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On Behalf of | Sep 20, 2017 | Business And Corporate Law

Do you have questions about your cannabis business? Call or email.

Ideas expressed in this blog post are mine, and do not necessarily represent that of the Firm.  This article speaks to obstacles faced within the cannabis industry, and is not politically driven. 

We haven’t seen it happen yet, but the rumors have begun and the industry is at an all-time awareness that federal enforcement might be on its way. And no one wants to be the test case.

What would federal interference look like? Who would be the target? These are real questions. Questions I have been asked many times, and to which the answers are still elusive. However, after more than four years of advising clients in this relatively new industry, I have a few hunches.

The Black Market is Alive

As recently reported by the Associated Press, states with legal recreational markets are struggling with the black market, especially Oregon.  Marijuana is tracked from seed to sale, providing data as to how many plants are being grown, and thus defining the volume of processed cannabis that should be on the market. The problem is, we are receiving reports validating the volume produced doesn’t match the amount that makes it to retail stores. There are reasonable explanations for some of this. E.g. bugs or mold could kill a crop before harvest. Or, a strain could turn out to not meet potency or quality standards of the grower. However, these scenarios require the grower to log a “destruction” into the traceability software, so the controlling regulatory body knows the plants have been destroyed, rather than harvested and processed for sale.  Thus, a gap between what is grown and what is sold remains.

This gap may be the key used by the federal government to potentially bring down the industry. No matter how many positive statistics I throw to you, if you are anti-marijuana, they won’t matter — you will still want the industry to be stopped. This is the same for politicians. Anti-marijuana politicians are looking for reasons to interfere, however, they need a sure win. Interference and a loss would bring only embarrassment, and could embolden the industry.

It is my prediction the “test case” will have unexplained gaps in production v. sales numbers, and will be a large grower. Oregon appears to have the most documented issues with untracked marijuana sales (the linked article being one of several like it available) thus leading me to believe that an Oregon grower will be first.

How Can I Protect Myself?

Going after medical marijuana consumers would be a political nightmare. There are many sympathetic figures who use the plant to ease chronic pain, lessen the effects of chemotherapy, or deal with other illnesses. Jeff Sessions would not take that fight. Again, he might lose. And a loss would be devastating to his career, and the fight against legalization.

On the recreational side, licensees should be internally meticulous about their records. Externally, licensees should be attentive on the traceability software, keep records of every plant purchased, and any reason a plant may not be harvested.  Any discrepancy could be used against you. If a strain produced only small buds, take photos and notes about the strain’s issues, and keep the information closely guarded. Substantiating your records may be critical down the road.

Reading the Tea Leaves

There is no crystal ball. However, one thing is for certain: federal interference with the industry will be an uphill and highly public battle.  On July 24, 2017, Attorney General Jeff Sessions, sent a letter to all states with legalized marijuana, expressing concern over the marijuana market in that state.

Washington State’s Governor and Attorney General have already gone public to oppose any interference, and have pointed to the misinformation scattered throughout the letter. Oregon’s representatives are sponsoring legislation that would “pave the way for responsible federal regulation of the legal marijuana industry” in a series of three bills. Additionally, Cory Booker, a senator for New Jersey, has sponsored legislation to decriminalize marijuana based, at least in part, on the racial inequality of arrests for the drugs, and the all-too-often excuse that the officer “smelled marijuana” as probable cause.

The good news is this and other creative efforts to pierce the federal armor around marijuana seem to be working.  The polls show growing support for decriminalization.  Public support and sympathy for medical marijuana users makes it unlikely, in my opinion, that federal enforcement would attack medical marijuana users. Between producers of medical marijuana and recreational marijuana, the recreational side of the industry is a much easier target, because there is no argument that recreational users are sympathetic characters. The political spin would be much easier on the recreational side.  If we see interference, it would make more political sense to go after a large recreational marijuana grower who has discrepancies in their traceability between seed to sale. Any enforcement would be risky.  Any enforcement would be met with public outcry and resistance. Any enforcement, and we will be ready to defend.

JDSA Law helps growers, producers and retailers. The I-502 initiative legalized the production, processing, sale and use of marijuana and cannabinoid products under certain, restricted terms in Washington State. JDSA is well versed on cannabis laws, and is active in assisting growers, producers and retailers in other states. Our attorneys can help you understand the regulation surrounding this market; and advise and assist you in matters concerning the control, taxation, record-keeping, labeling, advertising, permitting, and monitoring within the cannabis industry in your state. JDSA attorneys are dedicated to helping you understand the language and laws that cover this emerging industry.