When voters in Colorado and Washington state approved legalizing marijuana in 2012, those votes undermined an abusive—and profitable—police practice: civil forfeiture. Unlike with criminal forfeiture, under civil forfeiture people do not have to be convicted of or even charged with a crime to permanently lose their cash, cars, and other property. Police can then auction off that seized property and use the proceeds to fund themselves. In the 42 states that allow police departments to profit from forfeiture, that cash flow has funded both the militarization of police and allowed law enforcement to make ridiculous purchases, including a margarita machine, a Hawaiian vacation, and a Dodge Viper.

In Colorado and Washington, the federal government processed more than $36 million worth of cash and other property in civil and criminal marijuana forfeitures between 2002 and 2012. Pursuing cannabis cases earned local law enforcement in Washington an additional $6 million to $9 million in forfeiture revenue since 2008. Nationwide, the Wall Street Journal reported the federal government scored $1 billion in forfeiture from marijuana cases over the past decade.

Legalization now threatens that forfeiture revenue for the police departments that have relied on it. Legal cannabis and the subsequent drop in forfeiture have already caused one drug task force in Washington to cut its budget by 15 percent. That’s great news for due process and property rights.

But marijuana is still illegal under federal law, so local legalization has created ambiguity in civil forfeiture proceedings. Even in states where recreational or medical marijuana is legal, property owned by innocent people is still at risk thanks to “equitable sharing .” This federal program lets local and state law enforcement do an end run around state law and profit from civil forfeiture, simply by collaborating with a federal agency.

Equitable sharing is a two-way street: For the federal government to “adopt” a forfeiture case, cops can approach the feds and vice versa. The U.S. Department of Justice has applications online for agencies to apply for adoption and to transfer federally forfeited property. Crucially, criminal charges do not have to accompany a civil forfeiture case.

The proceeds from federal forfeitures are deposited into the DOJ’s Asset Forfeiture Fund. After the DOJ determines the size of the cut for the feds, equitable sharing allows the local police to take up to 80 percent of what the property is worth. In fiscal year 2012, the federal government paid out almost $700 million in equitable sharing proceeds to local and state law enforcement agencies.

Equitable sharing tempts cops to become bounty hunters, even in states with legal marijuana. Tony Jalali is living proof of this travesty. Jalali almost lost his business over four grams of marijuana.

After immigrating to the United States from Iran in 1978, Jalali became a successful small business owner. Jalali owns an office building in Anaheim, Calif.—worth around $1.5 million—that he rents out to fund his retirement.

Among the more staid tenants—a dentist’s office, an insurance company—was ReLeaf Health & Wellness, a medical marijuana dispensary. Posing as a patient with a legitimate doctor’s recommendation, an undercover Anaheim police officer bought $37 worth of cannabis from that dispensary. Keep in mind that medical marijuana sales were—and are—legal in California under state law, and this Anaheim cop worked for local law enforcement, not the feds.

Jalali never bought or sold marijuana. Jalali was not charged with any crime nor was he warned that renting to a dispensary could lead to civil forfeiture. “I had no idea I was doing anything wrong ,” Jalali said.

Yet for the DEA, which collaborated with Anaheim police in pursing the forfeiture, that $37 pot sale was enough evidence that Jalali should lose his property.

This Kafkaesque nightmare should not have happened under California law. Not only did California voters legalize medical marijuana in 1996, state law bans forfeiting real property (like a home or a business) unless the owner has been convicted of a crime related to the property. In fact, Anaheim authorities even requested aid from California prosecutors to take action against Jalali’s property. State officials refused.

But the state’s protections don’t exist on the federal level. By participating in equitable sharing, Anaheim police could directly benefit from a federal forfeiture, bypassing California law to cash in on Jalali’s property.

His case was not an isolated incident. In just the Central District of California alone (which includes Anaheim and Los Angeles), the U.S. attorney’s office filed 30 forfeiture actions against landlords and threatened more than 525 marijuana businesses in 2012 and 2013. Since 2008, Anaheim police have received over $21 million in forfeiture proceeds from the federal government. At the same time, for four straight years the city-owned Anaheim Convention Center has hosted the Kush Expo, the world’s largest medical marijuana trade show.

Both the ACLU and the Institute for Justice (IJ), where I work, have launched campaigns to close the equitable sharing loophole and end policing for profit. IJ took Jalali’s case pro bono. The federal government dropped the forfeiture suit this past October and cannot refile the case.

For the time being, the feds appear to be shifting priorities. Last August, Deputy Attorney General James Cole announced new guidelines to U.S. attorneys. If state laws regarding marijuana don’t conflict with federal law enforcement priorities (like keeping cannabis away from kids and preventing it from crossing state lines), the feds will defer to the states. But even that cautious memo is filled with caveats, like “this memorandum does not alter in any way the Department’s authority to enforce federal law, including federal laws relating to marijuana, regardless of state law.”

The equitable sharing loophole still exists. The federal government can continue to prosecute criminal cases and litigate civil forfeiture actions related to cannabis. Citing the risk of federal forfeiture, Wells Fargo, one of Colorado’s largest banks, has refused to finance properties in that state’s marijuana industry.

Buying recreational marijuana has been legal in Colorado only since Jan. 1 and pot stores haven’t opened yet in Washington. Yet selling the plant has already generated $14 million in Colorado—a tempting cash cow for local police.

The incentives behind equitable sharing are primed for abuse. Property owners’ protection from forfeiture currently depends on prosecutorial discretion. That is no substitute for meaningful legal reform.