Bankruptcy Case Reveals Federal Inequities

It takes a lot of guts to start your own business. There are innumerable challenges you will have to face as a business owner, not to mention the consequences of failing. Luckily, in the United States, if your business fails and you cannot pay your bills you can declare bankruptcy. While it is not a magic wand that waves your problems away, for many it means the difference between starting over and total ruin.

Unfortunately for the cannabis industry, the safety net of bankruptcy does not apply, leaving one herbal entrepreneur left out in the cold and wondering what to do. According to The Denver Post, Denver marijuana business owner, Frank Anthony Arenas, has had his bankruptcy case thrown out by a U.S. bankruptcy judge.

In his decision, Judge Howard Tallman explained why Arenas’ case was thrown out: “Violations of federal law create significant impediments to the debtors’ ability to seek relief from their debts under federal bankruptcy laws in a federal bankruptcy court.” Essentially, because marijuana is illegal on the federal level, marijuana business owners are not afforded bankruptcy protection.

If this reasoning sounds eerily familiar, that’s because it is. If you recall, marijuana businesses are also not allowed to have access to basic banking services because marijuana is federally illegal and by doing business with the marijuana industry, banks open themselves up to federal prosecution.

There seems to be this weird dissonance between state and federal law at the moment. Even though the Obama administration, by their own admission, has decided to let the states decide on marijuana, the federal government still throws up road blocks to prevent the cannabis industry from growing legitimate businesses.

What’s most upsetting is that Judge Tallman admitted that the result of his decision will be “devastating for the debtor” and yet there is nothing he can do. Sadly, judges are not meant to change the law, but merely interpret its meaning. Arenas has filed an appeal in the US 10th Circuit Court of Appeals in Denver and as well he should.

With more states legalizing marijuana, either for medicinal or recreational purposes, something has to give with the disconnect between state and federal policy. At some point the federal government is going to have to step in and afford some protection to cannabis business owners.

By closing off the cannabis industry to banking services and bankruptcy protection, the federal government simply creates an unnecessary complication to an issue that doesn’t need any more ins and outs. Some parts of the government, at least, are doing their part to improve the lot of the cannabis industry.

In July, the House of Representatives passed a bill that would allow banking access to the marijuana industry. It still needs to pass the senate, but it has a decent chance. What’s needed now is a bill extending bankruptcy protection to the marijuana industry.

You don’t have to like marijuana, but it’s not going away. If you don’t want the cannabis industry disrupting everyday life, then it is imperative that the industry be afforded the same protection as every other business in this nation.

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