the implications it has on their business operations and even public safety. The lawsuit was filed in the U.S District Court in Massachusetts, underlining its significance to the state’s burgeoning cannabis industry. At the heart of the case is the federal Controlled Substances Act, which the plaintiffs argue not only contravenes state legislation but also poses a threat to their businesses. Because of federal regulations, these cannabis enterprises are compelled to transact predominantly in cash, a practice that they argue jeopardizes public safety. They point out the incongruity of their situation, noting that while cannabis has received broad legalization across 23 states, these state-level decisions are undermined by federal law. The plaintiffs also contend that federal law is creating undue burdens for their businesses, particularly when it comes to financial matters. For instance, they claim that the law hinders cannabis enterprises from obtaining loans from the Small Business Administration. They are also burdened with excessive taxation, they say, and are precluded from employing trademark law to safeguard their intellectual property. These are but some of the adverse impacts they attribute to the federal law. Furthermore, the plaintiffs argue that the threat of federal enforcement has a chilling effect on the state’s cannabis industry. They say it dissuades individuals and businesses in Massachusetts from collaborating with cannabis businesses, stunting the growth of the sector. “We demand equitable treatment, aligned with any other small business in Massachusetts,” affirmed Meg Sanders, CEO and co-founder of Canna Provisions, in a recent statement. The lawsuit is a direct challenge to a 2005 ruling by the U.S. Supreme Court. The court had ruled that Congress’ objective to eliminate marijuana from interstate commerce justified federal interference in state drug regulation. Boies countered this, stating, “Archaic precedents from yesteryears no longer hold relevance. The Supreme Court has subsequently clarified the federal government’s lack of authority over purely intrastate commerce.” Boies, who is renowned for representing the U.S. government in its antitrust dispute with Microsoft Corp and Vice President Al Gore in the 2000 presidential election recount, has recently faced criticism for his association with Harvey Weinstein and the unsuccessful blood testing startup, Theranos. With this lawsuit, he is seeking a declaration of the unconstitutionality of the Controlled Substances Act when applied to state-legal operations, and calls for the prohibition of federal enforcement against state-legal businesses. The U.S. Justice Department, who represent the federal government in this case, have yet to respond to a request for comment. The department’s position on implementing federal drug laws against state-sanctioned cannabis enterprises has varied with changing presidential administrations. For instance, during President Barack Obama’s tenure, prosecutors were instructed to restrict their cases to a certain set of scenarios, such as impeding the flow of marijuana revenue to criminal organizations. However, this directive was withdrawn by the Trump administration in 2018. In March, Garland informed the Senate Judiciary Committee that the department’s marijuana enforcement policy was under development, but it would likely align closely with Obama’s approach. This lawsuit, therefore, represents a significant test of the federal government’s stance toward the rapidly evolving cannabis industry.