Felony state drug smuggling charges pending in Minnesota against two former executives of a medical marijuana dispensary highlight the difficulties of operating in an industry where state and federal laws are at odds.

That may be especially true now that U.S. Attorney General Jeff Sessions has rescinded the so-called Cole memo, which formerly told federal prosecutors to focus on drug cartels and cross-border trafficking, not marijuana outlets complying with state regulatory schemes, legal experts say.

In the Minnesota case, the former chief medical officer and security officer of medical marijuana company Vireo Health LLC, Dr. Laura Bultman and Ronald Owens, respectively, are charged in Minnesota state court with illegally transferring medical cannabis across state lines. They were charged after they allegedly transported cannabis oil in 2016 to New York to keep the company from missing a state deadline to start business there under a newly enacted New York law allowing medical marijuana distribution, according to court documents and news reports. Vireo Health, based in Minneapolis, is the parent company of medical marijuana dispensaries in Minnesota, New York and Pennsylvania. 

The defendants have pleaded not guilty to the charges. In commenting on his client's case, Bultman's attorney, Paul Engh, cited the uncertainty surrounding the industry and its legal scheme.

“The medical marijuana industry is in its infancy, the rules have never been
interpreted, and are patchwork and uncertain from state to state,” he said in an emailed statement. “What we do know is that Dr. Bultman, who enjoys distinguished reputation, acted in good faith to serve patients in evident need.”

Owens' lawyer, Ryan Garry, declined to comment on the case because it is still pending.

A spokesman for Vireo Health did not respond to an emailed request for comment, though in prior news reports he has pointed out that neither the company nor any of its affiliates are parties to the criminal case and that state regulators in New York and Minnesota last summer renewed those states' licenses.

Minnesota and New York are among the 29 states and the District of Columbia where marijuana use in some form is legal. But because marijuana remains classified as a Schedule I drug under the federal Controlled Substances Act, its use is regulated by the individual states. In addition to being prohibited by state regimes, transporting medical marijuana products in their final form across state lines brings heightened federal scrutiny, despite the Cole memo's general hands-off approach in marijuana-legal states.   

“You're not going to see a lot of interstate commerce at this point because of the federal government's stance,” said Adam Dolan, an associate at Goldberg Segalla in White Plains, New York. 

But with the rescission of the Cole memo, it's difficult to determine if the DOJ will begin going after particular states or dispensaries for violating federal laws against distributing marijuana, mainly because Sessions' memo wasn't clear on the matter, Dolan said. He added, however, that the agency is temporarily prohibited from spending any federal funds on prosecuting marijuana-related activities that are allowed under state law, due to the recently renewed Rohrabacher-Blumenauer Amendment.

Dina Rollman, chief compliance counsel of Chicago-based cannabis company Green Thumb Industries, said of the rescission's shift of more prosecutorial discretion to U.S. attorneys, “You have to have your finger on the pulse on a very local level.” The shift could lead to starkly different marijuana policies even within states that have multiple federal districts. “It's not enough to look at each state as a state,” Rollman said.

Despite the uncertainty, there are steps that medical marijuana executives and their in-house lawyers can take to stay off the feds' radar, the experts said:

• Make sure you are abiding by the regulations for all states in which you are operating, Dolan said. Breaking those rules by, for example, overproducing or transporting across state lines will get you “into [federal regulators'] crosshairs, he added.
• When you are unsure about state regulators' policy on a particular matter, ask them for guidance, said David Kotler, a shareholder with the law firm of Cohen Kotler in Boca Raton, Florida, who has a practice in medical marijuana business law for Florida. “I'm a fan of being proactive,” Kotler said. “If something hasn't been litigated and it's not in a statement, see if you can get a policy opinion from the department. Then you have something to fall back on if need be.”
• In addition to working closely with the regulators, work with other players, both state- and industrywide, said Bret Kravitz, chief corporate counsel at Green Thumb Industries.

“We're all competitors, but at the end of the day, we need each other to be compliant for the better of the program and what we're trying to achieve here in ensuring that patients have access to medicine,” he said.