A day in the life of a marijuana business lawyer puts me face to face with California cannabis business entrepreneurs who have been anticipating the inevitability of recreational sales in our state. Unfortunately, many of these forerunners and visionaries have tried to create business models that are “as legal as possible” because of local restrictions placed on this industry. Therefore, some have obtained licenses and created legitimate, non-cannabis businesses, but they also run their cannabis-related business at the same location. This, of course, is not disclosed to the city where they operate.
On Oct. 9, 2015, California’s governor signed into law the Medical Marijuana Regulation and Safety Act, which creates a state licensing and regulatory scheme for commercial cannabis businesses. As part of the licensing scheme, the state will prioritize licensing for cannabis businesses that can demonstrate they have been operating with the knowledge and permission of their local government, prior to Jan. 1, 2016.
This past week I spoke to a business owner with a huge dilemma. This person has a regular business, but runs his cannabis products business under that cover. He wants a proprietary spot in line for state licensing, but knows the current city government will not give him a license to run his cannabis business. To his credit, this business actually puts out an impressive product, complete with professional labeling and a sophisticated marketing plan. The product is even tested, although this is not currently a requirement under state law. This business owner has done what he felt he had to do to operate in the current Wild, Wild West environment of cannabusiness.
Naturally he feels he has been unfairly discriminated against, because California residents voted in the Compassionate Use Act of 1996, but hardly any cities will let cannabis businesses function like normal businesses. So now this business owner is concerned. He has spent a lot of money developing the product line and did not expect what the new regulations would require. What should business people in similar situations do?
It is advisable that every serious commercial cannabis business person become completely legal. “As legal as possible” is not the standard. Background investigations will be part of the state license application process, including a review of current corporate records, financial records and a check to ensure general business formalities. For those choosing this industry, it’s better to make the necessary changes now. Otherwise, you may find yourself waiting at the end of a long line, while those who moved mountains to be properly positioned will eat the first fruits of this newly developing industry.
Michele Brooke is an attorney in California who practices civil litigation and civil cannabis law (www.brookelawgroup). She is a member of Americans for Safe Access, NORML and the American Herbal Products Association.