Marijuana

Cashed: The 6 Most Bogus Claims In The Marijuana Industry

The next time you hear anyone make a too-good-to-be-true statement about the cannabis industry, at least be sure to check it out before buying in.

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growing-marijuana-indoorsWith a new year and a new presidential administration set to begin, my firm is fielding a lot of questions about what is going to happen and is hearing a lot of claims about the cannabis industry that just aren’t true. In the past, I’ve written about the top 10 industry red flags and the top 10 industry red herrings. In this post, I discuss the following six bogus claims about the marijuana industry:

  1. President-elect Donald Trump and appointee U.S. Attorney General Jeff Sessions will not impair state-legal marijuana. Nobody can know what this new administration will do with state-legal marijuana. President-elect Trump has been all over the place on cannabis and who’s to say whether he will remain consistent on states’ rights when it comes to marijuana (despite his campaign rhetoric)? What we do know is that as long as Congress continues to renew the medical marijuana protections in the appropriations riders, state law-compliant MMJ operators are less likely to be shut down by the Department of Justice. The same can’t be said for recreational marijuana businesses though. Both a lot and a little has been made out of Jeff Sessions’s three-day confirmation hearing this past week, but the bottom line is that he really didn’t say much one way or the other that could help us discern what will happen with cannabis in the next four years. In the end, it’s anyone’s guess as to what Trump and Sessions have in store for state-legal marijuana.
  2. CBD-Oil is legal everywhere in the U.S. Many “CBD” companies tout this claim and many consumers believe this true. CBD is not legal everywhere. The DEA considers CBD with active THC as covered by the federal Controlled Substances Act and recently made clear it considers CBD derived from hemp illegal as well and will be stepping up enforcement actions against online and interstate CBD sales. My firm has previously written on how medical claims about how the FDA goes after anyone making medical claims for CBD, whether for humans or pets.
  3. Florida medical marijuana is going to be huge. I have been getting a steady stream of calls and emails from folks wanting a Florida medical marijuana license or registration to start a cannabis business under Amendment 2, with far too many of these people believing such an opportunity will lead to guaranteed riches. The problem is that Florida cannabis is already dominated by seven Charlotte’s Web nurseries, and this will not change unless Florida opens its medical marijuana marketplace to others. Not only that, but it will likely take years for any Amendment 2 facilities to get up and running. Even if Florida allows applicants for cannabis licenses, its application process will surely be expensive, lengthy, and full of red tape. So, although Florida will eventually be a huge market, patience is called for and get rich quick Florida cannabis seminars should be avoided. In the meantime, here’s our primer on some of what you can do now to prepare for Florida licensing/registration.
  4. I’m just a landlord to a marijuana business so I cannot be criminally liable. Unfortunately for landlords, they face the threat of criminal prosecution for aiding, abetting, and conspiracy under federal law and the threat of asset forfeiture. Just look at what happened to the landlord in the Harborside case if you still believe otherwise (thankfully, that case was eventually dismissed). If you are a landlord to a cannabis business, you would be wise to get educated on your criminal liability and on federal and state forfeiture laws. Most importantly, your lease agreement should be drafted to ensure your tenant behaves.
  5. Yesterday, I was a criminal defense attorney. Today, I’m a marijuana securities and business lawyer. I hear of this sort of claim constantly and guess what, 99 times out of 100, you would be better off using a business lawyer with no cannabis experience than a criminal cannabis lawyer who now claims to know complex business and securities laws overnight. The sad truth is that criminal cannabis lawyers in states that have legalized cannabis are finding themselves without clients and they are having to scramble to re-brand themselves as cannabis business lawyers. But branding and reality are two very different things and, and firms that do have expertise in both business law and marijuana regulatory work are far too often called on to clean up expensive messes left by these unqualified lawyers.
  6. The cannabis industry is worth billions so I need to invest now, now, now. I never tire of writing about the hustlers and hucksters who insist investors immediately dump gobs of money into the marijuana industry. I received an email just yesterday with the following advertisement:

    7. The $100 billion marijuana industry is dominated by penny stocks. With legalization sweeping the country, these penny stocks have already begun skyrocketing in price. Take action TODAY, and you have a once-in-a-generation opportunity to turn a tiny $50 investment into an absolute fortune.

    Federal illegality makes it difficult to secure a bank account and the IRS continues to tax the industry to death under 280e. Cannabis investors can face criminal liability (just like landlords) and they can find themselves subject to asset forfeiture for financially supporting illegal entities and activities. Due to the newness of this industry, fraud is common. Investment in the ancillary, support sectors (like tech or real estate development) is a bit more straightforward and a bit less risky, but all investors in cannabis need to be vigilant, especially until we get a better feel for what the Trump administration has in store for us. For more on marijuana stock fraud and scams, see here and here.

So the next time you hear anyone make a too-good-to-be-true statement about the cannabis industry, at least be sure to check it out before buying in.

Hilary Bricken bio photoHilary Bricken is an attorney at Harris Bricken, PLLC in Seattle and she chairs the firm’s Canna Law Group. Her practice consists of representing marijuana businesses of all sizes in multiple states on matters relating to licensing, corporate formation and contracts, commercial litigation, and intellectual property. Named one of the 100 most influential people in the cannabis industry in 2014, Hilary is also lead editor of the Canna Law Blog. You can reach her by email at hilary@harrisbricken.com.

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