United States v. Stacy.
No. 25-6029. 9/26/2025. W.D.Okla. Judge Phillips. Controlled Substances Act—State Medical Marijuana Laws—Federal Prosecution—Drug Conspiracy—Maintaining a Drug-Involved Premises.
September 26, 2025
Stacy was an Oklahoma attorney with a legal practice centered on out-of-state clients who wanted to enter Oklahoma’s medical marijuana industry. Through his law firm, Stacy Legal Group (SLG), he created a two-entity business structure that would use a three-step process to facilitate commercial medical marijuana grows for his nonresident clients. First, Stacy would form a limited liability company (LLC) (the licensing company) to meet Oklahoma license requirements by having an Oklahoma resident own at least 75% of the LLC and the nonresident clients own the other 25% ownership interest. Second, Stacy would form another LLC owned by his nonresident clients, who would manage and operate the commercial medical marijuana grow through this second LLC (the operating company). The operating company did not apply for either an Oklahoma license or registration. Third, Stacy would create a management agreement between the licensing company and the operating company under which the licensing company granted the operating company (1) sole responsibility for lawfully producing marijuana, (2) the right to sell the marijuana production, and (3) a “management fee” equal to 100% of the revenue generated by the sale of the grown marijuana. In exchange, the operating company would pay an annual fee of up to $15,000 to the licensing company. The proceeds from this annual fee went to the Oklahoma residents in the licensing company. From August 2019 to at least June 2021, Stacy allegedly conspired with others using this scheme to subvert Oklahoma’s residency requirements for medical marijuana businesses. Stacy was criminally charged under Oklahoma law and, as relevant here, with two counts under the Controlled Substances Act: drug conspiracy, and maintaining a drug-involved premises. He moved to enjoin his federal prosecution, arguing that a congressional appropriations rider—an annual appropriations rider barring the Department of Justice (DOJ) from using its appropriated funds to impede state medical-marijuana laws (the rider)—prevents DOJ from using its funds to prosecute him. Following an evidentiary hearing, the district court denied the motion.
As an initial matter, the government challenged the Tenth Circuit’s jurisdiction over this appeal and the district court’s jurisdiction over Stacy’s initial motion to enjoin the prosecution. However, because the district court denied Stacy’s motion to enjoin his prosecution, the district court’s order is injunctive in nature, so this appeal falls within 28 USC § 1292(a)(1) as an appeal of an interlocutory order refusing an injunction. And the district court properly exercised its ancillary jurisdiction because to hold otherwise would render the rider effectively unenforceable.
On the merits, Stacy again argued that the district court abused its discretion by not enjoining his prosecution under the rider, asserting that it bars DOJ from funding his prosecution because his conduct is permitted under Oklahoma law. First, the parties disputed whether the rider applies to prosecutions of private individuals. The Tenth Circuit determined that based on the rider’s plain language, the rider bars prosecutions of private individuals who comply with state medical marijuana laws. To fall within the rider’s protection, the moving party must prove their compliance with the state’s medical marijuana laws by a preponderance of the evidence. Under Oklahoma law, to establish a medical marijuana business, a person must have (1) a medical marijuana business license from the Oklahoma Medical Marijuana Authority (OMMA), which requires Oklahoma residency; and (2) a registration issued by the Oklahoma Bureau of Narcotics and Dangerous Drugs Control (OBN), which allows the person to manufacture, distribute, or dispense medical marijuana. Here, Stacy failed to even substantially comply with Oklahoma’s medical marijuana laws by not disclosing the operating companies and their owners; Stacy’s two-entity business structure concealed their true ownership interests and involvement in the marijuana grows. Further, none of the operating companies in the two-entity structure applied for an OBN registration, nor could they obtain such registrations if they were to apply, because the operating companies need OMMA licenses to obtain OBN registrations but do not meet the 75% residency requirement for the OMMA licenses. The district court thus did not abuse its discretion in declining to enjoin the prosecution of drug conspiracy.
As to the charge of maintaining a drug-involved premises, the indictment alleged that Stacy knowingly and intentionally rented certain of his property for an unlawful marijuana-grow operation. Stacy argued that the district court did not identify any alleged violation of Oklahoma law, and he submitted an audio recording in which he supposedly informed his tenants that they could not grow marijuana without an OMMA license and OBN registration. He also claimed that he functioned merely as an attorney and landlord and that no evidence established his knowledge of the tenants’ marijuana-grow operations. But his former tenant testified that Stacy knew about the unlicensed marijuana grow at the rental property, and Stacy’s decision to rent property for the purpose of supporting an unlicensed marijuana grow violates Oklahoma law. Accordingly, the district court did not abuse its discretion in not enjoining prosecution of this count.
The order was affirmed.