By David Ingram

WASHINGTON (Reuters) - In a move marijuana advocates hailed as an historic shift, the Obama administration on Thursday began giving U.S. states wide leeway to experiment with pot legalization and started by letting Colorado and Washington carry out new laws permitting recreational use.

The Justice Department said it would refocus marijuana enforcement nationwide by bringing criminal charges only in eight defined areas - such as distribution to minors - and giving breathing room to users, growers and related businesses that have feared prosecution.

The decisions end nearly a year of deliberation inside President Barack Obama's administration about how to react to the growing movement for relaxed U.S. marijuana laws.

Advocates for legalization welcomed the announcement as a major step toward ending what they called "marijuana prohibition."

"Today's announcement demonstrates the sort of political vision and foresight from the White House we've been seeking for a long time," said Ethan Nadelmann, executive director of the Drug Policy Alliance, an advocacy group.

"I must admit, I was expecting a yellow light from the White House," he said in a statement. "But this light looks a lot more green-ish than I had hoped. The White House is basically saying to Washington and Colorado: Proceed with caution."

Marijuana remains illegal and tightly controlled under federal law, even as about 20 states, plus the District of Columbia, allow the use of medical marijuana. Voters in Colorado and Washington legalized recreational use in groundbreaking ballot measures in November 2012.

Obama had signaled he did not want a new crackdown, telling ABC News in December: "It does not make sense, from a prioritization point of view, for us to focus on recreational drug users in a state that has already said that's legal."

The leeway for the states will go only so far, though, if Colorado, Washington or other states show they are unable to control the drug, the Justice Department said in a statement.

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Forty-two percent of Americans age 12 or older have used marijuana at some point, according to a 2011 survey by the U.S. Substance Abuse and Mental Health Services Administration. Obama has said he used marijuana when he was young.

One opponent of marijuana legalization said his group would redouble efforts to spread word of the negative effects the drug can have on adolescents.

"This is going to really quicken the realization among folks that more marijuana in our communities is not a good thing," said Kevin Sabet, a co-founder of Smart Approaches to Marijuana.

U.S. Senator Chuck Grassley of Iowa, the top Republican on the Senate Judiciary Committee, said the Obama administration should not decline to enforce laws that it finds inconvenient or that it does not like.

"This sends the wrong message to both law enforcement and violators of federal law. Apprehending and prosecuting illegal drug traffickers should always be a priority for the Department of Justice," Grassley said in a statement.

EIGHT AREAS IN FOCUS

The Justice Department could have sued to block the Colorado and Washington laws from taking effect under the theory that they conflict with the Controlled Substances Act of 1970, the primary U.S. anti-drug law.

Coupled with the decision not to sue, the Justice Department sent a four-page memorandum to federal prosecutors nationwide outlining eight priority areas for marijuana enforcement.

While department officials said they are committed to enforcing federal restrictions on marijuana, prosecutors have now been told not to expend effort on cases unless they fall in one of the eight areas.

The areas include distribution to minors, situations when marijuana revenue is going to other criminal enterprises, trafficking across state lines and growing on public land.

The criteria mean, for example, that federal prosecutors will not charge a marijuana dispensary simply because it is large or profitable, said a Justice Department official who spoke on condition of anonymity.

But the criteria also stop short of guaranteeing immunity for anyone, leaving business and individuals open to prosecution if the case fits one of the eight areas, the official said.

Colorado and Washington will need to have regulatory systems to protect against those types of crimes, or else risk giving up the whole experiment, the department said in a statement.

Attorney General Eric Holder had a phone call on Thursday with the governors of Colorado and Washington to inform them of the decisions and told them there would be a "trust but verify" relationship between the Justice Department and the states, said the department official.

State officials said they shared Holder's concerns.

"This reflects a balanced approach by the federal government that respects the states' interests in implementing these laws and recognizes the federal government's role in fighting illegal drugs and criminal activity," Washington Governor Jay Inslee and Attorney General Bob Ferguson, both of whom are Democrats, said in a statement.

(Additional reporting by Alex Dobuzinskis and Jonathan Kaminsky; Editing by Howard Goller and Cynthia Osterman)