Even mor recently, the California Department of Industrial Relations issued a reminder to cannabis employers that they are bound to comply with California labor law requirements. Further, it was noted that labor protections apply to ALL workers – regardless of the worker’s immigration status or even the legal status of the business. That means individuals operating unlicensed cannabis businesses can catch heat not only for operating unlawfully, but also for failing to follow state statutes pertaining to worker rights.

As longtime Los Angeles cannabis lawyers who also practice employment law in Southern California, we are closely familiar with the intersection of these issues and the unique legal questions that can arise.

Cannabis businesses are expected to provide workers with:

• Minimum wage. The statewide minimum is $15.50 as of January 2023. Some cities may impose higher minimum wages.
• Overtime paid at 1.5 the regular rate. Generally, overtime rates must be paid if an employee works more than 8 hours in a day or more than 40 hours in a week. If the employee works more than 12 hours in a workday, they must be paid double for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.
• Valid workers’ compensation insurance. If the worker is hurt on the job, they have a right to expect workers’ compensation coverage, which is required by almost all employers in the state. If the company doesn’t have workers’ compensation insurance, they can be fined by the government and the worker can can sue them for damages.

The new unit of the DCC is aimed at taking action against cannabis companies that coerce or threaten workers, compel them to work in dangerous conditions, or deny them pay, benefits, or breaks to which they are entitled.

Last year, the Los Angeles Times published an investigation exposing the unfair treatment of cannabis workers, who are sometimes cheated out of wages, threatened with physical harm, or compelled to work in dangerous conditions that have actually proven fatal for some.

Allegations of employee abuse involving some 200 cannabis contractors and farms (half lacking state licensing) have been filed since marijuana first became legal in California. An estimated 37 cannabis workers have died on the job since 2016. In Lucerne Valley in December, an 18-year-old cannabis worker died in a greenhouse from suspected carbon monoxide poisoning. It was the same cause of death for a 30-year-old Mexican who died while working at a greenhouse in San Bernardino County. Carbon monoxide poisoning is the No. 1 cause of death among cannabis workers in California.

Other deeply troubling cases involve alleged instances of Argentinian immigrant workers toiling 14-hour days for weeks on end behind locked gates on a Trinity County farm – using a single-burner propane stove for cooking outdoors, a portable toilet, and a shipping container in which some slept at night. Others slept in tents or in their cars. Some said they were paid less than $8 hourly – rarely on time – and provided text messages showing their employer threatened to report them to immigration authorities if they complained.

Longtime California cannabis lawyers know that part of the problem is that the cannabis industry was underground for so long. For decades, cheap, vulnerable laborers were sought for work that was paid in cash and commonly exploited. Still, this doesn’t excuse the continuation of such practices now that the industry has been pulled aboveboard.

A number of sheriff’s offices in Northern California have started teaching officers in the narcotics division about how to identify, investigate, and intervene in suspected human trafficking situations.

The DCC has it’s own such unit, based in Fresno. It’s called the Human Trafficking/Exploitation Assessment and Response Team (or HEART). This marks a notable shift in the DCC’s response to labor exploitation. The agency had been primarily focused on licensing and regulating commercial cannabis operations. Any suspected cases were simply forwarded to state labor agencies. Now, the agency has more than a half dozen detectives who can work on human trafficking cannabis cases and refer to them to prosecutors and/or federal authorities. The team also provides training to law enforcement.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Cannabis workers face death and exploitation. California is stepping in after Times investigation, May 5, 2023, By Paige St. John, L.A. Times

More Blog Entries:

Los Angeles Cannabis Businesses Must be Audit-Ready, May 28, 2023, Los Angeles Cannabis Business Lawyer Blog

But as our Los Angeles cannabis company lawyers can explain, such deals are going to be a bit more complicated compared to other types of commercial contracts and lending. The fact that marijuana remains illegal under federal law inevitably has landlords, lenders, and financial institutions wary of engaging. The potential for sizable profit margins is certainly a draw, but concerns about forfeiture and fines can’t be entirely glossed over.

There is certainly a great deal of opportunity for real estate financing and leasing operations, but there is undeniably a greater complexity when it comes to opening the doors to marijuana-related businesses. Lenders and landlords need to proceed with calculated care and caution. Contracting with a longtime cannabis lawyer can help cannabis companies, investors, property owners, and financial institutions to make smart decisions that will best protect their assets and further their interests.

Among the potential risks that companies run:

Collateral Risk.

If a marijuana-related business is facing down some level of financial stress, the ability of the lender or landlord to recover will depend not only on applicable cannabis laws at the local and state levels, but also on federal law. If investors or lenders don’t properly anticipate challenges and take proactive measures to structure these agreements, they could find the collateral property at risk of government forfeiture. This will be true for as long as marijuana remains a Schedule I narcotic under federal laws. It makes any real property owned – or utilized – by marijuana companies potentially vulnerable to seizure by authorities, per 21 U.S.C.S. 881(a)(7). This risk can be minimized by ensuring that the cannabis company is fully compliant with all relevant state laws and regulations – including licensing requirements. As per the Cole Memo, federal prosecution against marijuana related businesses is going to be much more likely for a company that skirts state laws.

Banking Risks.

Banks and financial institutions run the risk of violating the Bank Secrecy Act when they work with marijuana-related businesses. The law was written to deter banks from becoming party to money laundering operations for criminal enterprises, but it’s a big reason why banks are still skittish in working with cannabis businesses. Where state-legal cannabis companies are concerned, the U.S. Department of Justice has left enforcement of this provision up to each district’s prosecutors. That said, enforcement risk is relatively low – per U.S. Department of the Treasury’s guidance – when banks and lenders are working with state-compliant cannabis companies. Guidance issued to banks on marijuana business lending by the Treasury Department in 2014 incorporates the priorities outlined in the Cole Memo.

Land Use Limitations Risks.

Land use rules, zoning requirements, state nuisance laws, and restrictive land covenants must be carefully reviewed before financial institutions, investors, and landlords agree to be a part of the deal. For example, if a state nuisance law prohibits “offensive odors,” that may be applied to certain cannabis operations – particularly cultivation and distribution sites. That can result in substantial fines and potentially being forced to relocate – at a loss.

Bottom line: Financial institutions, lenders, landlords, and others looking to back cannabis business growth would be wise to secure legal advice on cannabis company contracts in order to make informed decisions.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

The Controlled Substances Act, U.S. DEA

Over the last two decades, more 37 states have legalized medical marijuana and 19 allow adults to use recreationally. Yet sales across state borders are still aren’t happening, largely because the drug remains illegal at the federal level.

Cannabis has become a multibillion-dollar-a-year industry in California and across the U.S. But the federal government has pushed off regulation responsibility to the states – leaving a lot of open questions and hesitation on everything from security to labeling requirements to banking to insurance.

Ultimately, it may be the judicial branch of government that takes the reins on the issue. The problem with this is that the impact of the courts’ approach may be somewhat chaotic, potentially undermining efforts to protect public health and ensure industry diversity.

As our Orange County cannabis lawyers can explain, there are some states like California with cannabis programs that have been meticulously crafted to meet certain goals beyond merely legalization of adult recreational use. For instance, a top priority for some states has been ensuring that those awarded cannabis business licenses are either people of color and/or those who were somehow disproportionately affected by the failed war on drugs.

Now enter the courts. Those diversity programs typically require license recipients be state residents. But in a recent 2-1 federal opinion by the 1st Circuit Court of Appeals, justices ruled this was unconstitutional. That ruling likely means we’ll see some changes and shifts in state-level import and export bans. Some states are already positioning themselves to be able to hit the ground running with a national market for marijuana sales.

Recently, California’s governor, Gavin Newsom, signed into law a measure that imbues the state with the right to enter into agreements with other states regarding the regulation of cannabis imports and exports. A similar bill was passed a few years ago in Oregon, and New Jersey is considering something similar.

Still, the fact that court rulings could mean the whittling down of consumer protections and industry diversity efforts has many advocates calling for Congress to take charge and overhaul federal cannabis rules in a way that will realistically reflect what’s happening at the state level.

After all, the Commerce Clause portion of the U.S. Constitution entrusts Congress with the authority to regulate commerce at both the interstate and international levels. The flip side of that, the dormant Commerce Clause – the doctrine seized on the the 1st Circuit Court of Appeals – is that states aren’t allowed to discriminate against or burden interstate commerce. The case that gave rise to the appeal involved a medical marijuana law in Maine that required all officers or directors of a marijuana dispensary be residents of the state. One of those dispensaries with multi-state holdings sued over that residency provision. A coalition of smaller medical marijuana caregivers intervened, hoping to hang onto the 75 percent medical marijuana market share held by smaller operators. (Corporate domination in the market is an increasing concern.)

Meanwhile, other courts have ruled unfavorably against residency requirements as well. For instance, a federal trial court in Michigan ruled against a city government that was defending licensing rules that favored long-term residents. Also last year, a federal court in Missouri disavowed that state’s residency requirements for marijuana businesses. In both of those cases, the federal courts pointed to the dormant Commerce Clause.

While many marijuana legalization issues have put voters front and center, it appears the courts are taking a more prominent role in national marijuana policy. If the trend of federal courts continuing to weaken state power to dictate rules regarding import/export of cannabis over state lines, it won’t be long before companies are testing state power on issues like packaging and labeling. There’s concern that if the national market opens up without sufficient regulation that we’ll see cannabis purveyors setting up shop in less tightly-regulated states while selling across state lines.

Congress could intervene and ensure that a national market is enacted while still respecting state rules on things like product testing standards and diversity in licensing. The question of a national cannabis market in the U.S. demands not so much a “yes” or “no” answer, but a clear plan for interstate sales.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Courts could throw state marijuana markets into disarray, Oct. 2, 2022, By Mona Zhang, Politico.com

Cannabis remains illegal at the federal level, continuing to be one of the greatest sticking points for California marijuana companies. It is one our Los Angeles cannabis business attorneys expect to see changed sometime in the next few years.

As it stands, 36 states plus the District of Columbia have legalized marijuana for medical and recreational uses. Industry researchers report that last year, sales of legal cannabis climbed 45 percent. It’s estimated they’ll reach $41 billion in the next five years. Yet those who might most benefit from its use in the twilight of their lives have been denied due to the federal law that criminalizes marijuana and casts it in the same category of methamphetamine and heroin – highly addictive narcotics with no recognized medical purpose.

Clearly, that definition is outdated. Medical cannabis has been legal in California since 1996. Recreational use was approved by voters in 2016. Now, Senate Bill 311 is one step closer to turning the tide entirely.

While allowing cannabis to be administered by health care workers, it specifically prohibits vaping and smoking inside health care facilities. Supporters expect it will be administered mostly in pill form.

As for the hospitals and other health care centers, some have indicated support, saying the use of medical cannabis fits neatly into the pain management regimens they’ve been prescribing for terminally ill patients for years. Other facilities released canned statements of neutrality. The California Hospital Association, however, outright opposed the bill in letters to the governor before he signed it. Their reticence is mostly due to the official discrepancy between state and federal law where marijuana is concerned. The worry is that failure to comply with the strict letter of the law could jeopardize hospitals’ reimbursement from the Medicare and Medicaid programs, as well as federal contracts and grants.

Supportive lawmakers, asked whether they are worried the federal government would crack down on illegal cannabis administration in hospitals, said it is a possibility, but a very remote one. Our Los Angeles marijuana lawyers understand that there have been some facilities in the past that “made space for” terminally ill patients who were using cannabis, without directly endorsing or administering it. This law will grant those facilities more legal leeway. We expect cannabis use in health care facilities will be centered heavily in hospice centers. Although it’s expected there will be little, if any, backlash from federal authorities, we do recommend health care facilities considering onboarding cannabis treatments to patients to work with a civil attorney with years of practice in California medical marijuana law. The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources: Senate Bill No. 311, Approved Sept. 28, 2021, California Legislature

While COVID-19 has left the economy in a state of uncertainty, The Los Angeles Times reported the demand for cannabis actually surged in the immediate wake of state closures, with some . Gov. Gavin Newsom deemed cannabis businesses essential, and sales rose again.

Some theorize the uptick in sales has to do with people largely being stuck at home with not much else to do. Mounting anxiety likely also plays a role.

Whatever the reason, if you’re considering buying a cannabis farm, know that location is key (the last thing you want is a site that won’t be practical or productive) but there are ways you can mitigate your risk.

It’s important to discuss the specifics of your situation with a California cannabis farm lawyer. These are a few general guidelines to consider:

• Know the local rules. California gives cities and counties the authority to draw up local ordinances that are more stringent than state laws. You need to know the zoning laws of the site you’re considering because some cities and counties won’t allow you to operate within a certain distance of schools or parks. You’ll want to know if you can incorporate vertical integration, whether you have to process the plants offsite and whether you’ll need to factor logistics and transportation costs into your business model. If the community in which you’re looking to set roots has a cap on how much cannabis can be grown in a specific region, it will be important to find out how many cannabis farms there are now and roughly how many are waiting to have their application processed. Assess too how close the site is to residents and other businesses, which could increase the chances that you might face some local friction.
• Have an attorney verify all representations by the seller. Many have good intentions, but they may not understand the all the laws that apply. It’s not uncommon to come across sites that advertisements indicating the property has been approved by local and state agencies for a commercial cannabis business – when in fact, it is not. That might not be a deal-breaker, but it could cost you extra time to make the required improvements (lighting, fencing, screening, etc.) and secure permitting before you can break ground.
• Educate yourself on the water regulations. You cannot presume that that water supply regulations will be a simple matter. Access to water is mission critical to cannabis farms, but it’s too often overlooked when site scouting. You need to consider not just the local ordinance but California regulatory rules, input from hydrologists and the local politics.
• Investigate the quality of available soil. Cannabis crops are meticulously tested for pesticides and other contaminants before they can be sold. Prospective cannabis farmers must protect their investment by ensuring there are no potential contaminants in the water or soil – and no threat of them from the overs spray of nearby farms. Addressing the problem after the fact can be very expensive.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Boom times for cannabis businesses as Californians, in a pandemic fog, isolate indoors, April 18, 2020, By Susanne Rust, The Los Angeles Times

CBD is naturally found in cannabis plants, and is widely known for its relaxing properties. But CBD won’t produce a ‘high,’ as it lacks the psychoactive tetrohydrocanabidiol (THC), found in marijuana. CBD-derived products have quickly grown in popularity, thanks largely to a wide range of potential health benefits, including relieving pain, anxiety, seizures and brain injuries.

According to Michael Lux, partner at Crowe accounting firm, the next 6-12 months will involve strategic minority investments in the CBD space. He noted too that while the majority of CBD companies are of interest to investors, they are still less than five years old, so they’d likely need a little more time before preparing to engage in full exit strategies.

US Farm Bill Opened the Gates Over the last eight months, a slew of beauty, personal care, and pet brand products have quickly become available across a variety of retail stores. In part thanks to the US Farm Bill, which was passed in December last year. This bill essentially relaxed restrictions, allowing licensed cannabis growers to produce hemp on an industrial scale, without fear of prosecution. It also relaxed restrictions around selling hemp-derived products interstate. The passing of the US Farm Bill was a tipping point, enabling CBD-derived products to go mainstream.

A recent Forbes report even projected the combined U.S. CBD sales market would likely exceed $20 billion by 2024.

Too Early for Buyouts Meanwhile, one industry banker noted it will be some time before makers of CBD products start to see buyouts from traditional consumer packaged goods (CPG) companies, especially with regard to food and beverage products. Mostly because the Food and Drug Administration (FDA) is still working to outline its CBD regulatory framework, and that tweaking will likely be ongoing. Just last month the FDA announced it has prioritized efforts to establish clearer CBD guidelines, and plans to publish a report this fall.

Until then, companies selling personal care CBD products are particularly well poised to attract strategic investments. That’s because regulators are far more comfortable with non-ingestible products, which significantly minimizes an investor’s risk.

Regulators Pave the Way Once the FDA clarifies its regulations on CDB-derived products, we can expect strategic buyers to show interest in acquiring CBD brands across consumer, pharmaceutical, and food and beverage industries. In the meantime, there are five key regulatory concerns most investors are monitoring before investing in CBD businesses:

1. Drug Enforcement Administration regulation of CBD – marijuana is currently considered a Schedule 1 drug and is not approved for medical use in the U.S.; but hemp is defined as the plant, or any part of the plant containing a THC concentration of no more than 0.3 percent.
2. FDA regulation of CBD products – advertising or using CBD as a dietary supplement is currently prohibited.
3. Some state laws restrict CBD product sales – North Carolina, Maine and New York restrict CBD products, just to name a few, and could severely impact overall CBD product sales.
4. FDA limits advertising and label claims made on CBD products – the agency will diligently pursue companies making unsubstantiated marketing claims.
5. Regulation of CBD products will continue to evolve – a specific internal agency working group will continue to explore options for dietary supplements containing CBD to be marketed lawfully.

Legal Implications Thus Far While CBD businesses continue to blossom, investors will become increasingly active in the growing CBD sector. Investors, like so many other industry stakeholders will watch closely on how ongoing regulations will impact the marketplace. It is clear that no matter how the industry progresses, regulators and legislators will play a large role in defining just how products are developed, where they can be sold, and what can be touted in advertising and marketing efforts.

Need Legal Help Investing in or Acquiring a Commercial Cannabis Business? Our California Hemp & CBD attorneys can help answer any questions you may have.

The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734. Additional Resources: 2018 US Farm Bill FDA Guidelines

In its petition to the court, the cannabis firm argued that a specific part of federal tax code – Section 280E – doesn’t give the IRS authority to investigate and/or rule a marijuana business in violation of criminal federal statutes.

As our Los Angeles cannabis business lawyers can explain, marijuana is classified as a Schedule I narcotic per the U.S. Controlled Substances Act.

The IRS contends that this provision means it cannot allow any tax credit or deduction for any expense incurred or paid in carrying out business that conflicts with or is in violation of federal criminal law – including trafficking in controlled substances – which is what it contends marijuana dispensaries are doing.

The Cost of Denying Tax Credits & Deductions to Cannabis Businesses

Plaintiffs with the dispensary argued that as a business legally allowed under federal law, it had the right to the same responsibilities – and benefits – as any other – namely a host of business deductions that could collectively save marijuana companies millions a year.

For instance, a cannabis business that pays $600,000 for marijuana annually but then sells $1 million worth of that same product (in violation of federal law, but consistent with state law) must pay federal income taxes on its gross income, which is $400,000. This is true even if the business also incurs $100,000 in costs in the ordinary course of business (payroll, rent, benefits, etc.). Any other business would be allowed to claim $100,000 in credit and deductions, therefore only being taxed on $300,000.

In Declining Review, U.S. Supreme Court Allows 10th Circuit Ruling to Stand

The U.S. District Court in Colorado was the first to hear this challenge, and sided with the IRS on this matter, finding the cannabis business had no grounds to challenges Section 280E of the tax code. This ruling was later affirmed by the federal 10th Circuit Court of Appeals in Denver.

The IRS considers “taxable income” that which is total sales/less the cost of goods, grossed after the business/individual claims their deductions and credits. However, there are clear parameters on those deductions and credits, and the one concerning this case particularly pertains to 21 U.S.C. 801, the U.S. Controlled Substances Act, which bars intentional manufacturer, production, distribution and/or sale of controlled substances – including marijuana. This prohibition applies nationally – even in states that don’t prohibit it – as underscored in the 2005 U.S. Supreme Court case of Gonzales v. Raich.

The U.S. Supreme Court was asked to answer the following questions:

1. Is the IRS authorized, for purposes of application of Section 280E, to investigate and/or determine if a business is claiming a deduction for exemptions incurred in the course of unlawfully trafficking a controlled substance?
2. Is the petitioner’s inability to claim a tax deduction because of 280E a violation of the Eighth Amendment’s constitutional guarantee against excessive fines?

In declining to hear a review on this matter, the U.S. Supreme Court is in effect allowing the 10th Circuit’s affirmation of the IRS view to stand. Just for this particular business, denial of these deductions is going to cost the company more than $53,000 in federal income taxes. The bill has already been paid, with the challenge filed after in hopes of recovering some of the expenses.

Cannabis business attorneys in Los Angeles do note one encouraging aspect of the high court declining to hear the matter rather than affirming: It more than likely leaves the door open for a future challenge.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Alpenglow Botanicals v. U.S., May 2019, U.S. Supreme Court

Los Angeles athlete marijuana lawyers are aware now of a growing number of companies promoting cannabis as a means for recovery after a significant athletic feat. Whether it’s running a marathon or testing one’s endurance in a yoga session, cannabis has potential power to help the body heal from the strain such exertion can cause. A few sporting goods and activewear companies are teaming up with cannabis innovators to promote the use of cannabis in recovery.

In one case, as Los Angeles Magazine reports, one pop-up pot provider in Culver City incorporates the use of medicinal-grade marijuana with other rest and recovery techniques like yoga, hot stone massages and meditation. The anti-inflammatory effects of cannabis and CBD oil are touted as a means of easing pain and helping athletes get the rest they need to make a full recovery.

Most Sports Leagues Still Bar Athlete Cannabis Use

Athletes have long touted the medicinal recovery value of marijuana as part of their training routine. How widely it will catch on isn’t known because many colleges and professional sports teams routinely drug test, and marijuana isn’t on the list of prescribed pain medications.

Last year, USA Today reported on a survey of NBA players indicating an estimated 85 percent of teammates use marijuana. In the NFL, where physical exertion and serious injuries are higher, some put the rate of use at as high as 89 percent. Because marijuana is on the list of banned substances for the leagues, players who test positive for marijuana can be fined, suspended or even terminated. Yet players on record with the news outlet said even the general managers, coaches and presidents used the drug as well.

Kyle Turley, who spent a decade as an NFL offensive lineman, said publicly he became a vocal advocate for cannabis after incurring chronic traumatic encephalopathy as a result of more than 100 concussions he sustained while in the NFL. To treat his pain, he turned to legal opioids prescribed by doctors, but this quickly snowballed into addiction. He now says medical marijuana saved his life, and that he would not be where he is today were it not for that.

What Science Says About Weed and Athlete Recovery

Part of the problem with proving marijuana’s medicinal effects on recovery after athletic exertion is that researchers have not been given free range to study it. One of the major concerns is that marijuana is only beneficial if someone is chronically or terminally ill, otherwise it causes harm. But as Harvard medical doctors told Men’s Journal, there is strong evidence cannabis does have valuable medicinal properties. Proving this, though, is going to require scientific backup – and there is scan funding for such research when it might run afoul of federal law.

The effect of cannabis on muscle protein synthesis does not seem to be of note. There is some anti-inflammatory component, but what we don’t know is if it works at any sufficient magnitude to help heal muscle damage – which in turn would help an athlete return to their sport faster. It can also help with the side effects of delayed onset muscle soreness, which again, can get a person back into the gym faster. It’s also noted to help with chronic pain, per study conducted by the National Academies of Sciences Engineering and Medicine.

If an athlete from high school to professional runs afoul of their organization or league for testing positive for marijuana, an athlete cannabis lawyer can help represent players in meetings before state boards, employers and more.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

This Pop-Up Is Helping Athletes Incorporate Cannabis into Post-Workout Recovery, March 2019, Los Angeles Magazine

More Blog Entries:

Legal Marijuana Toke Prompts Pentagon to Review Security Clearance of Tech Billionaire, March 21, 2019, California Athlete Marijuana Lawyer Blog

Although it has become easier this year for cannabis companies to find insurance coverage than ever before, Los Angeles marijuana business attorneys recognize the industry is still very under-served.

Most cannabis insurance primarily focuses on product liability coverage, as explained in a recent article by Insurance Journal. However, there are a number of other potential liabilities too for which cannabis companies likely could use insurance coverage. That’s an opportunity for insurance companies, but of course many are keenly aware of the risk, given federal laws pertaining to money laundering when doing business with any enterprise that derives income from illegal sale of cannabis.

Insurers interested in entering the cannabis business market would do well to enter the various cannabis industry associations to get educated on the intricacies of the cannabis industry.

Cannabis Insurance Coverage Gaps

Cyber coverage for cannabis companies is one area that could use some additional coverage. That’s because cannabis companies store a significant amount of customer information in their databases. Substantial amounts of information are also stored in California’s track and trace system, which keeps tabs on marijuana inventory throughout the supply chain, from seed to sale. Potential for data loss is very real, but nonetheless, Los Angeles marijuana business lawyers recognize companies have a legal duty to protect that data. (Our cannabis attorneys in Southern California can help companies with their business plans for the best systems to protect this data and shield your firm from liability.)

Another potential liability – one few licensed cannabis companies likely have considered up to this point – is class action litigation. This is more likely to be an issue raised if cannabis is mislabeled or contaminated or in some way adulterated but not indicated. If cannabis firms are in some way (knowingly or not) violating state regulations, that could open the doors to class action too. This is especially more likely given that California cannabis rules are so onerous, and many operators find it difficult to be fully compliant (another reason for a qualified Los Angeles marijuana business attorney to be on board).

Doctors too may increasingly look for coverage for cannabis-related wrongful acts, risks or malpractice. Five years ago, physicians likely would not have needed separate coverage for this. Now, increasingly, it’s not a bad idea. Even physicians who aren’t commonly in the practice of recommending medical marijuana may still be seeing clients who are using marijuana medicinally (prescribed or self-treated). This has to be considered when prescribing any other medications. For instance, a condition called cannabis hyperemesis syndrome, wherein patients have high levels of THC or other cannabidinoids in their system that can make them sick. Doctors in California increasingly need to be educated on it – and insured in the event of a claim against them for failing to diagnose and treat it.

Whether you are a cannabis company or doctor or insurer considering the implications of marijuana insurance coverage – or the risks of going without it – our dedicated Los Angeles marijuana attorneys can often help advise you on your rights and responsibilities.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Expert Sees a ‘Strong Need’ for Insurance for Cannabis Industry, Dec. 3, 2018, By Don Jergler, Insurance Journal

More Blog Entries:

Credit Union Offering Marijuana Businesses Checking and Savings Accounts, Dec. 1, 2018, Los Angeles Marijuana Business Lawyer Blog

Recently, The Olympian reported recently that a pot shop owner in a Washington state suburb drew the attention and ire of state regulators for allegedly passing out free samples in violation of the state’s recreational marijuana laws. An undercover investigation was launched after officials received an anonymous tip about an alleged illegal marijuana club on site. Social media advertisements indicated free samples to the product were provided upstairs. Undercover officers began investigating the pot shop, and were offered free samples by an employee, who told them they could try it in another section of the building that wasn’t licensed. The officers reported that when they got to this portion of the building, they saw several individuals smoking marijuana.

The problem is marijuana retailers cannot, as Los Angeles cannabis business lawyers can explain, offer a ‘try it before you buy it” sort of deal for marijuana customers. This is largely owing to the fact marijuana business licensees in California, just as in Washington, are required to keep track of their product from seed to sale. By diverting products to be distributed as free samples, they are in violation of the law.

However in this case, the pot shop owner said he plans to challenge the citation (which could cost him his license) because No. 1., he insists the marijuana distributed at the shop was sold, not given out, and No. 2, the site where marijuana was being consumed was a separate business, owned by his film production company. He argued these two separate businesses were being treated as one by prosecutors. He is facing a Class C felony charge of operating a marijuana club.

Marijuana dispensaries in Los Angeles, Orange County and surrounding communities have caught heat in the last few months, despite the state legalizing recreational use of the drug, because a significant number don’t have licenses, as reported by The Los Angeles Times. In some cases, individuals are calling the business something entirely to avoid detection. For instance, one man in Costa Mesa reportedly referred to his marijuana dispensary as a church. Although he was visited by code enforcement several times and allowed a walk-through of his facility, undercover agents allegedly purchased marijuana from him on site on several different occasions. They were likely tipped off by the fact it is listed on weedmaps.com, a popular site consumers search to easy find marijuana sales. However it’s important to note police and federal agents can view it there also.

Even if you are a fully-licensed manufacturer or dispensary, you will want to check in with your Los Angeles marijuana business attorneys before running any kind of specials, particularly if it involves a give-away of marijuana, to ensure the practice aligns with the rules set forth by the Bureau of Cannabis Control and the California Department of Public Health.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Lacey marijuana store in hot water with regulators over ‘free samples’, Nov. 28, 2018, By Abby Spegman, The Olympian

More Blog Entries:

California Marijuana Investor Accused of Plot to Kidnap, Murder Cannabis Business Partner, Nov. 25, 2018, Los Angeles Marijuana Lawyer Blog

was the first country to fully legalize marijuana, and the South American country has learned much as a result of trial-by-error. Cannabis was legalized there five years ago, but it wasn’t until last year that legal sales began. Since then, Uruguay has experienced a number of supply problems. Residents report having to travel long distances to licensed pharmacies, and sometimes once they arrive, the supply is dry.

According to a report from High Times, the issues are two-fold. First an excess in government oversight is creating supply chain issues. Only registered pharmacies can sell cannabis, and there have only been 14 licenses issued out of the 1,200 pharmacies in Uruguay. The government is also in charge of cultivation of marijuana, but only two cultivators have received licenses. Much like in California, when too many restrictions come between buyers and their marijuana, many consumers will choose black market options, even though there are legal options.

Second, the head of the Uruguay National Drug Council said there is an issue of farming capacity. Farming cannabis on such a large scale was not common, and there certainly was not a guidebook available. This led to a learning curve for cultivators to catch up on technology and processing on a mass scale. The two cultivators have just recently reached the allowed capacity of 4 metric tons per year.Meanwhile, demand for cannabis reaches an estimated 25 tons of marijuana in Uruguay annually. Government officials have discussed increasing the amount of cultivators. They are going to have to if they plan to encourage people to stick with legal purchasing options and keep the black market at bay. In fact, the black market was a huge motivator in legalizing cannabis in the first place. Violence related to gangs involved in drug trafficking contributed to a significant percentage of the murders in the country, but because the black market has been able to keep such a stronghold, the violence has only increased.

Advocates still attest that the plan could work; it just takes time. California has also had its fair share of experience with the cannabis black market, though top concerns generally revolve around damage unlicensed growers are causing to the environment and public lands, making deliveries to states where marijuana is illegal, and creating unfair competition for marijuana businesses who are playing by the rules.

Our Orange County cannabis lawyers know plenty of challenges in California are certainly different. Uruguay, for example, is not still battling their federal government on the basic issue of marijuana’s safety, while the U.S. Controlled Substances Act still classifies cannabis as a Schedule I narcotic. In many ways, however, despite this, marijuana is more accessible in California, particularly if you live in a city that permits sales. Our state has managed to thrive and build a budding marketplace in spite of challenges we have faced. This level of success doesn’t come easily. It takes hard work, dedication, and a foundational understanding of creating a solid business plan amidst cannabis regulations and laws. Our attorneys can help you set that foundation with consultations and business plans and guide you toward a thriving future.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients, defendants, workers and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources: Uruguay Struggling to Meet Demand for Legal Marijuana, June 13, 2018, By Leonardo Haberkorn, Associated Press

More Blog Entries:

Uruguay Lifts Prohibition of Marijuana – Joins Colorado and Washington State, Dec. 25, 2013, Orange County Marijuana Attorney Blog

The Whoopi & Maya Market Goldberg and Elisabeth launched their cannabis brand, Whoopi & Maya, with a focus on female users. The Daily Beast reports that this has allowed them to gain traction in California’s expanding market for topical cannabis products. And as their business has expanded its efforts to meet the needs of women, Goldberg herself has become vocal on another issue: the use of medical marijuana to treat menstrual pain. She lives in New Jersey, where Governor Chris Christie has rejected legislative efforts to add menstrual pain to the list of qualifying conditions for accessing medical marijuana in that state. Goldberg claims that Christie has stated “several times” that he doesn’t believe period pain is real pain. This has spurred her efforts to market Whoopi & Maya products to sufferers of menstrual pain, and raise awareness of the issue in her public appearances. Goldberg’s strategy has the benefits of expanding customers in an increasingly-crowded market, and also addressing a political issue about which she is genuinely passionate. Unfortunately, she may soon face a significant obstacle in her efforts. Medical research has not yet been able to determine that marijuana does, in fact, reduce menstrual pain. According to Vox, the most reliable scientific data available indicates that marijuana may be effective at reducing muscle spasms and chronic pain from conditions such as neuropathy and cancer. But this cannot yet be extrapolated to period pain and other menstrual conditions. Goldberg will, no doubt, continue to face political and scientific opposition as she expands her business efforts. Finding the Business Strategy That is Right For Your Cannabis Business There are many important issues to consider when developing an effective business plan for a medical marijuana collective, a nonprofit mutual benefit corporation, and other types of cannabis business entities. Profitable operations can only be maintained with an effective strategy for sustained growth in appropriate markets. Aside from these business considerations, there are many legal matters which must be addressed in order for a cannabis business to operate lawfully. A business licensing attorney can secure the appropriate permits for your business, and identify the regulations which apply in order to continue lawful operations. A cannabis business tax attorney can help create an effective tax strategy which will reduce overall tax liability. The attorney will also help business owners meet their tax obligations without the benefit of federal banking and financial services (which force many cannabis business owners to operate in cash, and pay large tax bills entirely in cash). With appropriate strategic planning and skilled legal advice, cannabis business owners can prepare for profitable operations for years to come. The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Whoopi Goldberg’s Pot Biz Says Weed is the “New Penicillin” for Period Pain, October 25, 2017, by Ricardo Baca, The Daily Beast More Blog Entries: Report: Medical Cannabis Nuns Selling Products on the Internet, May 14, 2017, by Cannabis Law Group

Federal Tax Moneys Wasted A 2012 case out of Humboldt County shows the shocking waste of resources that occur when law enforcement agents do not respect the boundaries between state and federal laws. According to the Los Angeles Times, the Drug Enforcement Agency raided a remote farm, and seized ample incriminating evidence. Among the take was firearms; $225,000 in cash; more than three hundred marijuana plants; and bars of gold and silver. Both defendants entered guilty pleas to federal charges of conspiracy to manufacture and sell marijuana. And yet, after the case had progressed for five years, a federal judge issued a ruling that put an end to the case just before the men were about to be sentenced to prison. A short amendment to an obscure Congressional budget bill prohibits the Department of Justice from using funds in any way that obstructs a state from implementing its own state laws pertaining to medical marijuana. U.S. District Judge Richard Seeborg, sitting in San Francisco, relied upon this provision in order to stop the Humboldt case. It is unknown how much time and money the federal government spent investigating and prosecuting these defendants in the five years it took for their cases to be dismissed. And yet, as seemingly simple as this case may appear, there has been even more confusion about the application of the budget provision to other federal marijuana prosecutions. In one case, a federal judge ruled that a Fresno man had violated California’s medical marijuana law by selling marijuana for profit. The federal prosecution against him was therefore allowed to proceed. This is just one of the many legal technicalities which prevented the budget provision from being applied to any federal case prior to the Humboldt prosecution. These widely-disparate rulings only underscore the confusion that exists – even at the highest levels of the federal judiciary. Other arbitrary technicalities further complicate marijuana law enforcement in California. For example: with the passage of Proposition 64 (The Adult Use of Marijuana Act), recreational marijuana use is now permitted within California. It is, however, prohibited on federal lands within state borders. In another example, cannabis businesses operating lawfully pursuant to state law are prohibited from depositing funds in federal banking institutions. Under federal law, their business profits are considered illegal drug money. These are just two of the seemingly-endless conflicts between state and federal marijuana laws. Existing conflicts between state and federal law can make it difficult for defendants facing cannabis charges to be treated fairly by the criminal justice system. A marijuana defense lawyer will ensure that defendants’ important constitutional rights are protected. The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: The feds seized guns, gold and 320 pot plants. So why did a judge rule they can’t pursue marijuana charges? August 28, 2017 by Joel Rubin, The Los Angeles Times More Blog Entries: Marijuana Arrests Fall in 2015, Still Higher Than for Violent Crimes, October 29, 2016, by Cannabis Law Group

oral arrangements to marijuana favors for guests, there are many ways to incorporate marijuana into the more classical wedding traditions. The Guardian reports on one wedding that featured a “pot sommelier”. Wearing a three-piece suit, the elegant professional presided over a “dab bar”, and gave guests guidance on the best marijuana pairings for their palettes. The Atlantic describes another couple who chose to share a “first toke” with their guests in lieu of a more traditional first toast to the newlyweds. Still other couples commissioned specialty versions of traditional wedding products, such as a four-foot ice bong, or a “unity bowl” with two mouthpieces, upon which the couple could share a ceremonial first toke together. For wedding planners, caterers, florists, venue operators, and other wedding vendors, the legalization of recreational marijuana in California has created a vastly-expanded potential market of specialty services to offer their clientele. While the marijuana industry is still highly regulated, it is also very profitable. Wedding vendors can successfully execute business expansions with strategic operations, legal compliance, and other important business planning. Legal Considerations for Venues Venues can face potential liability for serving cannabis on the premises, but this can be mitigated with effective planning and compliance. Cannabis is somewhat analogous to alcohol in this regard: while venues can be liable for over-serving guests, or serving underage guests, a venue can protect itself with strict rules and training for its staff. Local permits may also be required, depending upon the city and county which govern the venue. For couples and coordinators planning events: be sure that your venue knows you plan to serve cannabis at the event. Consider making this a preliminary question when touring venues and making initial decisions. A venue may be able to cancel a contract at the last minute if it does not allow cannabis on its premises. Transportation Safe transportation of all guests should be a top priority for the couple, the planner, the venue, the catering staff, and anyone else involved in the planning of a cannabis wedding. This is not only out of a moral obligation to ensure the safety of imbibers. Any and all parties responsible for providing cannabis could face legal liability for any accidents which result from marijuana served at a wedding. To this end: ensure that the event has designated drivers and access to public transportation. Check the availability of ridesharing services (such as Uber or Lyft) before the event. Have many different options available so that no one’s safety is left to chance. Many marijuana advocates want to make cannabis part of their special day. Wedding planners and vendors can ensure their legal compliance – and avoid the potential for criminal charges – by consulting the best marijuana business lawyer. He or she will help you plan to expand your business into this highly-regulated and profitable market. The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: I toke thee to be my wife: inside a cannabis wedding in California , August 25, 2017 by Rory Carroll, The Guardian More Blog Entries: It’s a Nice Day for a Green Wedding, February 19, 2017, by Cannabis Law Group

The Conundrum of Marin County In the liberal cannabis climate of Northern California, Marin County is a conservative outlier on marijuana issues. Sonoma County has an estimated twelve thousand residents working in the cannabis industry. Nearby Humboldt, Trinity, and Mendocino Counties form an area quickly becoming known as the “Emerald Triangle” for its vast marijuana farms. In contrast, every city and town council in Marin County (other than Fairfax) has either taken public positions against marijuana dispensaries or banned them altogether. The San Francisco Chronicle reports that this lead Marin County officials to recently reject ten dispensary applications. The County also received two separate anti-dispensary petitions with hundreds of signatures. This is a confusing message from a county which approved the 2016 recreational use referendum by seventy percent. One dispensary owner in Marin County has become a target of federal efforts. Lynette Shaw – known as the “Godmother of Medical Marijuana” – made a name for herself in the cannabis industry in the 1980s by supplying Hollywood stars such as John Belushi. According to the Huffington Post, her dispensary was targeted by federal investigators and prosecutors, and eventually shut down in 2011. The assigned U.S. Attorney even made plans to foreclose on Shaw’s landlord. Despite the fact that Shaw was never convicted, her dispensary remained closed until 2017. And in perhaps the most aggressive statement of sentiment, the Marin County Board of Supervisors has banned non-medical cannabis business activities in unincorporated areas of Marin County. The North Bay Business Journal reports that the ban will preserve the County’s ability to control marijuana throughout the uncertainty of changing recreational use regulations. The County Administrator, Matthew Hymel, is also recommending that only medical marijuana delivery businesses should be licensed by Marin County. According to ABC7, Hymel is reacting to residents’ concerns about marijuana dispensaries being located near their houses, which were raised at public hearings on the non-medical business ban. Cannabis businesses face many hurdles in achieving financial success in Marin County. The simple matters of getting a business license and finding a legal shop location could be insurmountable obstacles for entrepreneurs. Moreover, public sentiment in Marin County is broadly against marijuana – recreational or medicinal. Overcoming hostility and finding successful marketing strategies will also be serious challenges for cannabis business owners in Marin County. Yet even in unfriendly business or political climates, marijuana growers and distributors can find financial success. With sound the business planning services of experienced cannabis lawyers, business owners can be prepared to thrive in California’s cannabis industry. The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Marijuana in Pot Phobic Marin County, California, June 26, 2017 by Jonah Raskin, The Huffington Post More Blog Entries: Marijuana Dispensary Owners File Lawsuit Against Police for Raid, February 25, 2015, by Cannabis Law Group