Introduction to Cannabis
Cannabis, more commonly known as marijuana or hemp, is a genus of flowering plants indigenous to South and Central Asia. It has been grown for food, medicine, and industrial uses for several thousand years. For much of human agricultural history, it was one of the most widely grown crops in the world.
Hemp is cannabis grown for industrial purposes and has only nominal amounts of THC, the compound responsible for marijuana’s “high.” Hemp’s myriad uses include the production of rope, paper, textiles, building materials, bioplastics, ethanol, biodiesel, food, and an estimated 25,000 other applications.
Marijuana, hemp’s higher THC cousin, has shown virtually unrivaled safety and efficacy in the treatment of a wide-ranging array of medical conditions, including chronic pain, insomnia, Alzheimer’s, osteoporosis, HIV, cancer, diabetes, MRSA, epilepsy, arthritis and dozens of others, including many conditions for which no other suitable treatments exist. Cannabis is now one of the most studied plants in the world with nearly 30,000 peer reviewed journal articles published on the topics of cannabis and its primary therapeutic compounds, cannabinoids.
Beginning in the early 20th century, a series of campaigns based largely on misinformation have served to restrict and criminalize cannabis’ cultivation and use in jurisdictions around the world. The result of these policies in the United States has been a war on drugs that is largely responsible for our status as the country with the highest incarceration rates in the world.
Over the past two decades, increased awareness of the benefits of cannabis as well as the harms associated with its prohibition have fueled a remarkable shift in the public’s perception of the plant. That shift in public opinion, coupled with the persistent efforts of advocacy groups and industry associations has caused many jurisdictions, both in the United States and abroad, to start decriminalizing and legalizing cannabis.
As of the writing of this article, 23 states have approved the medical use of cannabis and four states and the District of Columbia, have legalized its use by adults over the age of 21 regardless of medical need. These legal changes have given rise to one of the fastest growing industries in the country, with legal cannabis sales estimated to have grown by 68% in 2014 to over $2.5 billion.
As more and more cannabis sales are shifted from the black market to legal markets, the need for legal advice to help businesses navigate the rapidly evolving patchwork of regulations is increasing dramatically.
A Brief History of Marijuana Laws
The first law regarding cannabis governing what would later become the United States was a decree made by King James I of England in 1619 requiring each colonist to grow at least 100 cannabis plants. Cannabis continued to play a vital role in the development of the United States for centuries to come. It wasn’t until the early 1900’s that marijuana – and by extension hemp – began to be viewed as problematic.
The Marijuana Tax Act
In 1930 Harry Anslinger, former assistant commissioner of the Bureau of Prohibition, was appointed commissioner of the newly-formed Federal Bureau of Narcotics. After the repeal of the Volstead Act in December, 1933, he launched a systematic campaign of misinformation designed to vilify marijuana and its users and petitioned Congress to pass a law outlawing the substance. Due to the 10th Amendment, the federal government lacked authority to ban marijuana. However, in 1937 Congress passed the Marijuana Tax Act which required that all importers, manufacturers, and cultivators purchase a tax stamp for marijuana. By refusing to issue tax stamps the federal government effectively rendered marijuana illegal overnight.
The Controlled Substances Act
In 1969, the Supreme Court held the Marijuana Tax Act to be unconstitutional. In 1970 Congress repealed the Marijuana Tax Act and in the same bill, passed the Controlled Substances Act (CSA). The CSA created five schedules into which most drugs would be placed (alcohol and tobacco being two notable exceptions). The DEA and the FDA were given joint responsibility for determining which substances belonged in which schedule. Schedule I – the most restrictive schedule – is comprised of substances that meet all three of the following criteria:
- The drug or other substance has a high potential for abuse.
- The drug or other substance has no currently accepted medical use in treatment in the United States.
- There is a lack of accepted safety for use of the drug or other substance under medical supervision.
Marijuana, and its cannabinoids are listed in Schedule I of the Controlled Substances Act. Setting aside any potential for abuse, marijuana very clearly does not meet the second and third criteria.
In addition to the thousands of peer reviewed studies showing medical uses for cannabis, the United States of America as represented by the Department of Health and Human Services holds a patent (US Patent 6630507) titled “Cannabinoids as antioxidants and neuroprotectants” which claims among other things that “cannabinoids are found to have particular application as neuroprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease and HIV dementia.” It is difficult to reconcile how a government can claim that a substance has no medical use while also holding a patent for medical uses of that same substance.
The idea that there is a lack of accepted safety for use of marijuana is an even bigger stretch of the imagination. In response to a petition to reschedule marijuana, Francis Young, a DEA administrative law judge issued a finding of fact in 1988 which states “Marijuana, in its natural form, is one of the safest therapeutically active substances known to man. By any measure of rational analysis marijuana can be safely used within a supervised routine of medical care.” Despite these and other very rational arguments against marijuana’s current placement, it continues to be classified as a Schedule I substance by the federal government. By contrast, both cocaine and methamphetamine are in the less restrictive Schedule II.
Much of the advocacy work being done at the federal level aims to get the federal government to either reschedule marijuana so that it can be used medically or de-schedule it completely so that it can be regulated in a manner similar to alcohol.
California Proposition 215
In 1996 California voters passed Proposition 215 (also known as the Compassionate Use Act) which allowed patients and their primary caregivers to possess and cultivate marijuana for medical use. Proposition 215 made California the first state in the United States to allow for the use of medical marijuana. This created a conflict between state law, which now allows for the use of medical marijuana and federal law which continues to ban its use completely.
California’s Compassionate Use Act, the first of its kind, was extremely vague. This has proved to be both a good and a bad thing. In the absence of statewide regulations concerning exactly how marijuana could be produced and distributed to patients, much of the regulatory burden has fallen on the courts as well as local jurisdictions.
Since the passage of Proposition 215, many other states that have passed their own medical marijuana laws have looked to cities and counties around the state of California in order to identify best practices as well as regulatory failures.
California Senate Bill 420
In 2003, Governor Gray Davis signed the aptly named California Senate Bill 420, which sought to clarify the scope and application of Proposition 215. SB 420 created an optional state-issued ID card designed to protect patients from unnecessary arrest. It also allowed the Attorney General to set limits on the amount of marijuana that patients and caregivers could cultivate and possess. Those limits were subsequently deemed “unconstitutionally amendatory” by the California Supreme Court in People v. Kelly. Perhaps most notably though, SB 420 allowed for patients and caregivers to associate collectively and cooperatively to cultivate medical marijuana. It was this provision that created the legal opportunity for dispensaries to exist and thus gave rise to the beginning of the modern legal cannabis industry.
The failure of SB 420 to adequately anticipate the emergence of dispensaries and put in place regulations to govern them has allowed a patchwork of regulations to emerge at the local level across the state. Some jurisdictions like Oakland and Berkeley have created very effective regulations for dispensaries that are designed to ensure that all patients have adequate access to medical cannabis. Other jurisdictions like Los Angeles and San Diego continue to struggle to control an industry that expanded rapidly in the absence of an effective regulatory framework.
Where We’re Going from Here
With support for marijuana at an all-time high, it is almost a foregone conclusion that Californians will vote to approve an “Adult Use” ballot initiative in 2016 legalizing marijuana for any adult in the state. This will create many new opportunities for businesses in California and the attorneys who advise them.
In the meantime, California’s legislature continues to struggle to enact legislation that would effectively regulate the production and sale of cannabis at the state level. Because of the legislature’s continued failure to act, individual state agencies are starting to draft their own regulations to try to get a handle on the industry before adult use legalization creates another surge in the growth of the industry. The Board of Equalization, the State Water Resources Control Board and the Department of Forestry among others have already started moving forward with plans to regulate various aspects of the production and sale of cannabis.
The prospect of legal industrial hemp production in the United States is also moving forward rapidly. At the moment hemp production is largely centered in China and Europe but several U.S. states have legalized the production of industrial hemp and more are sure to follow suit. Senate Minority Leader Mitch McConnell even inserted a hemp provision in a recent federal farm bill. As American farmers start growing hemp on a large scale, we’ll see an increase in industrial applications including its use as a sustainable source of locally-sourced energy production.
The Increasing Need for Legal Specialists
Not long ago, the only “marijuana lawyers” were criminal defense attorneys. As more and more states allow for the legal sale of marijuana for medical and recreational use, new businesses are emerging at an accelerating rate in order to meet that demand.
These days, companies in the cannabis industry – whether directly involved in the cultivation and sale of cannabis or involved in providing ancillary services – need legal advice in a vast array of areas of practice. Some attorneys provide general legal services for cannabis businesses but for the first time in nearly a century, cannabis businesses are hiring attorneys specializing in intellectual property, tax law, land use and zoning, securities law, mergers and acquisitions, real estate law, agricultural law and pretty much every other area of law that traditional businesses have needed for years.
There is currently a growing opportunity for lawyers across many disciplines to capitalize on this rapidly growing market segment by taking the time to understand the unique – and not so unique – legal challenges that cannabis businesses face. Many lawyers and even entire firms spend most or all of their time working for clients in the cannabis industry.
How to Find Clients in the Cannabis Industry
The cannabis industry is growing at a break-neck pace and there are plenty of opportunities to get your foot in the door. One way is to form a relationship with attorneys, firms, and consultants already doing business with the cannabis industry. If you happen to specialize in a field that is in demand, you may end up getting more referrals than you can handle from other attorneys who either don’t have time to take on additional clients or don’t specialize in your field. Word still travels very quickly in the cannabis industry and if you do a good job for one or two clients, you’re likely to get more work just by word-of-mouth. Just be careful not to leave a bad impression… those words travel fast too.
Industry events and tradeshows are another good place to look if you’re trying to get started with the cannabis industry. Investor events, tradeshows, fundraisers, and other cannabis related get-togethers are happening all the time.
David Abernathy is a business management consultant who has spent the last five years working primarily in the cannabis industry. He has worked with some of the most prominent businesses in the industry on issues ranging from compliance and corporate structure to investment and development.
This article originally appeared in the 2014 edition of A Year in Review. Please contact Communications Administrator Valerie Brown Lescroart for a physical copy of the annual publication at valerie@acbanet.org or (510) 302-2215.