In what has been widely reported as “groundbreaking” statements and a “departure” from his conservative roots, U.S. Supreme Court Justice Clarence Thomas recently said that the federal ban on the cultivation and use of marijuana within states “may no longer be necessary or proper” and that inconsistent enforcement led to “traps” for marijuana businesses. Thomas went on to note how merely having both marijuana and a firearm could lead to a person “find[ing] himself a federal felon.”
To be clear, this is not a mic drop moment. Justice Thomas doesn’t want marijuana to be legalized. It’s not even clear if he wants to end federal marijuana prohibitions. Maybe Justice Thomas just wants less federal interference in state cannabis legalization. What we know for sure is that SCOTUS isn’t about to endorse cannabis or recognize it’s legitimacy.
The High Court on June 28, 2021 rejected the challenge from Standing Akimbo LLC, which operates a state-legal medical marijuana dispensary in Denver, Colorado. In a case styled, Standing Akimbo LLC v. United States, the U.S. Supreme Court said it would not hear an appeal in a case brought by this Colorado medical marijuana dispensary. The Court won’t even consider a Colorado marijuana dispensary’s dispute with the IRS over a deduction restriction for drug-related businesses. And yes, cannabis is still considered a “drug-related business” under U.S. federal law. The denial was accompanied by a statement from Justice Clarence Thomas, who criticized the federal government’s current stance on marijuana.
Thirty-six states now permit medical marijuana, and 18 states provide laws for adult-use (recreational) cannabis. But federal tax law does not allow marijuana businesses to deduct their business expenses. Under the U.S. tax code, legal businesses can deduct both the cost of goods sold and other expenses. However, marijuana dispensaries can only deduct the cost of goods sold because of federal prohibitions. That means the Colorado medical marijuana dispensary was denied federal tax breaks that other businesses are allowed.
According to court filings, the IRS is investigating whether Standing Akimbo improperly accounted for business expenses like rent and salaries when calculating its taxable income, which the tax code does not permit for businesses dealing in controlled substances.
Justice Thomas said the Supreme Court’s ruling in 2005 upholding federal laws making marijuana possession illegal may now be out of date. “Federal policies of the past 16 years have greatly undermined its reasoning,” he said. “The federal government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.” In his 5-page statement, Thomas noted that the Supreme Court had upheld federal prohibition of marijuana even within states in its 2005 decision in Gonzales v. Raich, on the grounds that allowing local use would undermine a “comprehensive” federal regime. The Supreme Court did not explicitly say why it turned down the Standing Akimbo case.
Colorado has legalized medical and recreational use of marijuana with soaring success. Yet marijuana is still illegal under federal law. Standing Akimbo has argued that the 4th Amendment to the U.S. Constitution protected its reasonable expectation of privacy with respect to the information sought by the IRS because it was filed with Colorado’s Marijuana Enforcement Division pursuant to a state law that criminalizes its disclosure. However, the 10th U.S. Circuit Court of Appeals disagreed, finding that the Colorado law did not apply to official investigations of unlawful activity by marijuana businesses.
“Given all these developments, one can certainly understand why an ordinary person might think that the Federal Government has retreated from its once-absolute ban on marijuana,” Thomas wrote. “Yet, as petitioners recently discovered, legality under state law and the absence of federal criminal enforcement do not ensure equal treatment.”
In sum, Justice Thomas’ remarks are something. His use of “equal treatment” and that the federal ban on marijuana may no longer be necessary are words that hang in the legal universe for which cannabis consumers and advocates want to find hope. I had the chance several years ago to talk with Thomas’ colleague and conservative compatriot, Justice Antonin Scalia. I asked him about the prospects for federal cannabis legalization. He replied, “Not in my lifetime.” And he was right. What’s important to understand about Justice Thomas’ remarks? Now we know that SCOTUS knows a house divided on the cannabis question cannot stand.