5 Things To Consider Before Starting A Marijuana Law Practice
The real key to being a good cannabis business lawyer is to be a good business lawyer, plus knowing the unique “extras” necessary for cannabis business law expertise.
Nearly every day, one of our cannabis business lawyers gets an email or a phone call from a lawyer somewhere in the United States wanting to know how they too can become a cannabis business lawyer. Our immediate answer is to tell them to first spend the significant time necessary to become a business lawyer and then more time getting up to speed on marijuana law and gaining marijuana industry expertise. The real key to being a good cannabis business lawyer is to be a good business lawyer, plus knowing the unique “extras” necessary for cannabis business law expertise.
Here are five issues you should consider before starting a cannabis business law practice:
Federal law and priorities. The federal Controlled Substances Act is governed by 21 U.S.C 801-971 (the Act). Most business lawyers have never read the Act, but being familiar with it is a requirement for those contemplating practicing in the marijuana business space. Though you do not need a criminal law background to effectively serve marijuana business clients, you do need to know the consequences your clients could face should the federal government take an interest in their businesses.
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On August 29, 2013, U.S. Deputy Attorney General James Cole issued an enforcement policy memorandum listing out the Department of Justice’s enforcement priorities regarding marijuana. That memo states that the federal government currently plans to tolerate states with “robust” marijuana regulations. Though the memo is useful guidance, it does not represent a change in federal law or in marijuana’s status as a Schedule I controlled substance. So if you are located in a state that maintains loose or vague marijuana laws, you should think twice about pursuing a marijuana business practice.
Federal prohibition leads to significant day-to-day business conflicts for clients. Federal prohibition causes substantial conflicts when actually doing business in the marijuana industry. Because of federal banking laws (namely, anti-money-laundering laws), marijuana businesses have difficulty obtaining bank accounts, loans, and traditional types of institutional financing. Federal prohibition also causes institutional investors and commercial landlords to fear federal prosecution and asset forfeitures for doing business with cannabis companies. You should also be familiar with how the Internal Revenue Service taxes marijuana businesses pursuant to Internal Revenue Code Section 280e, which denies standard business deductions to illegal businesses, including marijuana businesses, even in states where their operations are state-legal. IRS 280e tax calculations can skew any unprepared marijuana business’s balance sheet into the red, and attorneys need to be cognizant of this when advising their clients. And don’t forget that obtaining a federal trademark registration is unlikely to happen for your clients’ cannabis products.
State marijuana regulations. Cannabis law practitioners must be vigilant regarding state marijuana regulations as these are usually key to keeping your clients in compliance. For example, WAC 315-55, which governs recreational marijuana in Washington, is broad, covering everything for a marijuana business from security requirements to package, labeling, and quality assurance standards. Colorado, Oregon, and Alaska have similar regulations and you must study up on applicable marijuana regulations and state administrative procedure acts to prepare your clients for success — a single regulatory compliance misstep can mean a revoked license or large financial penalty. You should also have a system for keeping your clients updated on regulation changes, as the state agencies governing marijuana businesses are known to constantly amend the rules in response to perceived industry need or demand.
Know where you want to focus. Like any other legal practice, a marijuana business practice does not cover just one subject and it certainly is not static. Marijuana business law includes commercial litigation, corporate transactional work, corporate formation, land use and zoning, real estate law, intellectual property and patent law, environmental law, and so on. One practitioner cannot and should not do it all in a marijuana business practice. As a result, realize your limitations now and figure out for yourself the specific area of cannabis law on which you want to spend your time becoming an expert.
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Build up your professional referral network. Because no one lawyer can do it all in any practice, it is paramount that you familiarize yourself with other competent professionals to help your clients move their cannabis business forward. For example, your clients will need significant help when it comes to tax preparation for their business. Consequently, you should be building up your contact list with cannabis-friendly accountants who know inside and out both state tax obligations relating to cannabis businesses and the tax requirements set forth by 280e. You also should have a list of cannabis friendly business consultants, architects, insurance brokers, real estate brokers, and security companies, just to name a few. Most importantly, you should build up a network of lawyers to whom you can refer your conflicts (as there will be many) and those cannabis matters outside your area of expertise.
If you’re truly interested in starting a marijuana law practice — or if you’d like to learn about the steps it will take to open a dispensary legally in your state — please attend Above the Law’s Marijuana Law event this summer in Denver, Colorado, where I’ll be a panelist. I look forward to seeing you there and helping you learn the ins and outs of this complicated and rewarding practice area.
Hilary Bricken is an attorney at Harris Moure, 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@harrismoure.com.
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