Everything You Need to Know About Cannabis Law
Regardless of where you stand on the issue, it’s no secret that the legalization of cannabis is becoming more and more prevalent in the United States. As the industry grows, so does the need for lawyers who practice cannabis law. We spoke with Christopher J. Davis, the executive director of the National Cannabis Bar Association (NCBA) to learn more about this exploding field. Here’s what he had to say:
Why did you get involved with cannabis law and the NCBA?
For me, practicing in cannabis became unavoidable. I got to the point where I had so many people approaching me for advice about how to become a legal operator in the industry, it just didn’t make sense for me to continue to turn them away. Around the same time, I became aware of the National Cannabis Bar Association, and I began to do some volunteer work for them as a way to become more involved in the industry. Now I’m the executive director, and I couldn’t be happier with where I have ended up.
What steps should lawyers considering practicing cannabis law take to make sure they don’t break any ethics rules within their states?
Each state has different ethics rules governing how attorneys can service the cannabis industry. A lawyer that is considering serving this industry should consult their own state’s ethical rules and consult with an ethics attorney about the correct way to engage in this practice.
The unethical practice of law is always grounds for censure or, in some cases, disbarment. The federal prohibition on cannabis creates an environment where business advice for a cannabis entity could certainly be considered furthering a criminal conspiracy, which can get you in trouble on multiple levels.
On the other hand, offering strictly legal advice on how to comply with a state’s regulatory regime is generally less controversial. From what I have seen, as long as you are offering purely legal advice on how a client can comply with the regulatory requirements of a given state, state bars are less likely to engage in disciplinary action.
The most dangerous thing is a lack of knowledge of the risks involved in this industry. We should know the risks to our own professional lives, and we should certainly be able to convey the legal risks to our clients of engaging in this industry. That being said, as the social perception of cannabis evolves, I think that we will continue to see more receptivity to ancillary services providers (tax, accounting, law, etc.) serving this industry.
Where do we stand in terms of cannabis legalization on both state and federal levels?
At this point, “most” states (more than half) have already recognized the medical benefits of cannabis in one form or another. Most people in the industry believe its just a matter of time before the federal prohibition falls away. Some will tell you its two years off. However, some have been saying it has been two years off since the first medical laws were passed in California in 1996. Others say it is closer to four or five with the current administration.
Sessions has quite a bit to deal with, including a real drug crisis in the opioid epidemic. The Rohrabacher-Farr amendment remains in effect to block federal dollars from being used to prosecute state-legal enterprises. And the tax dollars in places like Colorado, Washington, and Oregon have become integral parts of those state budgets, adding a layer of political difficulty to a federal crackdown.
So, while the specter of of federal enforcement remains, most in the industry believe that cannabis will continue to be low on their priority list.
What are the various practice areas in relation to cannabis law?
This question actually sheds light on a common misconception. When I have conversations with people outside of the cannabis industry, they have the perception that “weed lawyers” exist. They don’t.
Instead, there are the areas of law that exist in any other business. There are corporate lawyers that deal with formation and structuring your business. There are real estate lawyers, tax lawyers, securities lawyers, and intellectual property lawyers. We have every type of lawyer that you would find in any other industry.
We just happen to practice in one of the most highly regulated industries in the country. We deal with extra sets of regulation from the cities, counties, and states in which our clients operate. We do everything that a normal lawyer would do for your normal business – but we have to lay these extra sets of regulation on top of our normal practice.
The main difference I see between lawyers that serve the cannabis industry and those that don’t is a willingness to be more agile in their practice and to tackle some of the most difficult legal problems that exist today. The group of lawyers that I know that serve cannabis clients are incredibly collaborative problem solvers that take pride in shaping this industry, and we are always open to welcoming new great minds into our ranks.
When it comes to choosing clients, are there important considerations when it comes to cannabis law?
Absolutely. Clients can get you into trouble, as we all know. If a client isn’t up front with you about their business practices or compliance, you can quickly find yourself in an ethical conundrum. I think here, more than most other industries, lawyers should be careful about who they choose to represent. For me, trust is always the biggest consideration.
If a lawyer is interested in getting involved with cannabis law, what’s your advice?
Learn. A lot. As I mentioned earlier, this is just like any other practice, but with multiple additional layers of regulation. You need to know your underlying concentration, and then you can begin to parse out the other levels of cannabis-specific regulation. But you have to always be willing to learn more, adapt, and adjust.
The dispensaries are often cash only. Does that mean that lawyers serving this industry will likely be paid in cash, too?
Yes, lawyers will often be paid in cash. Any individual, lawyer or not, that receives more than $10,000 in cash must submit a Form 8300. When bank transfers are made, amounts in excess of $10,000 are flagged by suspicious activity reports. When these are made outside of the banking system, they still must be tracked. However, the same mechanism does not exist, so the recipient must instead file a Form 8300. Failure to file these forms can get you in a lot of trouble, especially when your client goes to file their taxes and their documents don’t match up with the forms you might have forgotten to file.
As cannabis becomes more legal, some people are worried that it’ll become a slippery slope and that harder, more harmful drugs will become legal next. What do you say about that?
That’s a lazy argument. Much more harmful drugs are already legal in our society. We don’t lump these together because the argument is more nuanced than that.
Withdrawal from alcohol, benzodiazepines, and opiates can cause death. Alcohol is this country’s favorite recreational drug, and benzodiazepines (xanax, valium) and opiates (oxycodone, morphine) are legal with a prescription. If we are on a slippery slope, cannabis did not put us there.
But more importantly, cannabis has incredibly positive effects for many people. Ask the parents of the child who no longer has seizures because they are able to take a non-psychoactive tincture derived from cannabis. Ask the veteran that has finally found a way to ween their dependence on opiates while dealing with sever phantom pain or PTSD. Ask the cancer patient that has found relief from the nausea caused by their chemotherapy.
There is a real discussion here about the relative costs and benefits of legalizing cannabis. Ways that we are trying to eliminate the black market by pushing cannabis into a transparent marketplace with consumer protections and age restrictions equivalent to any other highly regulated industry. I would invite our “slippery slope” friends to join this conversation.