As banks are learning to navigate the murky legal waters inherent to cannabis-related businesses, they are increasingly becoming open to housing cannabis-related business accounts, even with the substantial burden placed on them by the federal government to comply with their respective state laws.

In August 2013, then-Attorney General James M. Cole issued a memorandum to all U.S. attorneys, which was published by the Department of Justice, setting expectations for the federal government, state governments, and law enforcement on how to address state-implemented, legal-adult-use cannabis programs. In summary, the Cole Memo told states that, if they implement a strict regulatory framework; prevent diversion by employing a seed-to-sale tracking system to monitor the growth, distribution, and sale of regulated cannabis; and create a transparent, accountable market, the federal government will, essentially, leave them alone.

Almost six months later, Attorney General Cole issued further guidance as to how the original memo would impact certain cannabis-related financial crimes. He stated that the provisions of money-laundering statutes, the unlicensed money-remitter statute, and the Bank Secrecy Act remain in effect with respect to marijuana-related conduct, and that Section 1956 of Title 18, otherwise known as the federal anti-money laundering statute, makes it a criminal offense … Keep reading

One commonality for businesses across all industries, including those in the medical and adult-use recreational marijuana space (“cannabis companies”), is the importance of access to capital. Everyone knows that running a company requires a significant amount of money. However, cannabis companies specifically face distinct hurdles to raising capital, especially when it comes to deciding whether to go public.

The process of a private company offering and selling stock to the public typically begins with an initial public offering, which can trigger large payouts for management and ownership; a certain elevated level of credibility; and, most importantly, increased access to capital, which can better situate a company for both short- and long-term growth. For many entrepreneurs, taking a company public may be the ultimate accomplishment. However, despite the pros, there can also be plenty of cons for companies undergoing an IPO, especially those in the cannabis industry.

In general, taking a company public not only results in increased costs and more comprehensive (and burdensome) disclosure requirements, but also a much more aggressive and scrutinized focus on short-term growth for shareholders, which can limit the flexibility and freedom to which management may be accustomed. For cannabis companies, perhaps the biggest challenge … Keep reading

Now that Massachusetts has legalized the use of marijuana for medicinal and limited recreational purposes, how should employers in the Commonwealth deal with worker use of marijuana? Here are three things any employer should be aware of about marijuana use in the workplace.

1. Employers can prohibit employees from reporting to work or performing work under the influence of marijuana, even if they cannot control the use of recreational marijuana outside of work.

However, detecting the current use of marijuana can pose a challenge, since cannabis-related substances may remain in an employee’s system for more than 20 days.

2. Although the medical marijuana law in Massachusetts allows employers to prohibit use in the workplace, for medical marijuana used in accordance with a valid prescription from a healthcare provider, employers must engage in an interactive dialogue to determine whether the lawful medicinal use is a reasonable accommodation of the employee’s disability.

In the recent case of Barbuto v. Advantage Sales and Marketing, LLC, the Massachusetts Supreme Judicial Court rejected the employer’s defense that the use of medical marijuana in the workplace is a facially unreasonable accommodation because such use is still a crime under federal law. Rather, the SJC … Keep reading

In a few weeks’ time—October 17th, to be exact—we are hosting our first conference on the topic of cannabis, called “The Cannabis Industry: Growth Opportunities for Professionals, Operators and Investors.” After months of planning and behind-the-scenes prep work, we’re thrilled that we’re now only a few short weeks away from what we know will be a fantastic day.

And as we detailed in our last post (ticket and other information here), we’ve put together a program that we think attendees will find informational, interesting, and enlightening. But what we’d like to do in this post is introduce our phenomenal keynote speaker. A person we’re truly lucky to have, and who embodies the spirit of what we hope to achieve with this conference. A person who has the requisite experience and insight to make this a major event on the Massachusetts cannabis calendar, and the ability to relay that experience and those insights in ways that connect with people.

That person is Kris Krane.

The founder and president of 4Front Ventures, which he established in 2011 with the stated purpose of “building a medical cannabis industry based on compassion, integrity, and accountability,” Kris has dedicated his … Keep reading

Burns & Levinson, in partnership Viridian Capital Advisors, is incredibly excited to announce the first in what it hopes will be an annual event, “The Cannabis Conference: Growth Opportunities for Professionals, Operators and Investors.”

Slated to take place at the Hilton Boston Dedham hotel on Tuesday, October 17th, from 8:00 a.m. to 6:00 p.m., the conference will bring together professional investors, entrepreneurs, thought leaders, and other participants in the cannabis space for an exploration of the industry’s potential opportunities and challenges. The event is by invitation only, and is geared toward those seeking to improve their present position in, or make an initial foray into, the legalized marijuana market.

The program features panels of regional and national experts who will be discussing the following topics:

The New England Experience
Nationwide, the landscape of the legalized marijuana industry has changed significantly in recent years—no place more so than New England. In 2016, Maine and Massachusetts voted to fully legalize cannabis, and Connecticut, New Hampshire, Rhode Island, and Vermont all allow its use for medical purposes. This panel will examine how the industry’s laws and regulations have evolved in the region, focusing on the experiences of operators who … Keep reading

Introduced in 2003, the Rohrabacher-Farr amendment prohibits the Justice Department from spending funds to interfere with the implementation of state medical marijuana laws. Its original text stipulated that:

“None of the funds made available in this Act to the Department of Justice may be used, with respect to the states of Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such states from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”

In December 2014, the amendment was inserted, without a vote, as a rider during final negotiations of the $1.1 trillion “cromnibus” spending bill. Soon after, President Obama signed the bill into law. To remain in effect, it was required that the amendment be renewed each fiscal year.

In October 2015, a court ruling by U.S. District Court Judge Charles Breyer lifted an injunction against a California dispensary to operate, providing supporters of the amendment with a major legal victory. Judge Breyer vehemently rebuked the Justice Department’s … Keep reading

Already generating billions of revenue dollars annually, the cannabis industry is moving ever closer to the mainstream, and newly created companies are increasingly seeking out investor assistance to turn their ideas into realities. In this post, we present some issues to consider and measures to take when deciding whether to invest in a cannabis-related company that is seeking funding.

1. Make sure the company has truly obtained all required licensure

Each state has its own system for awarding licenses to grow or sell cannabis. It’s important to understand how far along the business is in the licensing process, and what its status means for your investment. It’s not unusual to invest in a company prior to its obtaining full licensure; however, before doing so, you should protect your stake by ensuring that there are procedures in place for the return of all or most of your money if the company fails to get licensed in a reasonable amount of time.

Make sure you verify with the proper authorities where the company truly stands, as it may not fully understand the nuances of the process, and could be incorrect about its position. Often, this information is public record. We’ve heard … Keep reading

In 2012, Anthony Pisarski and Sonny Moore, marijuana cultivators operating legally under California law, were raided by federal agents, who seized 327 cannabis plants, firearms, and over $400 thousand in cash. Pisarski and Moore were each charged with conspiracy to manufacture and possession with the intent to distribute.

Five years later, and only days ago, their case was reviewed by the Honorable Richard Seeborg, a California U.S. District Court judge.

Judge Seeborg’s decision blocked federal prosecutors from pursuing claims against Pisarski and Moore, ruling that Pisarski and Moore’s actions were legal in light of California’s laws governing the growth and sale of medical marijuana. In his decision to dismiss the federal prosecutor’s claims, Judge Seeborg expressly stated that “[Pisarski and Moore]’s conduct strictly complied with all relevant conditions imposed by California law on the use, distribution, possession, and cultivation of medical marijuana.”

Pisarski and Moore’s defense was based primarily upon legislation known as the Rohrabacher–Farr Amendment, which was passed in 2014 and mandates that federal funds cannot be allocated toward prosecuting individuals following state cannabis laws.

In rendering his trailblazing decision, Judge Seeborg cited United States v. McIntosh, a case heard by the Ninth Circuit last year. In … Keep reading

Here’s some food for thought: 29 states currently have laws broadly legalizing cannabis, in some form. Eight of those states – Alaska, California, Colorado, Oregon, Massachusetts, Maine, Nevada, and Washington, as well as the District of Columbia – have legalized the plant’s sale, for both medicinal and recreational use. These numbers continue to grow. In fact, many studies indicate that cannabis is the fastest-rising industry in North America.

For companies to capitalize on the many opportunities this industry presents, however, they need startup and growth capital. And among the myriad questions they must address before entering the space is: What is best for my company, debt or equity financing?

Below is a primer of the pros and cons of both.

What is debt financing? Debt financing is when a company borrows money from a lender, whether institutional or non-institutional, that it will eventually pay back, in addition to agreed-upon interest. Sometimes debt may be convertible, or may also provide warrants to the lender.

What are some of the pros and cons of debt financing? 

– Pros: The advantages of debt financing are many. For example, a company does not give away ownership interests to its lender, and is able … Keep reading

In my previous post, I outlined some of the challenges property owners face with regard to leasing real estate to registered marijuana dispensaries (RMDs) and cannabis cultivation centers (MJ Tenants). For all parties involved, the path to success in the cannabis space begins with an understanding of the differences between applicable state and federal laws. With respect to leasing to businesses that actually touch the flower, there are significant zoning and locational restrictions imposed on RMDs and MJ Tenants that must be taken into consideration.

Additionally, factors like financing, security, and liability are also strong concerns for all stakeholders – protecting the property, as well as the business, is critically important.

3. The cost of financing
Many, if not most, federally regulated lenders do not, or will not, make loans to entities involved in cultivating or dispensing cannabis. Indeed, very few banks will even allow a dispensary to open a simple operating account. Banks remain concerned about the federal prohibitions against the use and sale of cannabis, and because most are either federally chartered or federally insured (or both), their unwillingness to lend to such businesses is expected to continue until marijuana is legalized at the federal level.

As … Keep reading