Federal Regulatory Involvement in Marijuana

Newsweek has a special edition out this week dealing with weed. Nine times out of ten, mainstream news articles about marijuana are a snoozefest of sweeping statements and undetailed, surface-level analysis. But there are some gems every now and then. One piece that caught my eye deals with federal regulatory agencies’ relationships with marijuana.

Cannabis regulation depends mostly on the states.
Cannabis regulation depends mostly on the states.

When talking about the federal government and marijuana, we usually talk about obstacles. The DEA wants to put us in prison. The IRS wants to tax us without allowing deductions. The Federal Reserve and banking regulators make it tough for financial institutions to give accounts to marijuana businesses. Even the USPS wants to curtail our mailings.

But many parts of the executive branch do things that consumers and investors rely on. The Federal Trade Commission enforces truth-in-advertising laws and establishes protections for franchisees and against anti-competitive business behavior. The Securities and Exchange Commission tries to ensure that investors receive truthful information before making investments. The FDA and Consumer Product Safety Commission try to make sure businesses aren’t selling us poison or products that are going to explode. In general, these regulations help. And they have largely ignored the cannabis industry.

In June, an FDA representative told Congress that historically the FDA has followed the DEA’s recommendations that the FDA stay away from Schedule I controlled substances. The same is true of the Environmental Protection Agency, which enforces a number of rules regarding chemical pesticides.

So, as long as these agencies are asleep at the wheel regarding pot, states have to step forward and deal with the issues. And states haven’t done a great job. We don’t even have pesticide testing in Washington. In Colorado, there have been a hefty number of recalls, but we don’t know whether that number is actually correct or not. The federal government has so much more experience dealing with regulatory issues of this nature that states have to struggle to reach a base level of competency in the field.

And most states have departments of agriculture, at least, that can step in and do some work on the pesticide front. General consumer protection issues that the FTC and CPSC deal with at the federal level, are often left to a cumbersome and unresponsive attorney general process at the state level. As more products come out, the potential dangers of manufacturers cutting corners will always be there.

The thing is, most of these federal agencies don’t have any restriction on regulating marijuana businesses. The SEC, for instance, has approved registered offerings of stock in the marijuana space. The FDA, FTC, and CPSC could all take strong actions now, even without a change in federal law. Though it would be more comfortable to regulators to ignore marijuana until is federally legalized, issues are already cropping up that invite closer inspection. Until they do step up, states will be left in the bind in which they currently find themselves: regulating every aspect of a new industry without federal support is really hard.