Local officials say that regulating the commercial pot industry could protect public safety, and would be a good source of tax revenue. But the Obama administration is pushing back. Local officials say that regulating the commercial pot industry could protect public safety, and would be a good source of tax revenue. But the Obama administration is pushing back.

With demand for medical marijuana surging around the country, some cities and states are looking to license commercial growing, including in California. Local officials say regulating the industry protects public safety and is a good source of tax revenue. But now the Obama administration is pushing back.

LaNier says the tripwire for the Feds' tough new posture came last year after Californians narrowly rejected Proposition 19, a measure to legalize recreational pot use. He says officials then zeroed in on local medical marijuana schemes like Oakland's, and decided to threaten prosecution.

"They're not going to go after someone who's standing on the corner or in their home using marijuana. This is going to be targeting those individuals who are facilitating production, trafficking, engaged in the distribution," La Nier said.

LaNier says the Justice Department letters state pointedly that even local officials could face criminal charges. But Jay Rorty, an ACLU attorney, says those warnings violate previous assurances from the Feds.

"It's important that the DOJ makes clear that people who are complying with valid state law do not fear federal prosecution," Rorty said.

Rorty and others insist that was the promise made in a 2009 Justice Department memo, which essentially stated: comply with state law and the feds won't prosecute you. But Justice Department officials are saying the exemption only applies to seriously-ill people, not commercial growers and not medical marijuana distribution outlets.

Benjamin Wagner, the US Attorney for California's Eastern District, says the Justice Department will enforce federal law.

"We've met with the DEA in this regard. People from Washington have been out to California to coordinate a statewide enforcement strategy," Wagner said.

It's unclear whether the Feds will target the state's most established medical marijuana operators, like Harborside Health Center in Oakland.

On a recent afternoon at Harborside, dozens of customers were eagerly inspecting gleaming glass cases displaying well-manicured marijuana buds. Despite a grueling audit battle with the IRS, owner Steve Deangelo says Harborside is turning over millions of dollars in sales each month. Still, he says, medical marijuana remains a risky business.