Tribes and Cannabis: Federalism is Messy

Luke EwingRegulatory NewsLeave a Comment

tribes

Today’s “legal” cannabis industry grew out of the cracks in our federalist system (a system where other states or governments operate in addition to the federal government). In the US, we have state government powers and federal government powers. Sometimes they overlap; sometimes they conflict. Cannabis is only legal because the federal government has chosen not to enforce its own laws which require complete prohibition of the substance. Under this funky regime, nearly every state has legalized the plant in one form or another; even US territories are legalizing. Medical marijuana is now legal in every territory except American Samoa; the Northern Mariana Islands even legalized recreational marijuana last year.

So what about the other class of U.S. jurisdictions? Can tribes legalize marijuana on their lands? This month, a Republican congressman from Alaska submitted a bill that would protect tribes who legalize cannabis from being discriminated against when being considered for federal funding. As a fan of complex regulatory regimes, I have been curious about how this situation would actually play out on tribal lands. So, I did some research, and guess what…

…It’s super complicated! Because Indian Law* is also super complicated!

At my law school, we were offered eight credit hours on Indian Law, and if you asked the professors, they’d tell you that those still aren’t enough to really understand the subject.  Regardless, here’s a high level breakdown of the layers of complication and jurisdiction that make the opportunity for cannabis on tribal lands so complicated.

Tribes in the US
Current state of tribe reservations + where Simplifya is available

Very Generalized Indian Law*

*I know the term ‘Indian’ is controversial, but that is the term used in legal contexts, so I will use it here, albeit sparingly.

Generally, federal law applies on tribal lands because tribes are treated somewhat like independent nations, but the land is “held in trust” by the United States government. Depending on which state the tribal lands are located, state criminal law also applies, thanks to Public Law 280 (PL-280). However, even in states that have PL-280 jurisdiction, some tribes remain exempt. Additionally, tribal lands have their own version of the Cole memo, known as the Wilkinson memo. It adopts the eight policy goals from Cole (e.g. keeping cannabis away from minors, organized crime, and interstate commerce) that the DOJ wanted states to enforce in order to keep the federal government from intervening, but it also adds the caveat that the feds will consult with tribal leaders before deciding to intervene. But Jeff Sessions repealed those memos, right? Again, sort of. Although the memos are no longer dictating which policies every US attorney must consider, Sessions, in his own memo, said each attorney should use their own judgment to balance enforcement priorities. In response, many attorneys said, “okay, if I can choose my own policies, I’m just going to choose the policies outlined in the Cole memo.”  

While every tribe is still governed under federal law, depending on the attorney, they might choose not to enforce cannabis laws against tribes who maintain a well-regulated market within their territory. State criminal law only applies within “PL-280” states (CA, MN, NE, OR, WI, AK, NV, ID, IA, WA, SD, MT, ND, AZ, UT) unless you’re within one of the many intrastate exceptions to the law. (Some intra-state exceptions are for specific tribes, regions, or legal subject matter.)

But that’s not all; there’s yet another layer to further complicate things. Because PL-280 only gives the states criminal jurisdiction over reservations, the only state marijuana law that can legally be enforced is a law that makes it a crime to deal with marijuana. So tribes in PL-280 states are exempt from any regulations or taxes that legalized states have put in place, but not exempt from a full-on ban. This also has the strange logical result that tribes inside non-PL-280 states that prohibit cannabis could legalize marijuana within tribal boundaries.

Tribes in Illegal States

Regardless, a tribe that chooses to legalize within a non-legal state should still be wary of the federal government stepping in. Even without the feds, the state could just choose to harass people at the borders of their jurisdiction. South Dakota took this route when the Santee-Sioux tried to legalize marijuana use at a resort on their reservation. South Dakota had an especially weird situation because although they are a PL-280 state, their jurisdiction only applies on highways that run through the reservation. The attorney general convinced the tribe to abandon their plans by threatening to arrest “busloads” of people for “possession by ingestion” the moment they reenter the state’s jurisdiction. They also threatened to take the tribe’s crops by force, which probably would be very illegal, but the tribe elected to burn it all before law enforcement got involved.

In Wisconsin, the Menominee Tribe voted to legalize. But implementation has stalled after the DEA raided one of their hemp crops. The Menominee are also in a PL-280 state, but are specifically exempted from Wisconsin’s jurisdiction, so they should arguably have the power to legalize.

Tribes in Legal States

In legal states, the situation is a little less contentious; many tribes in California and Washington have legalized cannabis. In general, those tribes have agreed to implement the state regulations in exchange for a compact allowing tribal cannabis to leave the reservation. In Colorado, none of the Ute tribal governments have expressed interest in the industry, and the Southern Utes actively enforce a ban on cannabis in their territory.

Should You Open a Cannabis Business on Tribal Land?

Even with the threat of possible state or federal enforcement on one side of the equation, the potential benefits of freedom from state tax and regulation lie on the other side. Additionally, if the tribe organizes as a corporation, they are exempt from paying federal income tax. The 280E Internal Revenue Code tax issue has been a huge thorn in the side of the industry, and tribal entities could potentially avoid it. One final complication under Indian Law is that these tribal advantages only apply to tribal members and tribe-owned businesses. So if you want to enjoy the edge that comes with tribal sovereignty, you’d better work closely with the tribe.

There are a lot of hurdles to overcome, but the advantages to tribal licensing and regulatory systems could really give a cannabis business an edge. You can also trust that when a tribe decides to go this route, Simplifya will be close behind, breaking down the complex regulatory content to help keep your business compliant. Being a tribal cannabis business can be complicated, but there are sizable advantages if you – and they – can navigate the complex jurisdictional hurdles.

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