Legislative Issues to Watch

At the Marijuana Investor Summit on April 22, 2015, attorneys Marc Ross, partner at Sichensia Ross Friedman Ference, and Michael McGrory, partner at SmithAmundsen, explored the history of marijuana laws and the factors that will shape the future of marijuana legislation.

The future they portrayed involves unsteady compromise. It will include balancing the interests of states, patients and doctors and will be shaped by state decisions about which medical conditions may be treated and how the market process from cultivator to consumer is regulated. There are more questions than answers, but understanding history and knowing the key issues can be powerful for stakeholders as they consider how to participate in the emerging world of legal marijuana.

Modern marijuana history begins in the United States in the 1920s as it headed north over the Mexican border. By the 1930s the federal government had stepped in, establishing the Federal Bureau of Narcotics, headed by Harry Ainslinger. “Ainslinger’s single mission,” according to Marc Ross, “was to demonize marijuana.”

The Bureau of Narcotics set about a campaign of dis-information that included the sensational “Reefer Madness.” The 1937 Marijuana Tax Act subsequently criminalized marijuana. In 1970 marijuana was placed on Schedule I of the Controlled Substances Act, despite the recommendation by President Nixon’s own Shafer Commission that the drug be decriminalized. This is the burden that marijuana has carried ever since.

Looking to the future, McGrory predicted that one of the issues to consider from a state standpoint will be the state’s personality. Among the factors McGrory mentioned were strictness of enforcement, whether the state is known for corruption, whether it is prepared to roll out a complex program and whether it has a reputation for being litigation-friendly. He pointed out that regulations will likely be pervasive. He also suggested watching how harsh penalties will be for violations, and whether they will be progressive.

From the patient perspective, one of the key issues will be whether there will be a patient registry. “What are the benefits of actually being on a registry,” McGrory asked. Will registration have an effect on child custody determinations? What protections will there be from the government’s subpoena power?

He further questioned whether it will be difficult for patients to register or to get and consume marijuana products. What protections will there be for users from other states? What will possession limits be and what employment protections will there be for legal marijuana patients? “What sort of rights does a proper medical cannabis patient have with respect to an employer? Can they just be fired for being a known medical cannabis user,” McGrory asked. What is the state going to do to get the word out to doctors about the potential for marijuana recommendations?

From the doctor’s perspective, it will be important for states to determine whether physicians may own dispensaries and what doctor/patient relationships will be required. “Does the state protect or immunize the doctor from liability or discipline for recommending marijuana? You want the doctors to be comfortable,” McGrory stated.

With respect to medical conditions, an important issue will be whether there is a list of approved conditions and what will be on it. In addition, a key issue will be how states may add to the list of medical conditions for which marijuana may be used.

Business owners will want to know what growing alternatives will exist. Will the law allow for home growing or for caregivers to grow for patients? Will the law require cultivation centers and dispensaries? The issue of how many dispensaries and cultivation centers there can be and where they can be located ties directly into the licensing issue. “States are going more and more toward a very big, thick application,” McGrory said. He further suggested that business owners investigate what advertising limits will be and under what circumstances the state may inspect a facility.

Finally, business owners should know what state law will provide regarding transfer of ownership. May owners transfer stock, sell to a privately owned company or go public? An exit plan is part of any savvy entrepreneur’s strategy.

With respect to banking, McGrory said, “I haven’t seen anything that I have really liked coming out of state legislatures.” Clearly, though, commercial banking relationships will be necessary to the growth of the industry.

Through the first years of legalization, much attention has been devoted to predicting which states will legalize next. As more do so, however, it becomes important to watch the precise shape of legalization as it is implemented in each jurisdiction. A checklist of questions may be among the best tools prospective market entrants can have.

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