Senate Struggles With Pot and Banking Laws

WASHINGTON (CN) - The Senate Judiciary Committee on Tuesday heard testimony on how to reconcile Colorado's and Washington's legalization of recreational marijuana with federal laws that prohibit banks from serving state-authorized marijuana industries.

Committee Chairman Patrick Leahy, D-Vt., called the hearing after Attorney General Eric Holder announced last month that the Justice Department would back off of prosecutions in states with loosened marijuana laws.

"Federal agents and prosecutors have scarce investigative resources," Leahy said at the hearing. "I really don't think they should be devoting them to pursuing low-level users of marijuana who are complying with the laws of their states."

Leahy echoed President Obama's statement last year that "there are bigger fish to fry."

Deputy Attorney General James Cole on Tuesday laid out the Department of Justice's policy toward states that have legalized marijuana for recreational use or medicinal purposes, citing eight priorities Holder gave to federal prosecutors in August.

Cole said the Justice Department's first priority is preventing distribution of marijuana to minors, and the second it to prevent money from its sale from falling into the hands of criminal organizations.

The DOJ also says it plans to act in cases of "drugged driving," trafficking marijuana to states where the drug is illegal, criminal enterprises that use the lax marijuana laws as pretext for trafficking other drugs, drug-related violence and growing marijuana on public land.

But even with the new guidelines, federal law creates a quagmire for legal pot-growers who want to operate a legitimate business.

"What I worry about is that we have some that take the position not to follow," Leahy said. "For example the banking industry is not willing to provide services to state-authorized marijuana dispensaries. They appear that they might be violating federal money laundering laws."

Cole said the government would address the banking issue, which has led dispensaries to operate on a cash-only basis, creating an environment vulnerable to violence.

"There are no perfect solutions here," said Cole. "We're working on it."

John Urquhart, sheriff of King County, Wash., which includes Seattle, testified that without banks, law enforcement officials have to deal with the potential for violence and the impossible task of preventing tax evasion.

Urquhart presides over the largest district in the country that allows recreational use of marijuana.

"My experience shows me that the war on drugs has been a failure," Urquhart said. "We have not significantly reduced demand over time, but we have incarcerated generations of individuals. ... The citizens of the State of Washington decided it was time to try something new."

Sen. Chuck Grassley, R-Iowa, co-chairman of the Senate Caucus on International Narcotics Control, criticized the two states' laws and the federal government's willingness to lend them credibility.

"Since Congress passed the Controlled Substance Act, the cultivation, trafficking, sale and use of marijuana have been illegal under federal law," Grassley said. "Marijuana's continued presence on this statute's list of illegal substances isn't based on whim. It's based on what science tells us about this dangerous and addictive drug."

Urquhart testified that the night before the hearing, he and a friend saw two men "approach a shady character" on a street corner to buy "weed."

Urquhart told the committee, "That doesn't happen in Washington State."

Grassley and other Republicans have resisted caving to public opinion polls that show support for legalization is on the rise, but Cole said the Obama administration is willing to work with states to regulate the criminal and health issues posed by legalization.

"The department has not historically devoted our finite resources to prosecuting individuals whose conduct is limited to the possession of marijuana for personal use on private property," Cole said.

Jack Finlaw, chief legal counsel to Colorado Gov. John Hickenlooper, told the committee that the best way to address Grassley's concerns is through robust regulation.

Finlaw said Colorado is working on rules that will prevent advertising pot to kids through cartoon characters and child-friendly products such as marijuana gummy bears.

The unusual hearing, which started late and ended early to facilitate briefings and meetings on the situation in Syria, was the first time Congress has addressed the issue since Colorado and Washington citizens passed the initiatives legalizing recreational use of marijuana.

Senators Leahy and Grassley were joined only by Sen. Richard Blumenthal, D-Conn., and Sen. Sheldon Whitehouse, D-R.I. for the hearing.

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