In August 2018, TIPS Chair Roy Cohen championed the Section’s launch of a new Cannabis Law and Policy Task Force. As a majority of the states have now legalized cannabis in some form— with more on the way—issues involving nuances of state-regulated cannabis, which is illegal under federal law, have begun to permeate myriad traditional legal issues, including federal, state, and local regulation; insurance coverage and litigation; banking and finance; tax law; Securities and Exchange Commission compliance; investment strategies; initial public offerings; mergers and acquisitions; cross-border transactions; import/export laws; product liability; intellectual property; litigation; employment and Americans with Disabilities Act accommodation; real estate zoning and land use; use of the civil Racketeer Influenced and Corrupt Organizations Act; public nuisance; criminal liability; and water rights—just to name a few.
Cannabis and hemp laws are complex given the federal and state tensions, varied interpretations and misinformation, and inconsistent handling by local law enforcement. In addition to navigating the ever-evolving and conflicting legal terrain, with the same issues handled vastly differently from state to state in an emerging industry, attorneys face the additional challenge of ethically providing legal advice at a time when cannabis remains listed as a Schedule 1 controlled substance under the U.S. Controlled Substances Act.
In some states, it is still considered “aiding and abetting” to provide legal advice to cannabis-related businesses. One of the immediate priorities of the task force will be to advocate for an amendment to the Model Rules of Professional Conduct to permit legal services to advise state businesses on compliance with state laws. Daniel Gourash, cochair of the task force, was instrumental in effecting a change by the Ohio Supreme Court in the Ohio ethics rule, which previously prohibited attorneys from providing medical cannabis businesses with legal advice because the industry practices of cultivating and selling cannabis violated federal law.
Through its vetted network of experts, the task force also seeks to educate other attorneys and industry operators regarding the tricky overlay of these new laws and regulations upon the landscape of traditional law principles. The task force will present a CLE program on May 3 at 8:30 a.m. EDT in New York City at The Westin Times Square that will briefly address multiple cannabis law topics, several of which eventually may become subcommittees of the task force. In early autumn, the task force will conduct a two-day seminar in Chicago. The task force plans to continue to produce publications, eventually including an authoritative text on cannabis law to date.
The task force is composed of approximately 40 attorneys in private practice and in-house from across the United States and Canada who have experience representing cannabis and hemp clients in each of their own legal practice areas, creating niches within niches in this pioneering industry. As this column is published, 33 states have medical cannabis programs, 10 states have adult use programs, and several more state programs will become legal in 2019. Federal legalization is a bipartisan 2020 campaign promise and the subject of hundreds of bills at the U.S. congressional level, now no longer hamstrung by Sen. Pete Sessions (R–TX), Senate Rules Committee chairman, who had prevented any previous cannabis bills from reaching the floor for a vote. His replacement, Sen. Roy Blunt (R–MO), supports legalizing cannabis, and many of the bills under consideration aim to protect states’ rights to regulate cannabis within their borders; to alleviate banking restrictions that force cannabis businesses to operate in cash only; and to rectify tax burdens created by an outdated Internal Revenue Code provision that was issued a decade before a cannabis industry was imagined, preventing cannabis businesses from deducting ordinary and normal business expenses. Because of these challenges, advising a start-up or even exit-level cannabis company is like a game of chess where the attorney must divine the course of future law and its potential judicial interpretations.
The complex interplay between federal and state law, in addition to the various agencies and regulations involved, creates an agile legal environment where the anachronistic law lags behind public opinion and is being rewritten for the future. The members of TIPS’s task force seek to be stewards of this historic change in the law by providing meaningful education and promoting professionalism and unparalleled ethics in this pioneering field.
In the coming months, the TIPS Cannabis Law and Policy Task Force will be examining the emerging business and legal issues for lawyers and clients involved in the cannabis and hemp industry in preparation for the seminar this fall. For example, on December 20, 2018, President Trump signed the 2018 Farm Bill, removing hemp from the definition of marijuana and setting into motion a sense of legality for a burgeoning hemp industry that is outpacing the more regulatorily burdened cannabis businesses by seizing on the cannabidiol (CBD) hemp extract craze, currently free from regulation or scrutiny. That craze has new legal ramifications that may change because CBD is now considered a drug instead of a dietary supplement by the Food and Drug Administration, which determines a pathway to take enforcement actions against those who do not comply with its regulations while also creating a pathway for testing the legality and availability of hemp-derived CBD extracts. Until the 2018 Farm Bill’s final regulations are adopted, the industry is still operating under a more limited 2014 program for industrial and university research–contracted hemp.
For all those who are interested in participating, the Cannabis Law and Policy Task Force, cochaired by Daniel Gourash and former TIPS Chair Michael Drumke, is currently holding regular calls in preparation for its fall seminar. Thanks to the early support and participation of TIPS members, the task force has reached general committee status in record time. In August at the ABA’s Annual Meeting, TIPS Council will approve the task force’s transition to become the TIPS Cannabis Law and Policy Committee. We encourage new members to attend the next meeting and join in the work of this new committee.