Marijuana is illegal under the prohibition laws of both the federal and state governments. The practice has evolved that federal law enforcement agents target “kingpins,” leaving the detection, arrest, prosecution and punishment of lesser offenders to state authorities. No law, however, stands in the way of federal police, like the Drug Enforcement Administration, going after small fry.

Indeed, the federal government has fought zealously to maintain the right to arrest and prosecute minor offenders. In the 2004 Raich case, the U.S. Supreme Court, at the government’s urging, upheld the criminal prosecution of a sick medical marijuana user who grew her own tiny supply, despite the fact that everything she did was entirely legal under state law.

In the second month of the Obama presidency, Attorney General Eric Holder announced that as a matter of Justice Department policy (not law), the DEA would not be raiding medical marijuana facilities that were in compliance with state law. He was silent as to whether the same policy will constrain the DEA from taking indirect steps to shut down the medical dispensaries, such as threatening to arrest and prosecute their landlords under federal criminal conspiracy laws, a common practice. After October, 2009, when the Justice Department issued written “guidelines” saying it wouldn’t be targeting people complying with state law as to medical marijuana, the raids diminished. However, in the spring of 2011 federal prosecutors in the medical marijuana laws have threatened state and local officials with arrest and prosecution if they carry out state law.  It is unclear if this new offensive represents a change in administration policy, or if the prosecutors are acting unilaterally.

If a state passed a taxation and regulation law, would it be running afoul of federal law?

No. There is no legal impediment to a state enacting such a law.* Implementing it, however, is another matter. The activities of persons engaged in or around cannabis cultivation and commerce, for which they would be licensed or otherwise permitted under state law, would likely constitute serious federal crimes. For example, farmers would be exposed to federal “manufacturing” charges, distributors to federal “trafficking” charges, and state employees who issued the licenses or the excise tax stamps to charges of “conspiracy.”

Although the Attorney General could announce a similar policy (not to prosecute people who are obeying state law) with regard to non-medical marijuana, that would hardly provide a solid foundation for a whole new legal/policy approach to controlling cannabis.

Unless a state is willing to exercise some chutzpah, changes would need to be made in federal law before a state’s regulation and taxation plan could go into effect. Ideally, those changes would resemble the 21st Amendment, repealing federal marijuana prohibition and liberating the states to experiment with a variety of taxation and regulation schemes, or retain prohibition if they choose. Alternatively, Congress could erect a national regulatory structure in which the states participate and benefit–or not–along the lines of the Cannabis Revenue Act.

As for the chutzpah, states have options to act unilaterally. That marijuana is prohibited under federal law does not mean that states must prohibit it too. Accordingly, a state could repeal its marijuana prohibition laws, and replace them with nothing, thus shifting the responsibility and expense for local enforcement to federal authorities. New York State did that in 1923, with alcohol, three years into Prohibition and ten years before repeal. (Some say that as a consequence, New York City, where speakeasies flourished, escaped the level of violence that plagued other large cities like Chicago and Detroit.)

In 1930, the voters of Massachusetts voted to repeal the Commonwealth’s alcohol prohibition laws. Curiously, the only geographic areas that didn’t support repeal were Martha’s Vineyard, Nantucket and Cape Cod, where rumrunning provided gainful employment. (Similarly, opposition to Prop. 19, the 2010 voter initiative in California, came from Humboldt County.)

In 1932, the voters of eleven other states repealed or modified their state prohibition laws. California, whose vote was 3 to 1 for repeal, went a step further with a constitutional amendment securing to the state government the exclusive right to tax and regulate the alcohol industry when legal under federal law.

A state feeling even spunkier could enact and implement a regulation and taxation scheme, leaving it to licensed farmers, processors, distributors and retailers to handle their own problems with the feds. Since a regulated system requires regulators, a state may want to provide legal protection to public employees charged with federal prohibition offenses.

A safe option for a state would be to enact a regulation and taxation plan, but with a proviso that it would not go into effect until necessary changes were made in federal law. That would keep states on the right side of the law, give them time to do serious planning, and send a strong message to Congress that states are ready to end the tax-exempt status of the marijuana industry.

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*“[W]e have always understood that even where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.” U.S. Supreme Court, New York v. U.S., 505 U.S. 144, 166 (1992) 2.26.11