Illinois Cannabis Programs Hampered By Federal Red Tape

Apr 30, 2019

Existing rules around the Illinois medical cannabis program could make the rollout for recreational use a less daunting task. But there are plenty of unanswered questions at the federal level which could complicate the process.

Illinois “went green” in 2013. That’s when lawmakers enacted the medical cannabis pilot program for people with qualifying conditions. Now the General Assembly could legalize recreational marijuana use.  Northern Illinois University Political Science Professor Mitch Pickerill says the strategy has worked in other cannabis-friendly states.

This story is part of a weeklong series from Illinois public radio stations focusing on the potential impact of marijuana legalization.

“The move to recreational, because it expands it, has tended to happen where you already have a medical marijuana regime in place, and so that makes it a lot easier for growers and dispensaries to work with the state and comply with licensing because all you’re really doing is expanding the user base,” he said.

Rose Ashby is a field director for the lawmakers who are sponsoring the measure. She says the biggest obstacle to legalization is the federal classification of cannabis under the Controlled Substances Act.

“Schedule 1 drug tells us it has absolutely no medical value and it is highly addictive,” she said.

In 2013, then-U.S. Deputy Attorney General James Cole released a memorandum stating the federal government wouldn’t expend its resources to enforce federal cannabis law in states that legalized it. This is provided the states have “strong and effective” regulation on growers, dispensaries, and users. But DOJ rescinded the Cole Memorandum last year.

Pickerill says the ambiguity creates tension.

“Whether it’s medical or not, the fact that state law makes something legal that federal law makes a crime and that the U.S. Supreme Court says the federal law can preempt the state laws," he said. "There’s a risk for anybody growing or selling cannabis.”

BANKING WORRIES

Ashby says this extends to parties that have business relationships with growers and sellers. Banks worry that doing business with the cannabis industry could put their federal charters at risk.

“So cultivators selling to dispensaries, they pay in cash," she said. "Anybody who goes in and buys in a dispensary can’t use their debit card or their credit card, because they have to pay in cash.”

Debit cards are accepted at some U.S. dispensaries. But this can still be a barrier to the unbanked.  Regardless of how dispensaries collect payment, the lack of transparency in cash transactions creates concern.

“That makes them a target for criminal activity, for fraud, or for tax evasion," said Illinois State Treasurer Mike Frerichs. "We would like to prevent that, as the chief banking officers in our state.”

To that end, Frerichs and several counterparts pushed for the SAFE Banking Act to be introduced in the U.S. House. It removes the risk of federal sanctions on banks that interact with legal state cannabis businesses. Frerichs supports similar measures at a state level. 

“We’re offering them a linked deposit program that would provide low-interest loans to the banks in order to bank this industry,” he said.

There’s also been a major overhaul to the state’s medical cannabis system. Then-Gov. Bruce Rauner signed the Alternative to Opioids Act into law last year. The law allows patients with an opioid prescription to substitute that medication with cannabis. It also affects federal participation.

"We used to ask our patients to have FBI background checks," Ashby said. "We no longer do that in our medical program."

But current federal law still leaves open the possibility of prosecution.

“Right now, each of these industries is developing on a state by state basis," she said. "You can’t transport anything over state lines. Everything has to be produced here.”

Legalizing recreational use in Illinois could expand the state’s cannabis regulatory standards beyond medical products. It may also result in Illinois granting additional cultivator and dispensary licenses to account for recreational demand. Pickerill says even with legalization, state government should remain vigilant.

NIU Professor Mitch Pickerill

“I think it’s really important that there be a sustained kind of monitoring and effort to do research so we understand better the effects of cannabis, especially on the medical side, but also the policy impact,” he said.

But the state/federal dichotomy won’t be resolved unless Congress reclassifies cannabis. Treasurer Frerichs says state policies may prompt federal action.

“There are now 33 states that have some form of legal cannabis," he said. "This is putting great pressure on Congress to bring federal laws up to date with our states.”

Until that happens, medical and recreational cannabis cultivators, distributors, and users will continue to operate in a legal grey area as they wade through the red tape.