* Six states have legalized marijuana for recreational use
* Trump previously said pot legalization “up to the states” (Adds federal funding restrictions on medicinal marijuana, California reaction, Trump’s previous marijuana comments, banking relationships with marijuana businesses)
By Sarah N. Lynch
WASHINGTON, Jan 4 (Reuters) - The U.S. Justice Department on Thursday rescinded an Obama administration policy that had eased enforcement of federal marijuana laws in states that legalized the drug, instead giving federal prosecutors wide latitude on pursuing criminal charges.
The action by Attorney General Jeff Sessions could have damaging consequences on the burgeoning marijuana industry in the six states including California and Colorado that have legalized the drug for recreational use, plus dozens of others that permit medicinal use.
Justice Department officials who briefed reporters about the policy change declined to say whether the department might take legal action against those states, saying further steps were “still under consideration.”
Sessions, known as a strong opponent of legalizing marijuana, stopped short of directly encouraging U.S. prosecutors to bring marijuana cases.
His action, outlined in a one-page memo, drew condemnation from marijuana legalization advocates and politicians in both parties who said it trampled on the rights of voters in states where the drug is now legal and created uncertainty about how strictly federal drugs laws will be enforced.
The announcement came three days after California formally launched the world’s largest regulated commercial market for recreational marijuana.
The administration’s move raised questions about how it might impact tax revenues in states that permit some form of legal marijuana use.
It also created uncertainty for banks, which have already been fearful about having a business relationship with the marijuana industry due to concerns they might run afoul of anti-money laundering rules.
The policy put in place under Democratic former President Barack Obama, outlined by then-Deputy Attorney General James Cole in a series of memos, recognized marijuana as a “dangerous drug,” but said the Justice Department expected states and localities that authorized various uses of the drug to effectively regulate and police it.
The Obama-era policy had discouraged federal prosecutors from pursuing marijuana-related criminal crimes in states that had legalized the drug. The Trump administration policy gives federal prosecutors around the country discretion to enforce the existing federal ban on marijuana.
There has been a surge in legalization of marijuana in U.S. states in recent years. Other states that permit the regulated sale of marijuana for recreational use also include Washington, Oregon, Alaska, and Nevada. Massachusetts and Maine are on track to do so this year.
California Lieutenant Governor Gavin Newsom, a Democrat, said his state will pursue “all legal, legislative and political options to protect its reforms and its rights as a state.” He said the Trump administration’s position “defies facts and logic.”
Republican Senator Cory Gardner of Colorado said on Twitter that the administration’s action “directly contradicts what Attorney General Sessions told me prior to his confirmation.”
Gardner added that he would take all steps necessary to fight the measure, including possibly holding up the Senate from voting on pending Justice Department nominees.
The administration’s action seemed incongruous with comments that Trump made during the 2016 presidential campaign. Trump told a TV news reporter that the decision to legalize marijuana should be left “up to the states.”
Among companies that have invested in the industry, Scotts Miracle-Gro, a gardening product manufacturer, has spent hundreds of millions of dollars to acquire companies that sell soil, lighting, fertilizer and other products to marijuana growers. Shares in the company dropped 3.8 percent to $104.54 after the news of the policy shift, before paring losses later in the morning. Several Canadian marijuana-related stocks also fell sharply.
Sessions has made no secret about his disdain for marijuana. He has said the drug is harmful and should not be legalized, and has also called it a gateway drug for opioid addicts.
The Sessions memo did not distinguish between enforcement against marijuana used for recreational versus medicinal purposes. But his department’s ability to pursue criminal charges related to medicinal marijuana remains in doubt.
Since 2014, federal lawmakers have attached language to spending legislation that explicitly bars the Justice Department from spending resources to enforce cases in states where medicinal marijuana is legal.
The San Francisco-based 9th U.S. Circuit Court of Appeals in 2016 ruled that the Justice Department cannot prosecute people over medicinal marijuana if they complied with their state’s rules and regulations. But the ruling held that people who violate the medicinal marijuana laws in their states can face federal criminal prosecution.
A task force created under a Trump February 2017 executive order, comprised of prosecutors and other law enforcement officials, was supposed to study marijuana enforcement, along with other policy areas, and issue recommendations.
Its recommendations were due in July 2017, but the Justice Department has not made public what the task force determined was appropriate for marijuana. Department officials on Thursday declined to disclose what the task force recommended.
Reporting by Sarah N. Lynch; Additional reporting by Susan Heavey; Editing by Will Dunham and Frances Kerry