As more states legalize marijuana for medical or recreational purposes, entrepreneurs believe they'll get rich from cannabis businesses that comply with the laws of a particular state. However, marijuana businesses that comply with state laws are still breaking federal law and, therefore, are criminal enterprises.
Business advisory and advocacy law firm McDonald Hopkins addresses this issue in a special report designed to help potential investors, vendors, and professionals, such as lawyers and bankers, understand the risks involved in participating in the so-called "legal marijuana business."
The report, authored by Bruce Reinhart, co-chair of McDonald Hopkins' white collar and government compliance practice group, details how federal law regulates controlled substances, and that only certain persons registered with the Drug Enforcement Administration (DEA) can manufacture, distribute, and dispense controlled substances.
Reinhart outlines the tremendous risks businesses and business owners take on when dealing with legal marijuana businesses, including exposure to criminal prosecution, loss of assets, civil penalties, loss of licensure, and fiduciary duty litigation. These risks are assumed in an environment with limited -- if any -- protection from legal counsel or insurance.
Given the current legislative landscape, the report warns that the decision to enter the legal marijuana market should be made cautiously and with the advice of legal counsel experienced in criminal, civil, and forfeiture law.