How to Comply with Cannabis Regulations

A Daunting Prospect? Not with Professional Legal Help

Knowing how to comply with cannabis regulations and understanding the legal issues to consider when starting a cannabis business can be a daunting prospect. Not only might you need a full understanding of your state´s legislation, but you might also need to be familiar with local ordinances relating to the cultivation, distribution and retailing of cannabis.

Furthermore, although regulatory and compliance matters may be your primary concern, knowing how to comply with cannabis regulations is just a fraction of the legal issues to consider when starting a cannabis business. Employment laws, intellectual property rights and taxation also have to be taken into account, along with organizing contracts, managing business transactions and dispute resolution.

Why Understanding Cannabis Legislation is so Daunting

Certain states have introduced regulations that either legalize or decriminalize the use of cannabis for recreational or medical purposes. These regulations usually have conditions attached to the amount of cannabis a person can possess, what type of cannabis a person can possess and where they can use it. However, certain federal laws can override state regulations, as can county or city ordinances.

For example; prior to 2012, you could possess up to an ounce of cannabis without penalty in the city of Denver, but it was a punishable offence throughout the rest of Colorado. In 2012, voters supported an amendment to the state constitution that allowed the commercial cultivation, manufacture, and sale of cannabis. Yet only sixty two of Colorado’s two hundred and seventy one cities, and just twenty two of the state’s sixty four counties have adopted any form of recreational cannabis regulation to date.

Furthermore, in 2015, the Colorado Supreme Court upheld an employer´s right under federal law to fire an employee for having smoked cannabis. The company – Dish Network – fired quadriplegic Brandon Coats after he had failed a drugs test, even though he had only smoked cannabis in his own home for medical reasons under his doctor´s authorization. The court ruled that employees who engage in an activity that is permitted by state law, but unlawful under federal law, are not protected by the state.

Yet the Industry is Attracting So Much Attention

Despite these inconsistencies in legislation, plenty of individuals and organizations are investigating the opportunities that exist in the legalized cannabis industry. The New York Times described the legalizing of cannabis as “the next gold rush” when reporting on how investors and venture capitalists are looking for rewarding opportunities – especially in an industry that many financial institutions are still wary of – and early indications seem to support the New York Times´ impression of the market.

According to the 2016 Marijuana Business Factbook nearly 90% of cannabis dispensaries, infused product manufacturers and wholesale cultivators report that they are profitable or at least breaking even – figures that are likely erring on the side of caution considering that states such as California are only part-way through the process of implementing “for-profit” legislation. Ancillary services such as technology suppliers and testing labs are also reporting a healthy market.

State and local governments are also keeping a very close eye on tax revenues in jurisdictions that have legalized cannabis. In April 2016, the State of Colorado collected just over $13 million in sales taxes, excise taxes and license fees, and is on target to top $150 million in income from the cannabis industry in the financial year 2015/16. Bloomberg reports that the State of Washington is also on target to collect in excess of $150 million in revenues, while the legalized cannabis industry will come close to generating $100 million in revenues for the less populous State of Oregon in its first year of regulation.

So, What are the Legal Issues to Consider when Starting a Cannabis Business?

The first legal issues to consider when starting a cannabis business are whether or not the cultivation, distribution and retailing of cannabis are legal in your jurisdiction; and, if so, is there a limit to the number of licenses that will be issued. A limit on the number of licenses can make starting a cannabis business more difficult, but also offer a better return to investment than in jurisdictions where there is no limit to the number of cultivators, distributors and retailers allowed.

Then you need to consider your company formation. In order to comply with cannabis regulations, some jurisdictions only allow specific types of businesses. There are licensing agreements to submit, commercial and employment contracts to organize, intellectual property rights to protect, and it may be the case that your project requires financing – in which case a business plan needs to be prepared and presented to the right people.

Once you have resolved the legal issues to consider when starting a cannabis business, it is important that you continue to comply with cannabis regulations. One lapse in compliance can result in falling foul of the laws relating to commercially activity, and it is not inconceivable that city officials or law enforcement agents – some of whom have strong opinions about the use of cannabis under any circumstances – could confiscate your assets and close your business.

Get Professional Legal Help to Comply with Cannabis Regulations

Starting a cannabis business is a massive undertaking, but the rewards can be very lucrative. Before being able to benefit from the rewards, there is a lot of work to be done with regard to the legal issues to consider when starting a cannabis business and then continuing to comply with cannabis regulations. This is why you should seek professional legal help from a cannabis attorney.

A cannabis attorney will be familiar with the regulations in the jurisdiction you intend to start your cannabis business, have experience of the licensing process and potential drawbacks you may encounter, and also be able to advise you on company formation, contract law, intellectual property rights and – if necessary – funding. They should also be able to assist you with accounting procedures, tax submissions and security recommendations.

Starting a cannabis business a daunting prospect? Not with professional legal help.