Cannabis Decriminalization Is The Short-Term Relief Entrepreneurs Need
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As cannabis companies look to the winter months, one topic is top of mind: the expansion of legalization.
On Election Day, Nov. 3, there will be a number of ballot initiatives for voters to consider. Voters in New Jersey, Arizona and Montana — where there are existing medical cannabis markets — will consider legalizing adult-use.
Mississippi may potentially become a new market for medical cannabis, and there are two ballot initiatives in South Dakota that seek to legalize both medical and adult-use.
Jennifer Fisher, a partner at law firm Goodwin’s cannabis and white collar practice, helped Benzinga zero in on what could potentially transpire after ballots are cast nationwide.
Fisher On Decriminalization 'At A Minimum': "The legalization of adult-use cannabis in New Jersey could have a significant impact on legalization efforts in surrounding states, including Pennsylvania, New York and Connecticut," Fisher said.
"The outcome of the presidential election and Senate races in key states could lead to reforms at the federal level, including passage of the SAFE Banking Act and the descheduling of marijuana under the [Controlled Substances Act]."
Fisher, who regularly advises cannabis operators and investors on regulatory compliance, licensing and disclosure obligations, also expressed support for one initiative in particular: decriminalization.
"At a minimum, anyone operating in the cannabis industry should be hoping for decriminalization," she said.
This would lift the barrier to dynamics that other industries enjoy, such as financial services, institutional investors, listing on U.S. stock exchanges, research and tax benefits, the attorney said.
Fisher also represents cannabis companies in litigation. Here's what she told Benzinga.
Benzinga: What are your cannabis clients primarily concerned with?
Fisher: Cannabis companies are increasingly facing the threat of litigation. More business disputes are ending up in court and consumer groups have begun targeting the industry.
This has led to more pre-litigation demands and the filing of class action suits alleging violations of securities law and attacking the way products are being marketed to the public.
I am spending more time counseling clients on litigation strategies, including ways to avoid getting caught up in these types of cases.
Benzinga: Do you think it's indicative of the varying and confusing state-by-state policies companies have to deal with?
Fisher: It has less to do with the patchwork of varied state-by-state regulatory policies and more to do with the evolution of the industry.
As cannabis companies grow, raise more capital and expand operations, they become targets for consumer litigation and business disputes.
The relationships between cannabis operators and their investors, vendors and customers are also becoming more complex, which has given rise to litigation involving contract disputes, intellectual property protection, the Telephone Consumer Protection Act and alleged violations of securities laws, among others.
Benzinga: Surveys show that cannabis reform is typically something both Republicans and Democrats want. But the Trump administration recently advised Republicans not to put cannabis reform on ballots. Democrats, meanwhile, put forward a plan focused on decriminalization. What outcome on Nov. 3 bodes well for the cannabis industry?
Fisher: At a minimum, anyone operating in the cannabis industry should be hoping for decriminalization.
This is the primary barrier preventing cannabis companies from having full access to financial services, raising capital from institutional investors, listing on the U.S. stock exchanges, developing scientific and medical research and getting the tax benefits available to companies in other industries, among other hurdles.
Full legalization at the federal level may be further down the road, but decriminalization would have a tremendous — and immediate — impact on the growth of the cannabis industry.
The industry will also benefit from the expansion of legalization in the states that are voting on recreational and medical use ballot measures. As the number of states with legalized cannabis increases, so does the number of elected officials at the federal level representing those states — which could move the needle on policy reform, even if it is not being driven by the administration.
Benzinga: Did anything surprise you in 2020?
Fisher: I was surprised, in the best possible way, to see so many states designate cannabis as an essential business during the implementation of the shelter-in-place orders as the pandemic hit the U.S. It signaled a turning point in terms of the credibility and legitimacy of this industry and the benefits it provides to the American people.
Benzinga: Let's talk about new entrepreneurs in the cannabis space who were either looking to start a business this year, or perhaps they started but were shaken by the pandemic. What would that first phone, or Zoom, conversation with you be like?
Fisher: My first Zoom conversations with new entrepreneurs in the cannabis space are focused on determining what distinctive value they think they can bring to the industry and how they are going to deploy the skills they already have to developing a business in cannabis.
Many skills are transferable, and good business judgment and ethics are imperative, but you still need to understand the plant itself and what makes this market unique.
It is a complicated industry from both an operational and regulatory perspective, so entrepreneurs need to have a clear mission for their product or service and must know how to effectively execute on a business plan.
There are phenomenal opportunities out there, but it takes a lot of hard work, resilience, flexibility and grit to be successful in this space.