Matt Zorn: The Attorney Who Sued The DEA and Won #TheDime

Matt Zorn: The Attorney Who Sued The DEA and Won

Matt Zorn: The DEA was doing all these unlawful things, and there was nobody there to say, 'Hey, this is wrong.' There were no lawyers willing to sue them, there were no companies willing to sue them, even though everyone knew this was wrong. Bryan Fields: What's up, guys? Welcome back to an episode of Dime. I'm Bryan Fields, and with me as always is Kellen Finney. And with us we've got a very special guest, Matt Zorn, partner at Yetter Coleman. Matt, thanks for taking the time — how are you doing today? Matt Zorn: How are you guys? I'm doing well, I'm doing well. Kellen, how are you doing? Kellen Finney: I'm doing really well, because I get to talk to Matt — excited to talk cannabis, psychedelics, the law, the federal government, everything. How are you doing, Bryan? Bryan Fields: Yeah, I'm good. I'm excited to talk specifically about the federal government — some of their, let's call it, not-best behaviors — and then ask Matt some questions about what we can do better collectively. But before we get started, Matt, it's important — we've got a little East Coast/West Coast battle. Where would you position yourself? Matt Zorn: I've got to position myself East Coast. I was born and raised in DC, spent seven years in New York City, so I've never really spent time on the West Coast. I like Seattle, it's pretty good. California, there are parts I like. But I've got East Coast blood flowing through me — although, if you were to ask me, I'd actually rather be in Texas. Bryan Fields: That's fine — of course Texas is its own place — but it's good to have strong legal representation here on the East Coast for us, Kellen, so we're stacking our roster. Matt, before we get started, for our listeners, can you give a little background about yourself and how you got into this highly regulated space? Matt Zorn: I went to law school at Columbia, and during law school I took a class on drug law and policy — this was back in 2010, 2011 — and I was particularly interested in it. I dug even deeper than the curriculum, read all the cases, and found it fascinating. I realized there was no real way to become a lawyer in that space at the time, or even if there were jobs, I had a lot of student debt that wasn't going to get paid off that way. So I went and worked at a big law firm and learned how to be a lawyer for big corporations — fantastic training, learned the basic skills. Then I left for Marshall, Texas, and clerked for Judge Rodney Gilstrap, who had the busiest patent docket in the country. So I'm a patent litigator by trade. After that I wanted to stay in Texas and started working at Yetter Coleman doing IP litigation — I still do patent litigation to this day, plus commercial and contract litigation, high-stakes work. But the reason I'm in this quote-unquote space — cannabis, psychedelics, I'll just say controlled substances — is that in 2019, four years ago, I sat through a presentation by a researcher named Dr. Sue Sisley, where she talked about how the DOJ and DEA were blocking her application to grow cannabis for research. I was about a sixth or seventh year lawyer at that point, and I thought I knew just enough to help her. Afterward I went up to her and said, 'I'll represent you pro bono if you want to file a lawsuit.' Less than a month later we filed, and about a month after that the DEA caved. Everything has grown out of that first pro bono lawsuit. I still do a lot of pro bono work in the space — right now I'm representing a DEA special agent who was fired for using CBD oil. But I also take on paying clients with issues relating to controlled substances, whether counseling or litigation. I've built kind of a weird practice — maybe one of the weirdest at the firm — but it's one I really like. Bryan Fields: Let's stay with Dr. Sisley. In those early conversations, was there something that triggered you — that said, 'Hey, there's something here we need to fight back against, bigger organizations like the DEA'? Take us through that thought process. Matt Zorn: When I was listening to Dr. Sisley's problem, I wasn't acutely aware of her specific issue, but about eight years prior I had studied this and knew broadly that it was a mess — not just from a War on Drugs or racism standpoint, though that's certainly true, but from a legal-framework standpoint, chaos, and what the DEA was doing being unlawful. Dr. Sisley introduced me to a specific problem, but it also opened my eyes to a bigger one: the DEA was doing unlawful things and nobody was there to say it was wrong. No lawyers, no companies willing to sue, even though everyone knew it was wrong. This space is different from other regulated industries — if the EPA steps on the energy industry, the energy industry claps back with high-paid lawyers and says, 'This is unlawful,' and you go to court, sometimes you win, sometimes you lose, but that dynamic creates healthy boundaries between regulator and regulated. You don't have that in the controlled substances space. Nobody develops healthy boundaries — they develop workarounds, and then workarounds to the workarounds. My analogy is that the Controlled Substances Act and drug law is a swamp, and rather than drain the swamp, we've built a castle on top of it — and it's no wonder the castle keeps sinking every year. Nobody's there to challenge the unlawful regulations or the structure. State-level legalization is its own specialty, and a lot of people have great expertise there, but the federal stuff is administrative law, and the people with expertise in one aren't the same as the people with expertise in the other. Bryan Fields: Before we dive into all these cases, could you give our audience a broad overview of the DEA, the FDA, and the other organizations responsible for regulating the controlled substances space? Matt Zorn: There's a big three today. Everyone knows the DEA, and interestingly it's actually the smallest of the three in cannabis right now because of the non-prosecution posture of the federal government over the past few years. The DEA still does some things — it still burns crops, sends letters about Delta-8 analogs, and so on — but it's the criminal law enforcement arm that runs the Controlled Substances Act, requires licensure to study, and processes Schedule I applications. The FDA shares responsibility with the DEA over administering the schedules because it's responsible for the medical and scientific aspects, and it's also responsible for approving drugs for use in interstate commerce. A lot of CBD crackdowns aren't based on the Controlled Substances Act at all — CBD isn't a controlled substance anymore — but you still can't market it as a drug because of the Food, Drug, and Cosmetic Act, which makes it illegal to introduce a drug into interstate commerce and advertise it as such without FDA approval. The third agency is the IRS, and it's probably the most important of the three, even though people don't mention it as much — that's because of 280E, which has an enormous impact on the cannabis industry and will likely have an enormous impact on the psychedelics movement as it follows cannabis's footsteps. The IRS assesses that penalty — really it's not a penalty so much as a bar on deductions. There are other agencies too — the Patent and Trademark Office processes cannabis trademarks, for example — but DEA, FDA, and IRS are the big three that most impact legalization. Bryan Fields: Going back to the DEA — you're there with Dr. Sisley, you realized nobody was checking them before you made that move to sue. Did you speak internally with your team, and if so, did anyone say, 'Matt, that's someone else's fight'? Matt Zorn: I ran it by the firm — I was an associate at the time, wrote up a memo. But the doctor was a researcher, so I wasn't taking on a representation for the cannabis industry. Second, the research was for veterans with PTSD. Third, I said, look, she's got a legitimate claim, this isn't a phony grievance. My firm's position is that we want worthy clients with worthy causes and meritorious claims, so there was never any hesitation. We've spent over a decade trying to reform the Texas foster care system, for example — we like hard cases, not easy ones, both on the pro bono side and on bet-the-business client matters. The firm has been very supportive of everything I've undertaken. Bryan Fields: From a broad-stroke perspective, back in 2019 the only place you could acquire cannabis federally for research purposes was the University of Mississippi, correct? Now there are seven additional licenses that have been issued — is that a direct result of some of this work? Matt Zorn: Absolutely, it's a direct line to what we did. After that case, the process moved. We filed another lawsuit where we got a secret memo out of the Office of Legal Counsel explaining why the program had stalled, then filed a third lawsuit, which we never won, but our client, Dr. Sisley and Scottsdale Research Institute, ended up getting a license, and so did other applicants — because the program was pushed along, almost certainly by the litigation. It's no coincidence the program started moving as soon as we started filing lawsuits. That said, if you ask the research community whether the supply of cannabis has drastically improved, it hasn't gotten much better, and the reason is the law was only one part of the problem. The MSOs and the industry don't appear too interested in funding real research, and none of these operations are that well-funded. There are researchers at many institutions interested in studying real-world cannabis the way people actually use it, but that's not where the industry dollars are going. Kellen Finney: It sounds like there's a cat-and-mouse game — people are fighting for their lives, and cash is such a premium asset that funding research becomes more of a 'nice to have' for another time rather than a priority. Matt Zorn: That's one aspect of it. I think the industry is focused on immediate cash flow — and yes, 280E plays into that — but I also think the cannabis industry likes doing business the way it does and doesn't necessarily want to move into the FDA-approved lane. If you're a business that doesn't want an FDA-approved product, why would you pay for that research? That's a rational choice, but it means the research isn't going to happen no matter what happens with the laws, because there's no economic incentive. Loosening research restrictions is essential, but cannabis research still lags far behind psychedelics, partly because the FDA isn't friendly to the idea of studying smoked or vaped cannabis, which is how a lot of people actually consume it. It's much harder to get that through the FDA than a tincture, so it's entirely rational that companies don't want to fund research the FDA won't accept anyway — which is a shame, in my view, because if that's how people actually use cannabis medically, we should be studying it that way. Kellen Finney: For sure — smoking is damaging to lung tissue and can cause cancer from inhaling free radicals. But if that's the majority way it's consumed, I'd at least want the research to understand those aspects and back up those claims. Matt Zorn: Right, but it's still how people use it. It's a lot like the vaping-versus-combustible-tobacco debate — is vaping better than smoking a combustible? I think that's the more useful question. With cannabis, would you rather have a standardized product with fully disclosed risks, similar to how we have relatively standardized beer instead of moonshine? I'm fine with products that are bad for you as long as the risks are fully disclosed. Bryan Fields: Do you think part of it is the industry looking at what happened to tobacco — decades of research eventually leading to a massive hammer coming down — and executives worrying that funding cannabis research could complicate the push for federal legalization if it reveals downsides? Matt Zorn: That's possible, but that's already the prohibition side of the debate saying it as if it were true. I've never found 'we don't want to research this because we don't want to know the truth' to be a persuasive reason not to do something. Kellen Finney: I'll take the other side — I wonder if the pharmaceutical and tobacco industries aren't interested in some of these advancements so they can protect their own moats, because if cannabis turns out to have real medicinal benefits, that changes the conversation around how the pharmaceutical industry adapts and protects its turf. Matt Zorn: That's a valid point, though I'd push back on 'if it has medicinal benefits' — it obviously has medicinal benefits. As a culture we've become addicted to the idea that the only way to know something is through double-blind, placebo-controlled studies, when really we have thousands and thousands of anecdotes that are enough to know something is medically useful without that gold-standard process. I don't think there's a serious debate that cannabis, administered in some form, helps cancer patients dealing with pain. That's why cannabis stayed on Schedule I so long — the federal government said you can't know it's medically useful until you show safety and efficacy through that process, and that's just not how we assess most things in daily life. Bryan Fields: When you're having these conversations with the DEA, FDA, or lawmakers, are they dismissive, or receptive? How does that go? Matt Zorn: The DEA doesn't want to hear it. What underlies Schedule I is interpreting the phrase 'currently accepted medical use' to basically mean FDA approval — a five-part test around safety, efficacy, and being well-recognized by experts, essentially everything you'd need for FDA drug approval. Courts are trying to grapple with this now, but the agencies aren't bending, and I don't think the FDA will either — it's very used to a pure pharmaceutical model. Look at what they just did with CBD regulation — they punted and said CBD hasn't been approved. I don't see a friendly audience in government for these arguments yet. Bryan Fields: I was watching you speak at Psychedelic Science, and you went through some of these procedural cat-and-mouse games — like the government not issuing a final decision so you can't move forward. Can you walk us through that? Matt Zorn: One legal strategy federal agencies use a lot is arguing there's no standing — meaning the person before the court doesn't have a sufficiently vested interest — or that there's no final agency action, or that you haven't exhausted administrative remedies, meaning you have to let the agency make a decision before you can go to court. If you don't check off all these procedural boxes, the court never reaches the merits. In our third Sisley case, we had great merits arguments but lost on a procedural problem, so we got thrown out without a ruling on who was right. The same thing happened in the AIMS Institute psilocybin rescheduling case — the court said there was no final agency action, so we couldn't proceed. So instead of asking the DEA how to get something done, we submitted an actual petition for an exception, which they denied — and a denial is a final agency action, so we could appeal. Agencies in general, not just the DEA, can take years to respond to petitions — the Administrative Procedure Act requires action within a 'reasonable time,' but courts have interpreted that to mean up to two years or more, versus what most people would expect, like a professor grading a final exam within a reasonable few weeks. It's not necessarily bad faith, but things move very slowly, and courts are reluctant to force agencies' hands the first time around. This matters because a lot of people in cannabis want immediate results, but there's a difference between getting quick results and actually fixing the underlying problem through careful, deliberate, persistent strategy. A lot of today's problems stem from state reform racing ahead while the federal government never moved, widening the gap between state and federal law instead of keeping them aligned. We shouldn't repeat that with psychedelics — state reform should continue, but ideally roughly in step with federal reform. Bryan Fields: Does that mean someone like you has to take this slow, methodical approach to iron out the kinks, or is there another way to align state and federal progress? Matt Zorn: I think we need to press on the federal government as vigorously as people press at the state level, rather than assuming nothing can get done federally. For psychedelics, that might mean not trying to get the federal government to legalize psilocybin overnight, but instead pushing for modest rescheduling so terminally ill patients who've exhausted other treatments can access it now instead of waiting for full FDA approval. I think there's real support on the Hill for that kind of incremental approach, even if some lawmakers won't want to make it their signature issue. If we do that consistently at the federal level while states continue their own reforms, we avoid recreating the huge state-federal gap we have with cannabis, which happened because federal reform only ever moved through executive non-prosecution policy, an experiment, rather than legislative change — and we should learn from that. Kellen Finney: It might come down to a mindset where individual companies feel they can't personally make a difference, versus the mindset you brought to Dr. Sisley's case — recognizing something is wrong and deciding to act. Matt Zorn: Right, and it's frustrating because I don't think the industry always understands why it has the problems it has. Take 280E — it exists because of a 1981 or 1982 tax court case involving a drug dealer taking ordinary business expense deductions, which outraged Congress during the height of the War on Drugs under the Reagan administration, leading to a hastily written statute tied to drug trafficking. If you don't see 280E as part of that bigger War on Drugs picture, you're missing how interconnected these issues are — like a Jenga tower. Simple possession, for example, seems to affect almost no one since the federal government rarely prosecutes it directly, but it matters enormously in immigration and public housing contexts. If the industry wanted to fix the system it built its business on, it would attack these connected issues the same way the NRA attacks any perceived infringement on gun rights — because it's a whole system, not isolated pieces. Bryan Fields: So is decriminalization the low-hanging fruit, or rescheduling to Schedule II, or something else — what's the first move? Matt Zorn: Decriminalization of simple possession is really important and something people across the spectrum can get behind — most people, including those with libertarian views on drugs, aren't in favor of drug dealing itself, and simple possession shouldn't put someone in jail when even this administration talks about treatment over incarceration. Rescheduling to Schedule II would also help, though there's not a huge regulatory difference between Schedules II through V; it would meaningfully help research. Honestly, I don't think we even need a Schedule I. We could also move administration of the schedules from the DEA to the FDA over time, and we should tackle civil forfeiture law — there's a whole drug-industrial complex that cannabis and psychedelics are on the losing end of. You take the low-hanging fruit, build momentum, and show that the sky doesn't fall, then move to the next issue. It's not necessarily about reaching full-scale legalization — I've never understood why large-scale trafficking isn't handled at the federal level like the ATF handles alcohol and tobacco, with smaller-scale enforcement left to the states, the way it works with basically everything else. I doubt that alignment will happen, given competing interests — including the pharmaceutical lobby and campaign donors. Bryan Fields: True or false — the DEA is an agency. Matt Zorn: The DEA is an agency. I assume you're referring to the litigation I'm involved in, where I argue the DEA is an agency and the government argues it isn't, because it's a component of the Department of Justice. I won't comment further on pending litigation, but something with billions of dollars in appropriations, an administrator, and employees across many cities and countries seems like it should qualify as an agency. I'm confident the court will review the arguments and reach the right decision. Bryan Fields: Let's go to the AIMS Institute case against Merrick Garland — can you give us the high-level view? Matt Zorn: I can give background, though it's pending litigation. Our client is a doctor seeking access to psilocybin for right-to-try or compassionate-use purposes, based on successful Phase 1 and Phase 2 trials and psilocybin's Breakthrough Therapy designation, for terminally ill patients. We first asked the DEA for an exception; they said they lacked authority. We went to court, which said there was no final agency action. So we submitted an actual petition for an exception, which they denied, citing the same lack-of-authority reasoning — but this time as a final agency action we could appeal. Simultaneously, we submitted a petition to reschedule psilocybin, based on something the government itself had said — that if it should be available for medical use, we should submit a rescheduling petition. They denied that too, and we appealed. We're now preparing a reply brief arguing the petition was wrongly denied, largely over what 'currently accepted medical use with severe restrictions' means. There's no dispute over standing or final agency action this time, but the DEA has suggested the court grant a 'voluntary remand,' which is when an agency asks to reconsider its own decision — another way for a court to avoid ruling on the merits. We're contesting that as well. Bryan Fields: So all of this is just so a doctor can try to help terminally ill patients who've exhausted other treatment options? Matt Zorn: That's exactly right, and your reaction is exactly why we're pursuing this case — it's kind of crazy that this is what it takes, and if we win, what we had to go through to get there. These are the narratives that need to be front and center to illustrate the problems with the system, because a story like 'our tax bill is really high' just isn't as compelling. That said, 280E is very much an equity and access issue too. Even if MSOs are the primary beneficiaries of eliminating 280E, that doesn't mean society as a whole doesn't benefit — lower prices could make cannabis more accessible, and companies freed from 280E could offer better benefits, like deductible health insurance, to retail workers. There's a difference between big Pharma or MSOs benefiting at the public's expense versus everyone benefiting from something together. Bryan Fields: My biggest fear is that if 280E continues, especially with what we're seeing in California, we could face an extinction event with a domino effect of companies failing. At what point does Washington realize there's a real problem? Matt Zorn: I don't see that realization coming easily, but those kinds of collapses have real ripple effects — people's livelihoods and even lives are at stake, and one company failing to meet its debt obligations cascades to others. I'm not a fan of bailouts or 'too big to fail,' but it's still not something you want to see. And it's already happening — in California, people are asking why get a license at all if you can just sell without one, pushing activity back into the illicit market. I'd like to see a cannabis industry that looks more like beer — commodity cannabis, craft cannabis, home-grow options — with the market sorting itself out, free of regulations like 280E that artificially tilt the playing field. Kellen Finney: If you had to rank them, what happens first — removal of 280E, federal legalization, or interstate commerce? Matt Zorn: Interstate commerce is a bit of an odd one — it's never been clear to me why people assume there's no interstate commerce possible today. If cannabis gets rescheduled but remains outside FDA approval, there's an interesting angle where you could run something like a cannabis café that's entirely intrastate — grown, sold, and consumed on site — putting it outside FDA jurisdiction, similar to the Amsterdam coffee-shop model. I think 280E is the first thing likely to change. There's a scheduling review underway, and I believe cannabis will get rescheduled — if it lands at Schedule III or below, the 280E problem disappears entirely. Bryan Fields: What's your guess — Schedule III or below? Matt Zorn: I don't think they'll leave it at Schedule I — the industry's too big now, and something has to give, because otherwise the industry could actually fail. Bryan Fields: Some of these numbers are not good — I think the top ten MSOs alone owe something like eight hundred million to a billion dollars in back taxes. Matt Zorn: Right, and don't forget the ancillary businesses — testing labs and others that depend on MSOs. Even if you don't love MSOs, rooting against them means rooting against the whole ecosystem around them, which I find puzzling. Getting rid of 280E lifts the tide for almost everyone — the only party that doesn't benefit is the IRS, and they've even said they'd rather not be paid in cash anyway. Bryan Fields: Switching gears — are we facing a potential IP battle in psychedelics or cannabis, now or in the future? Matt Zorn: I'm not sure. A lot of psychedelics IP is tied to the FDA drug development process, which is more of a pharma-style specialty. In cannabis there hasn't been much IP conflict — there are countless cannabis varietals and smoking cannabis has been around forever, so I don't see major battles brewing, though there could be trade secret disputes over manufacturing techniques, similar to any other industry. You don't see IP wars in the tomato industry, for instance. I do think federal legalization would bring more lawsuits generally, simply because more lawyers will be comfortable engaging and more money in the space tends to generate more disputes. Right now, it's unclear whether you could even collect on a judgment, or whether a federal court would hear a cannabis-related suit at all. Bryan Fields: Before we do predictions, we ask every guest — if you could distill your experience into one main takeaway for the next generation, what would it be? Matt Zorn: The biggest contributor to my success is that I trained to become a lawyer, not a cannabis lawyer or a psychedelics lawyer — I learned basic skills: reading, writing, thinking critically, deposition skills, and I became a good lawyer in IP and high-stakes commercial litigation before I ever seriously entered this space. I think that made me a better lawyer here too, because those skills transfer everywhere — a lot of what I do, even in the Controlled Substances Act space, is really administrative law. My advice is to think broadly and develop skills rather than just substantive industry knowledge. Learn how to practice law generally first, then drill down into the specific area, rather than jumping straight into cannabis law. Bryan Fields: Prediction time, Matt — hindsight is 20/20. What would you have done differently to set the cannabis industry up to thrive? Matt Zorn: I would have pushed harder on medical cannabis reform at the federal level sooner. Recreational legalization was always going to be a hard sell federally, but a strong push on medical could have helped remove a lot of the barriers rec is running into now. Medical was pushed hard and successfully at the state level, and rec followed right behind it, but we never got real traction on medical federally — things like banking might have been achievable around medical before recreational took off. Now it's hard to even discuss medical federally because it gets conflated with the push for recreational. Kellen Finney: I'd add that when GW Pharma got Epidiolex rescheduled, there was an opportunity to push harder for rescheduling THC and CBD themselves as compounds, but it felt like GW ran out of steam or funding after fighting that prohibition battle for so long, took their win, and moved on — especially since this was around 2018, right after Canada legalized and momentum was building around the Farm Bill. Bryan Fields: I'd say pushing back on and checking government behavior earlier would have been critical, so we didn't compound the problem as more states came online. We all agree there are medical benefits, yet we're not doing much logically to fix banking or 280E, which hurts operators and research alike, while regulators effectively tell the industry to just figure it out. That reactive mindset got us into a problem that keeps compounding in the wrong direction. Matt Zorn: I totally agree with that. Bryan Fields: Matt, for our listeners who want to get in touch or read more from you, where can they find you? Matt Zorn: On Drugs, at ondrugs.substack.com. If someone's looking for representation, I'm an okay lawyer, I've had some pretty good successes — I practice at Yetter Coleman. My email is mzorn@yettercoleman.com. I do IP litigation, contract litigation, basically any type of business litigation — and I'm pretty good, especially when I'm up against the government. Let's knock out those wins. Bryan Fields: Thanks for taking the time.