Marijuana Business Magazine - March 2018

Sessions’ decision, disclosed in a Jan. 4 memo, raised three questions: 1.Would there be a return to 2010-2012?That’s when federal agents routinely raided marijuana dispensaries and grows in California and other states, making the can- nabis industry a treacherous one to do business in. 2. Should marijuana businesses be prepared to fight against federal intervention? 3. Has the marijuana industry entered a new normal marked by heightened caution and worry? The answers to those three questions are: no, yes and yes. As of mid-February, there had been no widespread crackdown on state-legal marijuana businesses.Many lawyers and others argue that the new Sessions Memo didn’t change much – that, according to current policy guidance, top U.S. attorneys have more or less the same legal leeway as they did when the Obama-era Cole Memo was in force. Moreover, the attorney general’s decision didn’t change the fact that federal drug enforcers are already stretched thin by way of resources. If the feds go after any marijuana companies, they will probably target those operating in the black market or licensed businesses breaking state cannabis laws – not licensed operators in good standing. “For the most part, we are still dealing with the status quo,” said Darren Weiss, an attorney with Verano Brands, an infused product manufacturer in Maryland. Still, unless Congress changes federal marijuana laws, cannabis business owners remain vulnerable to federal action.Taking precautions that reduce – if not completely eliminate – risk and exposure makes practical business sense. And while 2012-style raids seem unlikely, federal authorities could try less conspicuous methods of interference. “The federal authorities know the public won’t stand for milita- ristic enforcement, but they could get away maybe with backdoor enforcement, things not necessarily in the public eye,” said Rachel Gillette, an attorney with Greenspoon Marder in Denver. She pointed to the Financial Crimes Enforcement Net- work (FinCEN), a U.S. Treasury Department agency. An Obama-era FinCEN memo effectively gives banks permission to serve marijuana customers, provided they can prove those businesses are complying with state laws. “Maybe we’ll see the feds crack down on banks or businesses that can’t meet FinCEN requirements,”Gillette said. She also noted that state-legal marijuana “is a heavily taxed and audited industry, so we might see more tax authority enforcement.” Some cannabis business owners might see taking the recommended precautions as onerous and resist shelling out cash for them out of principle or a lack of money. But, according to experts,MJ business owners should realize that their industry – while more regulated than others – isn’t the only one facing costly scrutiny from Uncle Sam.Think health care, pharmaceutical, food, alcohol, gambling and the like. A fter Attorney General Jeff Sessions ripped up the Cole Memo and gave U.S. attorneys greater leeway to prosecute marijuana businesses, many industry executives and experts wondered whether the days of the federal government leaving legal cannabis alone were over. Moreover, many of the practices that cannabis companies should be executing are things that smart businesses in any regulated market are already doing, not only because of compliance requirements but because they make for good business practices. Experts said the most important of those is compliance. “Your best defense against federal interference is to stay in strict compliance with your state law and local law,”Gillette said.That means paying taxes, keeping thorough records and back- ing them up and making sure facilities EXECUTIVE SUMMARY U.S. Attorney General Jeff Sessions’ decision to shred the Cole Memo raises the specter of federal legal action against marijuana companies. Here are ways MJ business owners can protect their companies: • Ensure your attorney is loyal and won’t give up your information if subpoenaed. • Comply with all local and state rules, and train your staff about compliance. • If confronting a wary landlord, be an educator and explain that the risks are minimal and can be avoided through compliance. Be flexible on rental terms. • Keep the size of your company in check to stay off the feds’ radar. Growers can resist major expansions, manufacturers can produce small batches and retailers can stay lean and mean. • Develop noncannabis revenue streams and business plans that your company can revert to if necessary. • Form alliances with members of your local community, including non-MJ companies and organizations. U.S. Attorney General Jeff Sessions March 2018 • Marijuana Business Magazine • 59

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