Thirty states and the District of Columbia have legalized marijuana for medical purposes,[1] while recreational marijuana is legal in nine states and the District of Columbia.[2] Cannabis sales are skyrocketing, with an estimated $9.7 billion in legal marijuana sales last year in North America.[3] In June 2018, the U.S. Food and Drug Administration (FDA) approved a new drug for rare seizure disorders that contains a plant-derived, highly purified form of cannabidiol (or CBD),[4] the first FDA-approved drug derived from marijuana.[5] As of October 17, 2018, cannabis products are legal, although regulated, in Canada.[6]
However, under U.S. federal law, the cultivation, distribution, and possession of marijuana are prohibited by the Controlled Substances Act of 1970, which classifies the plant as a Schedule I substance and imposes criminal penalties for engaging in proscribed activities.[7] Businesses in the cannabis sector therefore face potential federal prosecution and exposure to criminal penalties. The resulting uncertainties present significant hurdles for the cannabis industry and contribute to a risk profile that insurers approach with caution or avoid altogether.