Thank you for the opportunity to submit a written statement and testify at this hearing.REFAs the Rumpel Senior Legal Fellow at The Heritage Foundation, much of my recent scholarship has focused on drug policy and the involvement of foreign countries, including China, in the illicit drug trade.

Introduction

Most debates over the rescheduling, decriminalization, or legalization of cannabis, known in the lingo as “marijuana,” focus on the public health question of whether it is a relatively harmless intoxicant or a medically hazardous drug.REF This hearing, by contrast addresses a homeland security aspect of the controversy over cannabis: namely, the problem of control by Chinese organized crime elements (or Triads) of the unlawful medical and recreational cannabis markets in the United States.REF That is an important subject worth serious consideration.

It would be troublesome if any foreign nation gained a dominant position in any criminal market in the United States. But the subject of this hearing concerns a far, far more severe problem. The People’s Republic of China (PRC) and the Chinese Communist Party (CCP) are committed enemies of the United States.REF They seek to displace the United States as the world’s dominant military and economic power by no later than 2049, the centennial anniversary of the founding of the PRC. For that reason, it is a matter of paramount and urgent concern for the nation’s security that Chinese organized crime elements have infiltrated the American states that have legalized cannabis for medical or recreational purposes.

I. Chinese Organized Crime’s Involvement in the U.S. Domestic Cannabis Industry

According to the U.S. Drug Enforcement Administration (DEA), “Chinese and other Asian [Transnational Criminal Organizations, or TCOs] have taken control of the marijuana trade” in the United States.REF Over 10 years, “Chinese TCOs have come to dominate the cultivation and distribution of marijuana across the United States,” a development seen from California to Oklahoma to Maine.REF Most of the Chinese TCOs’ cannabis cultivation occurs in states that have legalized cannabis production under state law, although the TCOs often relocate to other states once they are discovered.REF According to a recent report by the federal High Intensity Drug Trafficking Areas entitled Chinese Nationals and Marijuana in the United States, “[a]n unprecedented expansion of Chinese-operated marijuana farms has been tracked across the United States, with operations from California to Maine,” meaning that “Chinese marijuana operations now dominate the U.S. illegal drug market at levels never seen before.”REF

Various other parties—including federal, state, and local law enforcement officers, Members of Congress, and investigative journalists—have reached the same conclusion.REF

Chinese organized crime has been able to move into the American cannabis industry because—contrary to what cannabis reform advocates have told us for the last 60-plus years—the legalization of cannabis has not eliminated a black (or grey) market for that plant.REF Since the 1960s, cannabis reform proponents have argued that a black market will always exist to meet the consumer demand for illegal cannabis, so the best way to eliminate that market is to legalize and regulate its cultivation, distribution, and sale. The availability of legally sold cannabis, we were told, would eliminate the black market for two reasons. The average person wants both to avoid arrest, prosecution, and imprisonment for purchasing cannabis and also prefers doing so from an above-board store with a reputation for selling a safe, reliable, and uniform product instead of buying a potentially dangerous substance with an unknown effect. Accordingly, the argument concluded, the illicit cannabis market would disappear through the ordinary work of basic economics and consumer choice in a legitimate market.

That is not what happened. As I explained in my article China and Cannabis:

History has proved the reformers wrong; illicit markets are still with us today, nearly 30 years after California rolled the first cannabis snowball downhill. According to estimates made by Whitney Economics, which analyzes the cannabis industry, the illegal markets constitute approximately 75 percent of the $100 billion industry, and two-thirds of the cannabis sold in these markets is grown domestically. Even the Supreme Court of the United States has acknowledged that “there is an established, albeit illegal, interstate market” for cannabis in the United States. Parties who grow and sell cannabis without a license have continued to prosper in states where it may be lawfully distributed under state law. The illicit industry in some states—California, where the contemporary cannabis revolution began, is a prime example—is larger than the lawful one that was supposed to drive the former out of business.

The reason for the black market’s survival is Economics 101 “with a dose of convenience thrown in.” Unlicensed growers do not pay the taxes that licensed businesses pay, nor do they comply with the environmental and labor regulations that increase the operating costs for regulated firms. The result is that they can sell cannabis at a lower price than state-licensed stores can charge. Additionally, some people will fear being “outed” as users because it could cost them their jobs or damage their reputation, so they will continue to purchase cannabis on the sly. Cannabis grown for medical or personal uses, which are not subject to any business taxes and regulations, can be sold locally in competition with retail stores. Finally, cannabis has been grown illegally in federal and state parks, which adds to the amount available for sale to the public. Illicit sales have become a fixture of the cannabis market, and there is no evidence that cannabis’s thriving black market will disappear, whether soon or ever.REF

II. The Potential Symbiotic Relationship Between Chinese Organized Crime and the Government of the People’s Republic of China and the Chinese Communist Party

There is reason to believe that Chinese Organized Crime is acting with the knowledge of, and tacit acceptance by, the government of the People’s Republic of China (PRC) and the Chinese Community Party (CCP). U.S. Senator Joni Ernst and 49 other Members of Congress made that point in a February 2, 2024, letter to then-U.S. Attorney General Merrick Garland.REF According to a 2024 report by ProPublica, “U.S. and foreign national security officials have alleged that the Chinese state maintains a tacit alliance with Chinese organized crime in the U.S. and across the world.”REF Brookings Institution drug policy expert Vanda Felbab-Brown concluded that “[t]he Chinese government has a complicated relationship with organized crime.”REF The PRC ostensibly condemns the Triads, but seems to acquiesce in their global fentanyl and methamphetamine drug trafficking networks. In addition, Chinese mobsters “overtly support pro-Beijing causes and covertly provide services overseas,” ProPublica noted, “engaging in political influence work, moving illicit funds offshore for the Chinese elite and helping persecute dissidents, according to Western officials, court cases and human rights groups,” and even provide “extra-legal” muscle for the PRC “to curry favor with the CCP.”REF Finally, there is evidence that a Chinese diplomat met with members of a suspected Chinese criminal network in Oklahoma.REF

It is important to realize that the PRC and CCP cannot escape responsibility for the actions of Chinese organized crime by arguing that there is no express agreement between the former two entities and the latter. In a criminal prosecution, the jury may “rely on inferences drawn from the course of conduct of the alleged conspirators.”REF As the Supreme Court of the United States has made clear, “[t]he doctrine of willful blindness is well established in criminal law.”REF as is the principle that the government may establish proof of a conspiracy entirely through circumstantial evidence,REF which appears to be in ample supply on this point.REF

III. Steps That the Federal Government May Take to Arrest and Claw Back the Infiltration of Chinese Organized Crime in the State-Legal Cannabis Industry

A. Actions that the States and Federal Executive Branch Can Take Without the Need for New Substantive Federal Legislation

There are various steps that the states and the Executive Branch can take to address this problem.REF For example, if a state has not yet adopted a medical- or recreational use cannabis régime, the state should not do so. In addition, states can take various actions to protect the nation against the PRC’s interest in acquiring real estate for spying or illegal drug activity, such as requiring real estate purchasers and lessees to identify all foreign individuals and foreign-owned or foreign-controlled companies with a legal or financial interest in their purchases or rentals. That would help to prevent the PRC from using third parties or sham corporations to obtain property for use as an indoor cultivation or production site for cannabis.

The U.S. Department of Justice also should undertake aggressive criminal investigations into, and prosecution of, the actions of Chinese organized crime elements for violations of one or more of several federal criminal laws. The most obvious place to start is with the Controlled Substances Act of 1970. Cannabis is a Schedule I drug, the category for drugs that lack a current medical use, have a high potential for abuse, and are dangerous even when used under a physician’s supervision.REF The cultivation and distribution of cannabis is a felony under federal law punishable by a lengthy term of imprisonmentREF that depends on the weight of a “mixture or substance” containing a detectable amount of delta-9-tetrahydrocannabinol (THC).REF The Department charged the parties in Maine and Massachusetts cases noted above with such drug offenses, for example.REF

But that is not all. From media reports and elsewhere, there appears to be evidence worth pursuing regarding the commission of other federal crimes that are ancillary to Chinese organized crime’s cannabis trafficking.">REF Those offenses might include money laundering, involuntary servitude, human trafficking, prostitution, fraud, and other federal offenses, such as violent crimes.REF Those offenses might already be under investigation by the federal government. If not, they should be.

B. Actions that Congress Can Take

Congress should consider whether federal legislation is necessary to protect uniquely national interests. The federal government has a surpassing interest in preventing any foreign power or nationals from purchasing or renting property that enables it or them to spy on sensitive federal locations (such as military bases), to commit federal offenses, or to generate illegal funds that can be used to undermine American interests in other ways. States cannot adopt domestic laws that interfere with the nation’s foreign policy, which is a uniquely federal interest, as the Supreme Court recognized in Zschernig v. Miller.REF As the Supreme Court explained in Haig v. Agee, “[i]t is ‘obvious and unarguable’ that no governmental interest is more compelling than the security of the Nation.” Accordingly, Congressional actions would be entirely appropriate.

1. Congress could establish a uniform property acquisition rule across the states.

Zschernig makes it clear that the President and Congress have broad power to define the nation’s foreign policy and protect its residents against harms resulting from foreign powers. Cannabis use, particularly by military age men and women, can weaken our national security by reducing, perhaps greatly, the number of potential soldiers, sailors, airmen, and Marines who are qualified and fit to serve. Congress therefore could regulate the acquisition of property, whether by purchase or leasehold, by anyone who is acting on behalf of, at the instigation of, or for the benefit of a foreign party, particularly the PRC or CCP. At a minimum, Congress could require that property owners notify the U.S. Department of Homeland Security whenever a Chinese national buys or leases real property.REF

2. Congress could expand the authority of the Committee on Foreign Investment in the United States.

Established by President Gerald Ford pursuant to the Defense Production Act (DPA) of 1950, the Committee on Foreign Investment in the United States (CFIUS) is an interagency committee authorized to review certain transactions involving domestic foreign investment, including certain real estate transactions by foreign parties.REF The committee has the authority to review such deals and advise the President as to whether to prohibit the transaction or allow it to go forward under whatever conditions he deems appropriate if he finds “credible evidence” that the transaction “threatens to impair the national security of the United States.”REF

Nevertheless, the CFIUS screen is not impermeable. Not every type of real estate transaction must be reported. CFIUS has decided that it lacks jurisdiction over so-called greenfield or start-up investments, and some parties have not made the necessary disclosures even for a “covered transaction,” which deprives CFIUS and the President of the information needed to decide whether to allow a particular transaction to go forward. Accordingly, Congress could revise the DPA to make it clear that there is no greenfield exception to CFIUS’s jurisdiction.

Conclusion

The High Intensity Drug Task Forces recently concluded that the problem discussed above “represent[s] a critical national security threat requiring coordinated federal response, specialized investigative units, and comprehensive legislative action to close regulatory loopholes that enable these criminal enterprises to operate.”REF There are steps that Congress can take to expose those enterprises and their illegal activities. The Homeland Security Committee and its Subcommittee on Oversight, Investigations, and Accountability has done the public a great service by exposing what is happening today. With luck, Congress will move forward to stem these problems.

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