The regulated cannabis industry is growing exponentially. Regulators, with the help of industry leaders and advisors, are demanding that the industry “grow up” and embrace the realities of functioning in a highly-regulated environment. Adolescent behavior will not be tolerated.

The OLCC is responsible for limiting the size of cannabis canopies. The term canopy is defined as “the surface area utilized to produce mature plants calculated in square feet and measured using the outside boundaries of any area that includes mature marijuana plants including all of the space within the boundaries.” The “square footage of canopy space is measured horizontally starting from the outermost point of the furthest mature flowering plant in a designated growing space and continuing around the outside of all mature flowering plants located within the designated growing space.” Therefore, canopy limitations apply to mature plants located within a two dimensional space.

Continue Reading Oregon Cannabis Producers Need to ‘Grow Up’ and Respect Boundaries

Next month, voters in five more states will decide whether to legalize recreational marijuana. As reported by The New York Times in an insightful article on this issue, some legalization advocates hope a (green) thumbs up from voters in these states (California, Massachusetts, Maine, Arizona and Nevada) will blow enough smoke in the face of “the war on marijuana” to help bring about nationwide legalization. In fact, the lieutenant governor of California is quoted in the article as believing that legalization in California’s ginormous economy will “put more pressure on Mexico and Latin America” to also consider legalization.

Continue Reading If More States Vote ‘Green’ This November, Some Believe It Could Be ‘The Beginning of the End of the War On Marijuana’

Money backgroundIs your cannabis business ready for an IRS exam? IRS examinations are increasingly focused on IRS Form 8300 reporting requirements. These requirements are the result of USA PATRIOT Act provisions requiring all trades or businesses to report their receipt of more than $10,000 in currency in a single transaction or in two or more related transactions. 31 USC §5331 and 31 CFR §1010.320.

The required currency filing must be made in accordance with IRS Form 8300 instructions. The instructions provide that the form must be mailed to the IRS Detroit Computing Center or electronically filed within 15 days of receipt of the currency. Filers must also provide each person named on its filed Forms 8300 with a specified written statement by January 31 of the year following the calendar year in which the currency was received. The statement must show the name, telephone number, and address of the information contact for the business, the aggregate amount of the reportable cash received, and note that the information was furnished to the IRS.

Continue Reading Cashed Cannabis: Required Reports for Amounts Exceeding $10,000

The Oregon Liquor Control Commission (OLCC) recently adopted new rules designed to ease the transition from the Oregon Medical Marijuana Program (OMMP) to the OLCC regulated recreational marijuana industry.  The rules address concerns about a shortage of OLCC licensed retail outlets, which impacts the viability of licensed growers and processors, as well as concerns about a shortage of supply as those growers and processors get up and running.

The rules (OAR 845-025-2910 and -3310) allow OMMP dispensaries and processors to transfer OMMP inventory acquired before October 1, 2016, to OLCC licensed retail and processing operations.  Transferred inventory will enter the seed-to-sale tracking system and must be sold by March 1, 2017.

Continue Reading OLCC Eases Transition From Medical to Recreational Marijuana Sectors (and Releases Related Business Resources)

The U.S. Drug Enforcement Agency (DEA)’s recent decision declining to reschedule cannabis is a step bridging the national discussion — a step toward a possible agreement on medical cannabis through scientific research. The federal agencies are calling for more research and “work to … ensure support by the federal government for the efficient clinical research using marijuana.” These calls create an opportunity for research scientists in Oregon, Washington and elsewhere, as well as opportunities for universities and initiatives like the University of Washington Cannabis Law and Policy Project. They are also a reminder not to squander first-mover benefits.

Continue Reading The DEA Is Getting Past Just Saying No: Scientific Research Into Medical Uses of Marijuana Is a Bridge Toward a Policy Shift

The U.S. Drug Enforcement Agency (DEA) recently denied a petition to initiate proceedings to reschedule cannabis under the Controlled Substances Act (CSA). Thus, cannabis will remain a Schedule I substance under the CSA. Prior to the announcement, there was a good deal of speculation that the DEA was considering rescheduling cannabis to Schedule II.

Continue Reading DEA Just Said No to Rescheduling Cannabis: Why It Matters

Considering diversifying with a high-risk investment? Heard the lure of the “green rush” toward a possible $100 billion legal marijuana industry?

Before you write that check:

  • First, research the company, related persons, and the business, industry and legal risks.
  • Next, if you decide to make the leap, consider having legal counsel assist you in documenting your equity position.

Pressing escape or reboot can be difficult, after you have already signed documents. If you’re investing in a partnership or limited liability company, state law imposes default rules, unless you have an agreement modifying them. If the business — or you — fail to comply with the state’s rules on ownership and investors, the state regulator may impose penalties including cancellation or suspension of license and fines.

Continue Reading High Stakes: Investing in a Legal Marijuana Business

Over the last year, the Washington state marijuana industry has anticipated the transition from an unregulated medical marijuana market to an integrated, medical-recreational market on July 1, 2016, under the Cannabis Patient Protection Act.

A month before the roll-out date, a medical doctor and marijuana patient sued the governor and others to block the merger.  On June 30, the federal court refused to stop the merger. The doctor and terminally-ill patient argued that the new rules will chill their medical communications in violation of the First Amendment. But the court validly rejected their request for an injunction on jurisdictional grounds. They had no private claim under the Controlled Substances Act, First Amendment and Supremacy Clause. The doctor and patient also failed to establish injury supporting a pretrial injunction.

Find more information on the history of the two merged industries, the recent suit and some takeaways.

Continue Reading Court Declines to Prevent Merger of Washington Medical and Recreational

Monday, June 20, 2016, was summer solstice. But in Washington, there were two other things to celebrate: a day to recover after the Fremont Solstice weekend, and, for legal marijuana businesses, the first day for the licensed marijuana industry to obtain funds from out-of-state financiers under the new rules from the Washington State Liquor and Cannabis Board (WSLCB).

This post describes the regulatory framework governing loans to Washington-licensed marijuana businesses and the penalties for noncompliance.

Continue Reading Out-of-State, Non-Bank Financing Becomes Available for Washington State Licensed Marijuana Businesses

I. The Conflict: The Long Arm of Federal Law

Recreational cannabis businesses operate in a world of conflicting state and federal laws. Several states have legalized recreational cannabis, yet, under federal law, cannabis remains an illegal Schedule I drug under the Controlled Substances Act (CSA). The CSA created five classifications of controlled substances. These classifications range from Schedule I to Schedule V, with varying qualifications for a substance to be included in each. The criteria for a Schedule I controlled substance includes a high potential for abuse, a lack of currently accepted medical use, and a lack of accepted safety for use under medical supervision. Controlled substances in Schedules II through V generally have a lower potential for abuse and/or some degree of currently accepted medical use. On April 4, 2016, the Department of Health and Human Services, the Drug Enforcement Administration (DEA), and the Office of National Drug Control Policy issued a letter indicating the DEA intends to reconsider the classification of cannabis in the first half of 2016. It is unclear if the DEA will continue to classify cannabis as a Schedule I drug, reclassify it to a different schedule, or remove it from the five schedules of controlled substances. Legalization at the state level does not protect recreational cannabis businesses from federal prosecution. The federal government continues its war on drugs and drug trafficking. This war currently includes cannabis. Cannabis businesses need cannabis to be removed from the schedules of controlled substances in order to eliminate the threat of federal prosecution.

State legalization rules are limited in scope to in-state purchase and consumption in an effort to “legitimize” the legislation and avoid federal intervention. For instance, state laws in Oregon and Washington do not permit a recreational cannabis consumer to acquire cannabis in Washington and later consume it in Oregon. States have carefully drafted their laws to prohibit importing or exporting cannabis. It is not so easy, however, to prevent federal intervention in all respects, and the long arm of federal law is felt most deeply in two areas: taxation and banking. This article addresses the tax challenges.

Continue Reading Recreational Cannabis — Section 280E and Tax Efficient Structuring