How to Mitigate My Legal Risks when Starting a Cannabis Business

In the Cannabis Industry You Have to Know Your Legal Risks

Before explaining “how to mitigate my legal risks when starting a cannabis business”, it is best to illustrate what the legal risks are. Generally they fall into two categories – the legal risks of being involved in an industry that revolves around the cultivation, distribution and selling of a Class I federally illegal drug, and the rapidly changing landscape of state, county and city legislation with relation to the marijuana industry.

Within those categories, the legal risks to cannabis businesses vary depending on the nature of the cannabis business you intend to start and the jurisdiction in which it is located. Ideally, you should seek professional legal advice from a cannabis business attorney during the business planning stages in order to discover what the specific regulations are concerning your business, and how to mitigate the legal risks when starting a cannabis business.

Federal Legal Risks to Cannabis Businesses

The federal legal risks to the cannabis industry are the ones you will read about most on the Internet. This is because the cultivation, distribution, selling and use of marijuana is still illegal under the Controlled Substances Act. Although legislation has been introduced to reclassify marijuana as a Class 2 substance – and declassify CBD altogether – any venture into the cannabis industry currently has the legal risk of being in breach of federal law.

A measure to mitigate legal risks when starting a cannabis business was passed in 2014. This measure prevented federal prosecutors and DEA agents from using federal funds to pursue breaches of marijuana-related laws in states where the use of cannabis for medical and/or recreational use had been authorized. The measure failed to stop any prosecutions already underway or offer any protection to residents of states in which the use of cannabis had not been authorized.

Local Legal Risks to Cannabis Businesses

The local legal risks to cannabis businesses are mostly attributable to the speed at which the marijuana industry is evolving. In Colorado – one of the first states to legalize marijuana for recreational use – the state´s Director of Marijuana Coordination – Andrew Freedman – admitted recently: “We´re making the plane as we are flying it”, implying that laws are being introduced to reflect new situations as they develop.

Local legal risks to cannabis businesses also exist in jurisdictions where there is still significant opposition to the marijuana industry. Despite the measure to prevent DEA agents from pursuing breaches of federal law, some local law enforcement agencies have taken it upon themselves to intimidate growers and retailers. Experience has shown that the best way to mitigate legal risks when starting a cannabis business in a hostile environment is to develop a relationship with local officials and law enforcement agencies – and comply with the frequently-changing local ordinances.

Get Help to Mitigate Legal Risks when Starting a Cannabis Business

There are various avenues through which you can seek help to mitigate legal risks when starting a cannabis business. Local marijuana communities are often the best place to start, as industry professionals within these communities will be able to advise you on whether the area in which you intend to start your cannabis business has a hostile or friendly environment. You will also learn a lot by hearing about their experiences.

You should also speak with a cannabis business attorney. A cannabis business attorney will be able to help mitigate legal risks when starting a cannabis business by guiding you through specific regulations relating to your business, through the licensing process, and through the company formation process to ensure that your corporate structure is in line with what the governing authorities decree. The attorney should also be able be able to assist with potential issues such as intellectual property rights, contract law and – if necessary – acquiring funding for your venture.