Not all cannabis-related companies are created equal. In fact, in the eyes of state and federal regulators, they differ significantly, depending on whether they “touch” the cannabis plant—and they’re treated accordingly.

The most common types of companies that do touch the plant are the “operators” that are cultivating, processing, or dispensing cannabis or cannabis products. “No-touch” companies generally provide a product or service pertaining to the industry, but avoid direct involvement with the plant itself. Examples include suppliers of cultivation-related products (e.g., fertilizer) and packaging, as well as providers of real estate, consulting, and legal services (like Burns).

The complexity of the regulations that apply to “touch” companies, as well as the rigor with which those regulations are enforced, also serves as a point of differentiation. Each state that has legalized cannabis, whether medicinal or adult-use, has enacted an enormous set of rules that govern its cultivation, processing, and sale. While there is no federal standard, cannabis operators generally need to ensure compliance with stringent guidelines regarding security, waste removal, advertising and branding, and packaging, as examples.

Generally, and unsurprisingly, “touch” companies are viewed by both observers of and players in the space as inherently riskier than their … Keep reading

While trademarks for cannabis products and many accessories are ineligible for federal trademark protection (because such goods are still unlawful at the federal level), the savvy cannabusiness operator should nevertheless approach their branding strategy thoughtfully and engage in some investigation into potential trademark conflicts before adopting a new brand or business name.

Importantly, trademark conflicts are not restricted to simply using the identical mark of a competitor. Instead, they generally turn on whether use of the mark is “likely to cause confusion” in the marketplace. In other words, if it is likely that consumers will assume a relationship between you and the senior trademark owner.

Earlier this year, for example, Woodstock Ventures LC filed suit against Woodstock Roots, LLC on the basis of trademark infringement. Since 1969, Woodstock Ventures has produced the annual WOODSTOCK®-branded music festival in New York. In the intervening years, the company has expanded its offering to include audio records, movies, clothing, and other promotional merchandise, all offered under the WOODSTOCK brand. It holds federal trademark registrations for these goods and services, all of which, on their face, have no obvious relationship to cannabis goods. However, and as Woodstock Ventures readily concedes and, in fact, boasts … Keep reading

This year is primed to be the cannabis industry’s biggest yet. Almost $3 billion of capital was raised in the first quarter of 2018, more than four times the amount raised in the first quarter of 2017. With the increase in capital investment comes an increase in the sophistication of investors, including institutional ones like venture capital and private equity sponsors.

As more institutional money pours into the cannabis industry, entrepreneurs are being held to higher standards of professionalism, and are now expected to understand basic venture finance and equity structures. Part of this understanding includes preferred equity, which is a general term used to describe any class of securities (e.g., stock, limited liability company [LLC] units, limited partnership [LP] interests, etc.) that has higher priority for distributions of a company’s cash flows or profits than common equity.

In its simplest form, the “preferred” component of the equity represents additional rights and privileges investors receive in return for their investment beyond owning a percentage of the company. In most instances, when a company takes on outside investors, it will have at least two classes of securities: common equity and preferred equity. The common equity will be that owned by … Keep reading

Last week’s presidential support of states’ rights to regulate cannabis was a welcome development for many in the legalized marijuana space. It shouldn’t have necessarily come as a surprise, though—after all, on the campaign trail, then-candidate Trump often espoused his view that the issue should be “up to the states.”

And it seems that many in Washington are beginning to come around to the President’s thinking on the matter, second-guessing long-held beliefs that have influenced federal policy for decades. In just the past week, two of the nation’s foremost media drivers of political thought/coverage have run articles that categorize the march toward legalization as having a cadence unmatched by any in history.

Per Politico:

Evolution on the marijuana issue is proceeding at warp speed in political terms. [Former House Speaker John] Boehner is just the latest in a string of noteworthy newcomers to the legalization movement that has been barreling through state houses for the past decade. Just in the past several weeks, Mitch McConnell fast-tracked a Senate bill to legalize low-THC hemp. Chuck Schumer announced that he would introduce a bill to deschedule marijuana entirely … The Food and Drug Administration opened a comment period on the

Keep reading

After threatening to block any Department of Justice nominations following Attorney General Jeff Sessions’ revocation of the Cole Memorandum, Senator Cory Gardner of Colorado said in a statement that President Trump has given him assurances that states in which marijuana is legal will be protected from federal interference.

Per Senator Gardner:

Since the campaign, President Trump has consistently supported states’ rights to decide for themselves how best to approach marijuana. Late Wednesday, I received a commitment from the President that the Department of Justice’s rescission of the Cole memo will not impact Colorado’s legal marijuana industry. Furthermore, President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.

Because of these commitments, I have informed the Administration that I will be lifting my remaining holds on Department of Justice nominees. My colleagues and I are continuing to work diligently on a bipartisan legislative solution that can pass Congress and head to the President’s desk to deliver on his campaign position.

If true, this indicates a willingness on the part of the president to break sharply from the stance of Attorney General Sessions, who, in nixing the Cole … Keep reading

Client Spotlight: A Q&A with New England Cannabis Trailblazer, TaShonda Vincent-Lee

The CannaBusiness Advisory is pleased to spotlight some of the Burns & Levinson clients that are pushing the cannabis industry forward, in Massachusetts and beyond. First up is TaShonda Vincent-Lee, co-founder and director of community outreach at ELEVATE New England, a networking firm “created to support the New England cannabis industry’s need for workforce and community education.”

What made you decide to start ELEVATE New England? 

My co-founders and I couldn’t ignore the undeniable need for cannabis education in New England, both for the diverse people wanting to work in and own businesses in the newly legalized marijuana industry and, perhaps more importantly, for the communities in which cannabis businesses sought to operate. Despite passage of Question 4 by a significant margin in 2016, municipalities across the state are discussing and implementing bans and moratoria, and this is because of ignorance and fear about the plant. We created ELEVATE to connect the cannabis workforce with training and opportunity, and to provide proactive outreach to a variety of communities and demographics, so that more jobs can be created by thriving businesses. To that end, we provide professional networking opportunities, coordinate community education efforts, and generally promote a more diverse … Keep reading

Momentum Grows for Capital Raises in MJ Markets

The capital raised in the first five weeks of 2018, alone, matched deals for all of 2016. And the feeding frenzy has not decelerated, with the overall first quarter of 2018 seeing almost $3 billion in capital raises—more than four times the amount raised in the first quarter of 2017. This is attributable to increases in both the number and size of capital raises: The cannabis industry saw over 160 capital raises (vs. about 100 in 2017) at an average raise size of roughly $15 million (vs. roughly $5 million for 2017), with more than a dozen of these raises bringing in $50 million or more.

The landscape of the cannabis capital markets is also changing. During the early years, investments were often made in the form of high-interest-rate loans, due to investors’ skepticism of industry growth and aversion to risk related to all things cannabis. Now, over 80% of capital raises are equity raises, as a result of investors seeing real potential in an industry where regulatory and other risks are becoming fewer, and public acceptance and support are growing wider. Smaller “cannabis-focused” venture capital funds are popping up around the country at a rapid pace. Mainstream … Keep reading

Moskol in MJBizDaily: Massachusetts’ Recreational Marijuana Market Offers Opportunities, Pitfalls Aplenty

The following quotes have been excerpted from an article, written by Omar Sacirbey, that originally appeared on the website of Marijuana Business Daily on March 22, 2018. 

________________________________________________________________________________________________________________________________________________________________________

“If you’re able to get open [in Massachusetts], you’re going to see a more protected environment,” said Scott Moskol. “We’re not going to see the downward pricing pressures as quickly,” he added.

Moskol [further] noted, there will be “plenty of room for brands in Massachusetts to establish themselves and gain a following.”

Read the full article here.

________________________________________________________________________________________________________________________________________________________________________

Scott Moskol will present twice at this weekend’s 4th Annual New England Cannabis Conference (NECANN). Tickets are available at this link.Keep reading

Green Hands Aren't Unclean Hands: 9th Circuit BAP Retreats from Mandatory Dismissal in Marijuana Cases

A 92-year-old landlord who leased a storefront to a marijuana dispensary will receive a new hearing after a court dismissed her bankruptcy case on the grounds that acceptance of rent payments from the dispensary disqualified her from bankruptcy relief. Last month, a Bankruptcy Appellate Panel for the 9th Circuit remanded the Chapter 13 case after finding that the Court did not adequately detail a bad faith finding and, therefore, did not support its conclusion that the debtor violated federal law (namely, the Controlled Substances Act).

The landlord, Patricia Olson, owned a shopping center in Lake Tahoe, California, and, in 2013, began leasing space to Tahoe Wellness Cooperative, a state-licensed dispensary. However, the CSA makes it illegal to knowingly lease a property for the purpose of distributing marijuana. At the initial hearing to authorize the sale of the shopping center, the Bankruptcy Court for the District of Nevada took issue with the fact that Ms. Olson had continued to accept rent payments from the dispensary during her bankruptcy proceedings. The Court went so far as to say that Ms. Olson committed a crime by leasing to a business operation deemed illegal under the CSA. Accordingly, the Court concluded that … Keep reading

Bank On It: States Taking a Proactive Approach to Cannabis Banking

When it comes to the cannabis industry, banks and other financial institutions can find themselves in particularly murky legal waters (see Banking & Cannabis: Where Do Things Stand?). Federal rules dictate that banks and financial institutions that accept deposits from cannabis-related businesses may be liable for penalties, which has led to cannabis-related business in many states being conducted almost entirely in cash. Not only does this result in operational hurdles, particularly when it comes to paying taxes and compensating employees, it can also result in large amounts of cash being stored onsite, which, in turn, can lead to increased crime and an unsafe work environment. As California Senator Robert Hertzberg pointed out, “these business handle significant economic activity, yet they are forced to operate under the table and with little government oversight, as if they’re a black-market operation.”

Historically, under the Cole Memo, the consensus seems to have been that financial institutions would not be penalized in states that have legalized cannabis, unless those financial institutions were willfully ignorant to customer activities that could lend themselves to criminal financial transactions (e.g., the concealment of funds derived from other illegal activity, or the use of marijuana proceeds to support … Keep reading