Local Control a Looming Issue

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Last week’s Republican debate included some word salad about marijuana, the specter of federal agents snatching babies’ medicine, a biting comment about economic privilege and some “gateway” language that somehow ended with an endorsement of state’s rights. It was a bit of a logical wander.

But the devolution of marijuana regulation to states and, by extension, to even more local levels of government, is a two-edged sword that could ultimately limit and destabilize the legal marijuana market.

 

Opt Outs

Article XVIII, Section 16 (5)(f) of Colorado’s Amendment 64 permits localities to opt out, stating:

a locality may prohibit the operation of marijuana cultivation facilities, marijuana product manufacturing facilities, marijuana testing facilities, or retail marijuana stores through the enactment of an ordinance or through an initiated or referred measure

Thirty-five towns and cities, including Colorado Springs, opted out early on, citing fears of crime and the risk of losing federal funds.

Alaska’s Ballot Measure 2, approved by the voters in 2014, similarly permits local governments to ”prohibit the operation of marijuana cultivation facilities, marijuana product manufacturing facilities, marijuana testing facilities, or retail marijuana stores through the enactment of an ordinance or by a voter initiative.”

Retail sales have yet to roll out in Alaska and regulations are still being finalized, so it is not yet clear how many localities may choose not to participate in legal cannabis sales.

Oregon takes a different approach, limiting the option to cities and counties in Oregon, in which at least 55 percent of voters voted against Measure 91. Fifteen counties largely east of the Cascades have elected to remain cannabis free.

 

Local Regulation

Even where laws do not explicitly permit jurisdictions to refuse cannabis businesses, they may require local licensing or permit local regulation to a degree that accomplishes the same goal. California’s recently passed Medical Marijuana Regulation and Safety Act requires that medical marijuana businesses be licensed by both the state and local government and permits local governments to regulate them more strictly than required by state law.

California currently has many local bans and restrictions, as well as local marijuana legislation, including Los Angeles’s Proposition D. These are widely expected to remain unaffected. This, more than anything, demonstrates the problem with local regulation.

The MMRSA has been widely hailed as a giant step forward for both patients and the legal marijuana industry, but it would apparently leave in place much of a regulatory structure that had been criticized as a confusing, unenforceable patchwork that was harmful to the industry and patients, and an invitation to federal and state enforcement action.

If approved in November, Ohio’s Marijuana Legalization Initiative would similarly require precinct electors to approve the location of retail stores, as they do now for alcohol sales.

 

Pre-emption

The issue of local governments undoing the will of the voters with respect to legal marijuana sales, often through administrative action, has been simmering since the towns of Wenatchee and Fife in Washington State refused to issue a local business license to individuals who had received a state approval.  A Washington State court has held that state law does not preempt local zoning regulations. At the time of the ruling, 28 Washington towns and two counties had banned marijuana businesses.

Local control, like the issue of state’s rights, is an appealing concept at first blush. It seems a gesture toward fairness and an effort to ensure that policy decisions are made at the level of government closest to the people. It has some troubling side effects, however.  It can introduce complexity, cost and uncertainty into business decisions. It may also, if pervasive enough, reduce the overall size of the legal market and encourage illegal sales.

Anne Wallace is a New York lawyer who writes extensively on legal and business issues. She also teaches law and business writing at the college and professional level. Anne graduated from Fordham Law School and Wellesley College.

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