ABA Midyear Meeting

ABA House of Delegates urges legislation protecting marijuana lawyers and banks

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The ABA House of Delegates adopted two resolutions Monday urging federal legislation to shield lawyers and banks from criminal liability for providing services to state-legalized marijuana businesses.

Both resolutions were sponsored by the Tort Trial and Insurance Practice Section.

Under Resolution 103B, the ABA will lobby Congress for changes to federal laws so that lawyers do not face the threat of criminal charges when they represent clients in states that have legalized marijuana.

Steven Cash, a member of the TIPS Cannabis Law and Policy Committee who co-authored Resolution 103B, told the House of Delegates on Monday during the ABA Midyear Meeting in Austin, Texas, that 33 states have legalized cannabis, but attorneys could still be charged with conspiracy and aiding and abetting under federal law.

“That’s an untenable position,” Cash said.

Though prosecution is unlikely, the report said the current state of the law could deter lawyers from representing marijuana businesses and clients. Under the Controlled Substances Act, marijuana is a Schedule 1 drug, putting it in the same category as heroin. Last year, the ABA passed a resolution to remove the drug from Schedule 1.

“Many lawyers believe, as an ethical matter, that they should not engage in conduct that violates a criminal law, even if the chance of prosecution is slim, perhaps even vanishingly small,” the report accompanying the proposed resolution stated.

Resolution 103D calls for the ABA to urge Congress to clarify and mandate federal laws to ensure that banks and other financial institutions can do business with marijuana businesses and attorneys in places where they are complying with state and local laws.

“The resolution is simple,” resolution co-author Adrian Snead, a member of the TIPS Cannabis Law and Policy Committee, told the House of Delegates. “It simply urges Congress to take action in the form of the SAFE Banking Act or similar legislation that would make clear that federal depository institutions can take money from legitimate cannabis industries in states that have chosen to legalize the substance without fear of federal prosecution.”

Both resolutions passed overwhelmingly.

Follow along with the ABA Journal’s coverage of the 2020 ABA Midyear Meeting here.

Michael Drumke, chair of the TIPS Cannabis Law and Policy Committee and a co-author of both resolutions, said lawyers should be able to represent cannabis clients without the fear they will be targeted for their work.

He noted prosecutions against attorneys are not unheard of. In 2017, San Diego attorney Jessica McElfresh faced felony charges for representing a marijuana business. The charges were dropped in 2018.

“It’s not really a clear system,” Drumke said in a recent phone interview. “You’re not supposed to aid and abet the commission of a federal crime. But under the model rules, clients are entitled to representation.”

Paul Larkin, a senior legal research fellow with the conservative Heritage Foundation, said that moves to shield lawyers and banks do not tackle the “fundamental issue” surrounding the legal sale of cannabis.

“I think what we need to do is decide as a society if we are going to legalize cannabis and how. If we’re going to legalize it, there’s no need for an exemption for banks and lawyers,” Larkin said in a phone interview.

The industry is projected to be worth $30 billion by 2025, according to New Frontier Data, a firm that provides analysis on the cannabis industry.

President Donald Trump’s first attorney general, Jeff Sessions, repealed the Cole Memorandum, a President Barack Obama-era policy that directed the Justice Department not to prosecute cases in states where marijuana is legal in January 2018. Last year, Sessions’ successor, William Barr, said he supports a softer approach to cannabis enforcement and changes to federal laws.

Still, uncertainty has beset financial institutions. In 2014, the Department of Treasury Financial Crimes Enforcement Network issued guidance under the Bank Secrecy Act clarifying how banks should do business in the legal cannabis industry.

“Unfortunately, this did not provide sufficient safety for many financial institutions,” said the report accompanying Resolution 103D.

Then last year, the U.S. House of Representatives passed the Secure and Fair Enforcement Banking Act of 2019. The bill, still pending at the Senate, would clear the way for banks to open accounts for marijuana businesses without fear of prosecution.

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