The “gold rush mentality” is rampant in the marijuana industry, with too many people racing into cannabis believing it will be the second coming of gaming. Many of these people are uninformed, unprepared, undercapitalized, and sometimes even delusional about the cannabis industry. Pioneering is not the same as profiting and everyone involved with marijuana (or any other business for that matter) needs to think carefully before putting money on the line to try to “cash in” on the “Green Rush.”
Especially sovereign American Indian nations and tribes.
Even though tribes now have the October 2014 Wilkinson DOJ statement (“Wilkinson statement”) as support going forward, there has been no change in federal law proscribing marijuana. Equally important, just because something has been made easier, does not mean that it automatically makes sense to do it.
Pretty much every day we see streams of press releases that such and such cannabis company is working with large numbers of tribes to take advantage of the Wilkinson statement. To the extent any aspect of these press releases are true, we as lawyers are concerned. The Wilkinson statement alone makes clear that the legal issues involving tribes participating in the marijuana industry are incredibly complex, involving jurisdictional issues between state, federal, and tribal governments, tribal sovereignty issues, and issues regarding how each U.S. Attorney will treat tribal marijuana issues within his or her own sphere of authority. Moreover, there are a slew of social, political, and economic issues for tribal leaders to address with their citizens. The tribes with which we are working are taking the time to research the marijuana issue and to discuss whether it makes sense for them to proceed under the Wilkinson statement and, if so, how to do that. These tribes are looking at some of the following:
How and when to consult with the federal government. The Wilkinson statement essentially requires that any tribe interested in cannabis consult with the federal prosecutor in its jurisdiction. Here’s the catch on this though: no U.S. Attorney is going to explicitly give his or her blessing for any tribal marijuana regime at first glance. Securing that nod of approval is going to require a well-formulated ready-to-implement comprehensive marijuana regulatory regime and lengthy dialogues with the U.S. Attorney’s office. The U.S. Attorney is not a one-time, one-stop shop for approving marijuana visions of grandeur. We have not yet reached the stage of being ready to talk with any U.S. Attorney regarding our tribal clients’ plans because the last thing we want to do is rush things and get rejected. There have already been accounts of tribal representatives who have gone to the U.S. Attorneys and been flat out told “no.” This reaction, too, raises fairness concerns, and further justifies the need for a well thought out strategy in advance. We also are seeing tribes announce in the press that they will be going into cannabis or even that they have already done so. We worry that most (none?) of these tribes have failed to secure U.S. Attorney approval beforehand and that their unilateral announcements have only reduced their chances of securing even a tacit approval.
How to address potential application of state laws. A number of tribes from California have publicly expressed their interest in pursuing cannabis on tribal lands. California is both a Public Law 280 (“PL 280”) state and a state with abysmal state medical cannabis laws. There are eighteen PL 280 or PL 280 equivalent states in the union. In a PL 280 state, state law enforcement can assert criminal jurisdiction on tribal lands to arrest and prosecute for state law crimes. PL 280 can be problematic for a tribe wanting to undertake a cannabis operation where that operation may not be in line with existing state criminal laws. For example, tribes that legalize adult use cannabis could be subjecting their members to state law prosecution where California does not have any recreational marijuana laws. We know first hand that some of the California tribes that have expressed such keen interest were not aware of this. The Cole memo from 2013 stipulates that those states that adhere to the eight enforcement priorities set out in that memo will generally be free from federal enforcement actions. California arguably does not meet any of these eight criteria, making it a target state for federal enforcement. The state in which a tribe operates is going to make a big difference in how a tribe should implement its own marijuana regulations.
How to choose competent and trustworthy partners. When it comes to cannabis, no one firm or business can do it all. If a tribe is being pitched by a consultant or a law firm claiming that it does everything from seed to sale to securities to criminal defense and tribal law, that tribe is being pitched by someone either grossly ignorant or simply dishonest. Choosing trustworthy partners requires due diligence which takes time to accomplish.
How to develop marijuana regulations and a business plan. The federal government expects states to follow eight strict enforcement priories, ranging from traceability of product to preventing diversion to youth to preventing cannabis from crossing state lines. Tribes will not be held to different standards, the Wilkinson statement is clear on this. This means that any tribe looking to get into cannabis should first develop legally sound and strict regulations for their cannabis operations and be able to prove that it has the capacity to both implement and enforce those regulations. Without all this, anything the tribe does with cannabis could subject its members to criminal prosecution and could subject the tribe as a whole to a cut-off in federal funding. Each tribe also needs to determine whether cannabis will be a financially worthwhile venture for their nation in the years to come. This almost always requires analyzing state economies, population distributions, tribal budgets, market exclusivity, costs, tax structures, pricing fluctuations, and consumer demand, none of which can or should be done quickly.
How to ensure protection of sovereignty. As tribes discuss how to implement their marijuana regimes, issues like cultivation techniques, processing methods, and effective distribution will likely require outside experts which will, in turn, require contracts for services and may lead to tribal ventures. Wrongly done, these contracts and ventures can put a tribe’s sovereignty at risk. The cannabis “experts” lining up to “help” the tribes very likely do not have any experience working with tribal governments so the tribes themselves will need to take the lead in protecting their sovereign status. In addition, interactions with the federal and state governments invariably run a risk of conflicts over jurisdiction and sovereignty. This convergence of risks justifies the need for understanding both the Indian law and marijuana law issues as they intersect.
Above all else, the tribes need to be patient and reject dealings with anyone who is saying that they must act now or forever lose out. While timing is certainly pertinent, rushing it before absolutely ready won’t serve any purposes. We wrote last year of the many red flags in the marijuana industry. Read that list and then double it for the tribes. Even worse is that a single misstep by one tribal government could upend the opportunity for all tribes.
Patience, patience, patience.
* This post was co-written with Robert Odawi Porter, an attorney expert in the field of American Indian law who has dedicated his 20-year legal career to protecting and expanding the rights of indigenous nations and peoples. Our cannabis business lawyers work with Mr. Porter on all tribal marijuana matters.