How to sell a California cannabis businessSince passage of the Medical Cannabis Regulation and Safety Act (“MCRSA“) and Proposition 64, one of the top questions our California marijuana lawyers have been getting from existing medical marijuana operators is “how can I sell my medical marijuana collective?” Of course, many collectives are not hard-pressed to find willing buyers. In the City of Los Angeles, for example, where only 135 Proposition D-compliant dispensary collectives are allowed to exist (which will also receive priority status from the City under the MCRSA and Prop. 64 in the event Measure M passes on March 7th), buyers are lining up to try to buy LA dispensaries that can get them into that market. There is also plenty of buyer interest in other California collectives that can demonstrate continuous operation and good standing with their local jurisdictions to qualify for “priority status” under both the MCRSA and Prop. 64.

But here’s the big issue: neither the MCRSA nor Prop. 64 repealed Proposition 215 and Senate Bill 420, which together make up California’s current and very vague medical marijuana laws. What this means is that all medical marijuana collectives must still operate as non-profit entities unless and until the application period opens for licenses under the MCRSA or Prop. 64. And just to further complicate matters, “collective” is an industry term of art; it is not a specific type of California legal entity and you are not going to find it in the California Corporations Code. One of the main reasons for California’s “collective model” is that the California Attorney General’s office issued a memo in 2008 with its interpretation of the medical marijuana laws that concluded those laws forbid the sale of medical marijuana for profit and, therefore, only “non-profit operation” would be allowed in the event qualified patients were to “collectively or cooperatively” cultivate and distribute medical cannabis to other qualified patients.

As a result of that 2008 memo, most qualified patients form nonprofit entities to handle their “commercial” medical marijuana activity. They typically form nonprofit mutual benefit corporations (“NPMBCs”) that they refer to as “collectives.” In turn, it isn’t possible to “buy” a collective. Why? Because there’s no equity or stock to purchase. Of course, there are other solutions to this non-profit conundrum, but they must be carefully considered and well thought out by both a prospective purchaser and the collective.

In NPMBCs, the articles of incorporation and the bylaws govern the collective’s every move and decision–but the bylaws really govern the day-to-day activity and decision-making authority of the members. For example, NPMBC bylaws will have provisions that dictate, among a slew of other things, admission of new qualified patient members and what they must do to maintain their membership in the collective. In addition, well-drafted bylaws also typically will address the voting rights of the members and directors. Under the California Corporations Code, a prospective purchaser cannot buy the stock of a NPMBC (because none is authorized or issued). The California Corporations Code does however permit membership transfers if the collective’s bylaws allow them, and these transfers are fairly unrestricted unless the bylaws specifically create restrictions around them.

Section 7320 of the Corporations Code governing NPMBC membership transfers states the following regarding the transfer of membership rights:

Subject to [member voting restrictions in the bylaws]:

(a) Unless the articles or bylaws otherwise provide:

(1) No member may transfer a membership or any right arising therefrom; and

(2) Subject to the provisions of subdivision (b), all rights as a member of the corporation cease upon the member’s death or dissolution.

(b) The articles or bylaws may provide for, or may authorize the board to provide for, the transfer of memberships, or of memberships within any class or classes, with or without restriction or limitation, including transfer upon the death, dissolution, merger, or reorganization of a member.

(c) Where transfer rights have been provided, no restriction of them shall be binding with respect to memberships issued prior to the adoption of the restriction, unless the holders of such memberships voted in favor of the restriction.

The ideal situation is usually one where the bylaws create two classes of membership: usually directors who manage the NPMBC and qualified patient members who access the NPMBC for medical marijuana, with the directors being the only ones who vote on management decisions affecting the NPMBC. The bylaws usually also allow for director membership transfers (presumably with a fee), without requiring a vote of every single qualified patient who has ever become a member of the NPMBC. In turn, directors can sell their memberships to prospective buyers who can then take over and operate the NPMBC until MCRSA and Prop. 64 licensing.

Unfortunately, nearly all of the NPMCB bylaws our California cannabis lawyers have seen on the deals on which they have worked are a mess, largely because most of the lawyers in California that do cannabis law are criminal lawyers not corporate transactional lawyers. Much of the time, the NPMCB bylaws do not contain a provision allowing for membership transfers or they require every single member of the collective vote on such a transfer because they lack multiple membership classes or voting exceptions. In these situations, it is sometimes possible to set up a system where the departing directors provide notice to every single qualified patient member that new directors could take over the board of directors and those new directors might vote to pay the departing directors a fee for services to be rendered to the NPMBC after-the-fact. For example, the new directors could vote to hire the departing directors in a consultant capacity and pay them a fee for that work. Though neither ideal nor efficient, this is one of various workarounds that can be done to transition the management of an NPMBC with bad bylaws.

The bottom line is that non-profit collectives cannot be “purchased,” and it takes good bylaws (or convoluted workarounds) to be able to transition from one group of directors to another. So, if you are looking to “sell” or “buy” a California cannabis business, be sure that the relevant bylaws allow for such a change and that your transition documents are in-line with what the bylaws actually allow. If such care isn’t taken, the buyer can be left with nothing but an empty wallet and the collective may find itself in direct violation of California’s Corporations Code and an expensive and painful lawsuit as well.

Marijuana Real EstateTomorrow, I will co-present a national continuing legal education (“CLE”) for the American Law Institute, titled “Cannabis and Commercial Real Estate.” I will present this 90-minute seminar and webcast with Daniel Dersham, a talented real estate attorney with the San Francisco law firm Wiley & Bentaleb LLP. The seminar is designed for lawyers around the country who wish to assist clients in buying, selling and leasing real estate in the cannabis industry. It is also a great opportunity for non-lawyers to gain insight on how cannabis properties are rented, bought and sold, and to understand how attorneys approach these unique transactions.

Over the past few years, our Oregon, Washington and California offices have advised on hundreds of real estate transactions related to state-legal cannabis. In the Oregon office alone, we are continuously working on these deals, which may range from the negotiation of a 1,500 square foot lease for a dispensary, to the purchase of a 150+ acre property for large-scale agriculture across multiple licenses. Each deal is a snowflake, and each brings unique opportunities and challenges.

Because we are always doing real estate deals, we tend to write about them often. For a recent sampling of work related to this field, including topics that will be covered at tomorrow’s CLE, please see the following recent Canna Law Blog articles:

Like many aspects of the cannabis industry, the central issue that makes real property transactions challenging, unique, and even sort of fun (at least for us cannabis business lawyers), is federal illegality. That issue ripples through pretty much every cannabis real estate deal in myriad ways, and a skilled practitioner with knowledge of the following is required: (1) the dynamic interplay of state and federal law; (2) the intricacies of state and local regulatory programs for cannabis– including zoning and land use laws; and (3) industry standards on achievable deal points for a lease or sale transaction.

Over the next year or two, existing state marijuana markets will continue to mature and new markets will come online. We expect to see a continued emphasis on real estate deals during this period. Buyers, sellers, landlords, tenants and service providers who understand the way this game is played will have a considerable advantage. And for many in the cannabis industry, negotiating a real estate transaction will be the largest decision of all.

I hope that you can join us.

Cannabis business growthMany of the posts on this blog focus in one way or another on how tightly regulated marijuana industries force cannabis entrepreneurs to adapt their practices to stay within the rules. When you are getting started as a marijuana grower, processor, or retailer, you can afford to stay compliant with less organization. So long as your cannabis company’s key players know the rules, it is possible to keep 5-10 employees in check and make sure they (and you) are doing everything by the book. But as soon as a business starts to grow, whether internally through new employees or externally through new locations either in-state or out-of-state, it loses its ability to maintain regulatory compliance through sheer force of will. At that point It has to update its internal structure and systems so that the cogs of the machine can operate without direct oversight of the founders.

This advice isn’t really limited to regulatory compliance. Businesses looking to build a brand need consistent, reliable operations. At a certain point, the business’s founders are no longer able to micromanage every detail of compliance or operations, but they want the business to continue growing according to their vision. That period of a business — the transition from start-up to going concern — is always hard for founders. A business’s ability to rocket upward without constraints is going to falter sooner or later, and there is a plateau period, where every marginal gain in productivity starts to produce equal or greater levels of operational cost or risk of regulatory compliance.

Going back to compliance, this stage is when it is key to start implementing structures that may at first seem antithetical to rapid growth. I am referring to things like writing and maintaining standard operating procedures, company policies, and clear hierarchies and chains of responsibility. It makes sense to run a startup as a “flat” company, where everyone is expected to pitch in and do everything. But in a highly regulated industry, a clear organizational hierarchy is key. With written policies and procedures and clear levels of responsibility, it is easier for businesses to prevent problems and to develop and institute solutions when problems do occur. In every settlement conference that the Washington State Liquor and Cannabis Board has after it issues an Administrative Violation Notice, the hearing officer asks what steps the cannabis business has taken to prevent similar violations in the future. And if the cannabis business on the hot seat is able to explain clearly why the problem occurred and the corrective actions it has and will continue taking to make sure “it” never happens again, the penalty will be reduced.

But this isn’t just about penalty reduction; it is about a business’s founders being able to move from day to day management and micromanagement to bigger picture thinking. Startups succeed because their founders have a vision and they implement plans to achieve that vision. When a business reaches a certain size, the daily triviality threatens to overwhelm everything. By delegating authority, allocating responsibility, and creating standard operating practices, a founder is able to step back, review the broader picture, and chart the overall course for the business going forward.

In more practical terms, here are some steps to take when your cannabis business starts to hit that plateau period:

  • Adopt written standard operating procedures, written company policies, and a written employee manual;
  • Appoint one or more compliance officers at each business location who are absolutely responsible for knowing state and local regulations and how those regulations fit within the company’s standard operating procedures;
  • Revisit and update the standard operating procedures regularly, and have your company compliance officer(s) recommend amendments to procedures to ensure continued compliance with state and local regulatory changes.

For marijuana businesses with multiple locations, especially locations in different states, it will be important to separate the company-wide policies and procedures from the site-specific policies and procedures. The more that can be company-wide, the better, but vast variations in state marijuana laws call for variations in day to day practices in different states.

If you do take these steps, you have to take them seriously and stick to them. Written policies and procedures are worthless if a company doesn’t follow them. There are some growing pains — it isn’t fun to lose some of the flexibility that you had as a startup — but these steps really can help put your business on a path to healthy expansion and the failure to take them could be your downfall.

Marijuana Cannabis and the DEA

The Drug Enforcement Administration (DEA) has made many a dubious claim about cannabis over the years. For this reason and countless others, our cannabis lawyers have consistently called to disband the DEA, believing it past the point where it can be redeemed. The good news it that the DEA took a hit last week for having posted false claims about cannabis.

In December 2016, the nonprofit medical marijuana advocacy group, Americans for Safe Access (ASA) formally requested the DEA either remove or correct misinformation regarding cannabis on the DEA’s website. ASA made its claims under the federal Information Quality Act, which ensures “the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by Federal agencies.” ASA contends that the DEA failed to meet the Information Act’s and the ASA’s executive director explained why it was challenging the DEA on its inaccurate marijuana claims:

For years, the DEA has published scientifically inaccurate information about the health effects of medical cannabis, directly influencing the action —and inaction— of Congress. We are simply taking the DEA’s own statements, which confirm scientific facts about medical cannabis, and analysis that has long been accepted by a majority of the scientific community. Our request is simple: the DEA must change its public information to better comport with its own expressed views, so that Congress has access to the appropriate tools to make informed decisions about public health. Alternatively, ASA requests that the DEA simply remove the inaccurate statements or the documents in their entirety.

ASA’s take-down request focused on “The Dangers and Consequences of Marijuana Abuse,” an article available on the DEA’s website that contained 25 allegedly inaccurate statements, including the following:

  • “Marijuana use can worsen depression and lead to more serious mental illness such as schizophrenia, anxiety, and even suicide.”
  •  “Marijuana takes the risks of tobacco and raises them. Marijuana smoke contains more than 400 chemicals and increases the risk of serious health consequences, including lung damage.”
  • “Teens who experiment with marijuana may be making themselves more vulnerable to heroin addiction later in life, if the findings from experiments with rats are any indication.”

The ASA pointed out that the DEA itself had contradicted many of these 25 claims in a DEA report from August 2016 on its decision not to initiate proceedings to reschedule marijuana, including the following:

  • “At present, the available data do not suggest a causative link between marijuana use and the development of psychosis.”
  • “The HHS concluded that new evidence suggests that the effects of smoking marijuana on respiratory function and cancer are different from the effects of smoking tobacco.”
  • “The HHS cited several studies where marijuana use did not lead to other illicit drug use. Two separate longitudinal studies with adolescents using marijuana did not demonstrate an association with use of other illicit drugs.”

By using the DEA’s own research against it, ASA forced the DEA into a corner where it had to either disavow its August 2016 report or admit that its website was incorrect. By removing the offending page, the DEA chose the latter.

Count one for the good guys.

 

Cannabis business lawyers

Dr. Hurd, the Ward-Coleman Chair of Translational Neuroscience and the Director of the Center for Addictive Disorders at Mount Sinai, speaks here to cannabis’ medicinal properties. She has extensively studied whether marijuana can help ease withdrawal symptoms in heroin users, and her work was published in the journal Trends in Neurosciences this past Thursday. Dr. Hurd’s work was inspired by the ever-increasing issue of opioid addiction, which has become a huge epidemic in the United Sates–an epidemic estimated to have economic costs of at least $78 billion in the US alone. The overprescribing of opioids leaves many addicted to legal drugs such as hydrocodone and oxycodone, but it also is a gateway to heroin addiction for far too many.

Dr. Hurd’s findings show that opioids are far more neurologically dangerous than cannabis. Further, she asserts that not only does cannabis have therapeutic properties, it can reduce heroin cravings and restore some of the neurobiological damage caused by opioid use as well.

The DEA decided against rescheduling cannabis last year on the grounds that marijuana is not a commonly accepted  “safe and effective” medicine. The DEA has us in a catch-22, since a large part of the reason cannabis is not commonly accepted as medicine by the scientific community is because there is a dearth of high-level cannabis research because of cannabis’ federally illegal status. One can only hope that with new research such as Dr. Hurd’s, the DEA (and the federal government in general) can begin to accept that marijuana is shockingly safe and does have medicinal qualities, and then move forward accordingly. If truly accomplished scientists are declaring cannabis to be a non-addictive and effective medicine, as based on their own rigorous scientific research, it is high time (pun intended) the DEA catches on.

Washington State cannabis delivery serviicesAre cannabis delivery services legal in Washington State? 

Strong demand for home-delivery cannabis services in Washington – and particularly Seattle – is apparent, as demonstrated by the numerous delivery services operating in plain sight, as revealed by a simple Google or Yelp search. Yet, such operations remain illegal following the passage and implementation of I-502. In 2016, Seattle proposed a law to permit a pilot project for legal delivery in Seattle (which failed in the state legislature). This year, Seattle officials are pushing for similar legislation, with certain modifications, that they hope will open the door to cannabis delivery throughout the state.

What’s the status quo in Washington State?

Cannabis delivery services are as old as old-school weed dealing itself. The common trope is of the marijuana dealer who delivers late (and stays past their welcome) – and only after multiple calls or texts. Today’s pot delivery services, particularly in states with legal medical or adult-use cannabis, are exponentially more professional operations – yet, in large part, they remain illegal under both state and federal law. Such is the case in Washington State.

What happened with the 2016 proposal?

Last January Seattle city officials supported Washington State House Bill 2368, which would have authorized a pilot plan for home cannabis delivery in Washington in cities with 650,000 or more people – effectively just Seattle.

HB 2368 was seen by as “Seattle-centric” and lawmakers outside Seattle and greater King County did not vote for the bill because it would not directly benefit their constituents. Also, Washington can be a deceptively conservative in general and in terms of cannabis, especially on outside its urban centers and especially on the East side of the mountains. Ultimately, HB 2368 did not become law.

How does the new proposal differ?

MyNorthwest.com reports that Seattle City Attorney Pete Holmes intends to broaden support for the 2017 bill by allowing home cannabis delivery statewide. Such marijuana delivery services would still be subject to county and municipal regulations and prohibitions.

Will it pass?

The bill’s ultimate fate is unclear. City Attorney Pete Holmes said in January that the bill was in the early stages of finding a bill number and sponsor, though he was optimistic going forward. Ultimately, only time will tell if this or a different bill authorizing cannabis delivery eventually becomes law in Washington State. Though it is far from certain, I think pot delivery services will within the next few years become legal in Washington and I say this because the longer Washington legalization goes on without the sky falling down (and I do not foresee the sky falling down), the more Washingtonians will come to realize it is no big deal and the less they will care about restricting it by doing things like forbidding cannabis deliveries.

Why is this important for the future of cannabis reform in Washington State?

Other jurisdictions with legal medical or adult-use cannabis have experimented with home delivery, and “gray market” home delivery operations are thriving in Washington and other state-legal cannabis states since before legalization. This despite many arrests in Seattle.

The demand for cannabis delivery ensures and proves its durability as a market force. Allowing illegal delivery operations to prosper erodes the legitimacy of legal cannabis markets, and undercuts its economic rationale. Our cannabis clients resent having to pay big taxes and be subject to massive regulations while at having to compete with illegal operations that avoid both of those things. The solution is to permit legal home delivery for medical and/or recreational users and to license and treat those cannabis delivery services  as any other cannabis business.

Why is this important to medical patients and adult-use cannabis consumers?

The ability to legally provide home cannabis delivery services is particularly important to medical marijuana patients with limited mobility or other disabilities that make it impossible or unduly burdensome for them to personally go to a dispensary to obtain cannabis. Also, even adult-use recreational patients can benefit from the convenience and added value of a cannabis delivery service. Just look at Amazon Prime.

For its part, earlier this month a Seattle Times editorial endorsed legalizing cannabis deliveries.

 

Cannabis Business LawyersOur cannabis business lawyers are always getting pitched on “creative solutions” to the cannabis industry’s banking problem. Because marijuana is still federally illegal, most banks will not provide financial services to marijuana businesses, even though FinCEN issued guidelines to allow financial institutions to provide bank accounts to the state-legal pot businesses. Many tout Bitcoin as the solution.

Bitcoin is viewed as the world’s first completely decentralized currency. Unlike the Dollar, the Euro, the Yuan, etc., no central government manages or backs Bitcoin. It is also called a “cryptocurrency” — a digital currency that uses encrypted services to generate units of the currency and to transfer funds.  You can read primers on it here and here. Using a Bitcoin wallet enables customers and businesses to engage in transactions without using paper currency and without going through an intermediary institution like a bank. Its chief appeal to the marijuana industry is that allows for currency transfers with little to no need for a bank. There are though significant issues involved with using Bitcoin in the marijuana industry and law enforcement associates Bitcoin with the illegal narcotics trade (see the Silk Road).

At the beginning of January, Washington State Senator Ann Rivers (who was instrumental in securing passage of SB 5052, which essentially wound down Washington’s existing medical marijuana cooperative system) proposed a bill to ban Bitcoin in Washington State’s marijuana marketplace. Senator Rivers says that her proposed bill to ban Bitcoin was brought to her by “an organization” looking to preserve “the transparency that we have in our legalized marijuana system in our state.” The eight-page SB 5264 adds to the definitions section of RCW 69.50.101 (Washington’s Controlled Substances Act) the term “virtual currency,” and then proceeds to ban it for marijuana sales. Under the bill, “virtual currency” would be defined as follows:

a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government. “Virtual currency” does not include the software or protocols governing the transfer of the digital representation of value or other uses of virtual distributed ledger systems to verify ownership or authenticity in a digital capacity when the virtual currency is not used as a medium of exchange.

The bill then states that “[a] marijuana producer, marijuana processor, or retail outlet must not pay with or accept virtual currency for the purchase or sale of marijuana or any marijuana product.”

The Bitcoin ban bill was debated at length in Olympia and Senator Rivers’ cited to the Cole Memo prohibiting the “shrouding” of anyone who participates in Washington’s marijuana industry as its justification. Senator Rivers contends that BitCoin can’t meet the 2014 FinCEN transparency guidelines. Tom Parker and Kenneth Berke of PayQwick also testified that Bitcoin does not satisfy FinCEN transparency guidelines and allowing it for Washington State marijuana businesses will invite federal enforcement and thereby harm the cannabis industry as a whole. On the other side of the argument, Ryan Hamlin and Jon Baugher of POSaBIT testified that BitCoin is perfectly traceable, auditable, verifiable, and transparent, and that the state needs to better understand BitCoin transactions before it bans its use in the marijuana industry. James Paribello, legislative liaison for the Washington State Liquor and Cannabis Board, testified that the Board essentially has no opinion on the use of BitCoin or its proposed ban, so long as the Department of Financial Institutions allows it, which it currently does.

Given the uncertainty of the state-legal marijuana industry under Trump and Sessions and the precarious staying power of the Cole Memo and the FinCEN guidelines, Bitcoin may just be too risky for Washington State’s marijuana industry. But if the state can get educated about and comfortable with BitCoin, virtual currency may be here to stay in the Evergreen State’s marijuana industry.

Stay tuned.

California cannabis marijuanaLast Friday, the California Bureau of Medical Cannabis Regulation (BMCR) announced in a press release that it has begun seeking applicants to participate in a Cannabis Advisory Committee. The role of the Committee will be to help the Bureau and other state agencies – the Department of Food and Agriculture (DFA) and the Department of Public Health (DPH) – develop cannabis “regulations that protect public health and safety while ensuring a regulated market that helps reduce the illicit market for cannabis.”

The Committee is required under Proposition 64 and is one of several steps needed if California is to keep its promise to begin issuing cannabis business licenses by Prop 64’s January 1, 2018 deadline. The agencies still have their work cut out for them, including the challenge of reconciling the conflicting provisions under the Medical Cannabis Regulation and Safety Act (MCRSA) and Proposition 64.

The Bureau and other state agencies have been holding pre-regulatory meetings throughout California over the past year to gather information from cannabis stakeholders, which it is now using to draft initial state regulations for the various cannabis license types. According to the Bureau’s communications director, Alex Traverso, the Cannabis Advisory Committee will meet several times during the next year to review drafts of regulations and share their opinions to ensure that California rule makers are on the “right path.”

They are specifically seeking input from representatives of the cannabis industry, labor organizations, local or state law enforcement, state or local agencies, and from communities disproportionately affected by past federal and state drug policy, as well as cannabis cultivators, environmental experts, patient advocates, physicians, public health experts, social justice advocates, individuals with expertise in regulating intoxicating substances for adult use, and individuals with expertise in the medicinal properties of marijuana.

The application to join the Cannabis Advisory Committee includes requests for any relevant work history in the cannabis industry, and past or present affiliation with a cannabis company, relevant qualifications to serve on the Committee, an explanation of why you wish to serve on the committee, and any potential conflicts of interests. Applicants will also need to provide four references and submit a resume and letters of recommendation. In addition, selected committee members may be required to complete a Fair Political Practices Commission (FPPC) Form 700, Statement of Economic Interest disclosing their personal assets and income.

Committee members will be appointed by the Director of the Department of Consumer Affairs (DCA), Awet Kidane. The DCA is not looking to fill a specific amount of committee seats, but instead the committee’s size will be determined by the number of qualified applicants. Also, the positions on the Cannabis Advisory Committee are voluntary, which means you will not be paid for serving on the Committee, but members are entitled to receive reimbursement of their travel expenses to approved meetings, which will be held in the state’s capitol in Sacramento.

If you’re interested in applying, the bureau says it will keep the application process open for at least a month. For those currently involved in or hoping to join the California cannabis industry, this is an important opportunity to help shape the laws that will impact your/our future. The best way to affect marijuana law and policy is to get involved, whether it’s at the local, state, or federal level.

Cannabis lawyersIt is easy to burn through money when starting a business. Expenses like market research and professional fees can kick in almost immediately, and capital expenditures like inventory, property and tools are unavoidable beyond the early stage. In addition to these traditional start-up costs, the state-legal cannabis industry brings regulatory add-ons, like licensing and permit fees, and, in some jurisdictions, requirements for plans by architects and engineers. Like any business, starting a pot business can be expensive. Only more.

In our Washington, Oregon and California offices, our cannabis business lawyers speak daily with entrepreneurs in the early stages of cannabis business planning. Given the recent advent of state-legal marijuana, even our most “seasoned” industry clients and those with industry cachet have operated above board for only a couple of years. Because the regulated cannabis industry is a start-up industry, everyone needs to monitor costs closely. Those costs include professional fees.

At the onset of business planning, it is tempting to engage a range of professionals to handle any foreseeable matter. Like any industry, the cannabis industry has its experts: lawyers, accountants, realtors, vendors and any variety of “consultants.” Many of these individuals can be helpful along the way, if used correctly. The key is knowing when, whether and how to engage each provider in the life cycle of your cannabis business.

Lawyer. Potential clients are surprised when we sometimes send them away. In Oregon, for example, licenses are tied to locations, and unless there is an urgent need for legal services (i.e., the business is being capitalized), we often suggest that would-be clients return after they have sourced a target property. At that point, we can hone in on zoning issues as well as the lease or sale transaction, while structuring the business to boot. Otherwise, with no location in mind, there is a tendency to run up fees unnecessarily, and before the point where a lawyer is truly required.

Accountant. In the cannabis industry, it is critical to have an accountant (as well as a lawyer) who understands the quagmire of IRC 280E. An accountant versed in the cannabis industry will be able to assess the pros and cons of various tax elections in the context of a tax code tilted against pot businesses, and offer ongoing planning advice. Like cannabis business law, cannabis accounting is highly specialized, but the right CPA can make all the difference.

Realtor. Many aspiring pot businesses attempt to find a realtor. Unlike lawyers or accountants, realtors generally do not work for an hourly fee; they typically get paid when a deal closes. In the marijuana industry, realtors are not enthusiastic about pounding the pavement for smaller placements, like a dispensary lease. The commission simply isn’t there. But, if you are looking at a larger transaction—and specifically to buy a building or a piece of property—a good realtor can be a real asset.

Vendors. Most cannabis businesses enlist a couple vendors at the onset of operations. The two most commonly retained vendors are insurance providers and security operators. Regarding insurance, cannabis businesses need the same products as other small businesses. This tends to include property insurance and workers’ compensation, in a highly specialized field. As to security, the cannabis industry is unfortunately still a cash game for the most part. Not only are security providers required for property set up and installation, but they are often hired to transport cash during business operations.

Consultants. There are innumerable cannabis consulting firms nationwide, but many of them do not add value. For this reason, we have cautioned (on more than one occasion) to be wary of expensive consultants, particularly at the outset of business operations. Most of what a consultant can provide can also be obtained for free, from other industry sources. Anything worth paying for can almost always be got somewhere else.

Marijuana cannabis potPresident Trump’s actions have sparked massive activist energy from progressives. His Executive Order on immigration created waves of protests at cities and airports across the country. Those protests have been significant in getting lawmakers that oppose Trump’s actions to take stands where possible. Without massive protests, Washington’s Attorney General Bob Ferguson may never have brought the case that put a temporary stand to the immigration executive order. The protests may also have had a chilling effect on new executive orders that would generate more protests, including one order that would have curbed LGBT rights that appears to have been scrapped. Basically, the activism appears to have had some impact.

What will it look like if the Trump Administration goes after cannabis?

With the confirmation of Jeff Sessions as Attorney General, we now have an ardent pot critic in charge of our country’s law enforcement apparatus. Because of the Rohrabacher Amendment, the Department of Justice cannot use resources to interfere with state implementation of medical marijuana laws, which includes medical marijuana businesses at least in the Ninth Circuit. However, recreational states such as Washington, Oregon, and Colorado could be targeted if Sessions and Trump decide to make this an issue.

If they do decide to go hard after recreational marijuana, with either a general notice or targeted civil actions or even criminal law enforcement actions against cannabis entrepreneurs, what will the public reaction be? It isn’t automatic that legal changes a majority of Americans oppose will lead to massive reaction and protesting. The administration has appointed someone to the Federal Communications Commission who threatens the open internet we have today and would like to replace it with a system where internet service providers can curate content. Yet, there have been no protests or even much public opposition by political leaders against this appointment. Net neutrality as a concept is very popular, but it does not provide the same energy spark as civil rights, LGBT rights, or immigration.

One of the best ways to prevent an attack on the rights of states to treat marijuana how they see fit is to convince federal officials that marijuana issues will spark the same kind of energy as the refugee ban. This means that people who don’t care at all about cannabis as a product have to get involved. There were tons of people involved in the immigration protests that have probably never known a Syrian refugee or Iraqi immigrant, but they protested because Trump’s immigration order struck them as un-American.

In the same way, using federal law enforcement authority to attack businesses and individuals that are fully compliant with a marijuana state regulatory system is deeply un-American. It has never been the job of the federal government to involve itself in intrastate issues unless it is trying to protect civil rights or voting rights. Every success the federal government has had at the intrastate level has been to curb discrimination and protect the rights of workers, voters, and others against state actions that violate federal law or the constitution. Federal action against intrastate activity outside of those types of issues has been seen as brazen overreach.

If we grant that public reaction and public protest is a real check on federal authority, then people who care about cannabis rights must place the issue within the framework of fundamental American values. Only through that structure, and through adoption of that structure by people who are not cannabis users or business owners, will there be enough potential or actual public backlash to avoid the administration upending the current cannabis status quo.