As the American cannabis industry continues to grow at the rapid succession that it is, so too will the size of the companies that sell and produce popular cannabis brands. While the current federal law and the many provisions of the Controlled Substances Act limit interstate deliveries and sales, large multi-state operators have sprung up across the legal states and act just as a non-cannabis related company with locations and operations throughout America would. They’re as corporate and mainstreamed as any other major player in a multi-billion dollar American industry possibly could be. In recent years, these conglomerate-like entities have purchased many of the highest selling and most popular brands, some of those acquisitions reaching near the billion-dollar mark.
Just like any other major industry in a country as devoutly capitalist as America, multi-state operators such as Curaleaf and Green Thumb Industries have become as ever present as the dozens of brands of products that they have acquired over the years. These companies have thousands of employees that span the coasts of this country and have just as many shareholders and boards of executives as any Fortune 500 company. “Mom and pop” will someday soon feel increasingly rare, in comparison to these larger companies.
Throughout the decade since Colorado and Washington first legalized, these large cannabis companies have faced criticism of monopolizing the industry and even attempting to stifle unionization efforts in some locations. However, these multi-state operators are utilizing their vast network of resources and expansive budgets to attempt to spearhead a legislative change that has yet to be completed in America.
Some of America’s largest and most lucrative cannabis companies, those being Ascend Wellness Holdings, TerrAscend, Green Thumb Industries, Eminence Capital and Poseidon Investment Management, are strongly supporting a lawsuit filed by a very high-profile law firm that is suing the federal governmentand Attorney General Merrick Garland on grounds that the federal ban on cannabis is “unconstitutional.”
The lawsuit was originally filed in the U.S. District Court for the District of Massachusetts, Western Division, by multi-state operator Verano Holdings Corp. and the Massachusetts-located cannabis businesses Canna Provisions and Wiseacre Farm, as well as Treevit CEO Gyasi Sellers. It’s quite ironic that the lawsuit with the potential to be precedent-changing was filed in a state that has had a statewide legal cannabis industry since 2018, but the lawsuit could lead to monumental change nationwide if enacted.
Among the many costly and detrimental issues that the lawsuit filed by the aforementioned companies and the law firm Boies Schiller Flexner would like to address, one of the most prominent is the prohibition of interstate commerce opportunities for legal states that share borders such as Nevada to California or Washington to Oregon. In particular, Gyasi Sellers, Canna Provisions, and Wiseacre Farms are alleging that the federal prohibition of cannabis has tremendously affected their business. Verano Holdings, a major MSO in the cannabis market, is listed as a co-plaintiff.
Among the very powerfully loaded allegations of the lawsuit, the plaintiffs argue that many clauses of the Controlled Substances Act are clearly either contradictory or outright untrue. Since the Controlled Substances Act was created, only four states are without any form of a medical cannabis program and recreational cannabis will soon be legal in 24 states, which are monumental changes by anyone’s standards.
“Despite these changes, the federal criminal prohibition on intrastate marijuana remains in place, an unjustified vestige of a long-abandoned policy,” the initial complaint states. “This unjustified intrusion of federal power harms Plaintiffs, threatens the communities they serve, and lacks any rational purpose.”
The lawsuit is far-reaching in terms of not only allegations but also with the possible outcome of the lawsuit. Not only are the plaintiffs addressing the prohibitive issues surrounding interstate commerce, they’re also discussing and detailing the many disadvantageous ways that the very problematic IRS Tax Code 280E interferes with business success via a lack of common business tax breaks and exorbitant further taxes. The lawsuit also discusses how traditional and FDIC-insured banking providers are almost entirely forbidden from offering financial services to fully legal and compliant cannabis businesses.
“Federal criminalization also denies small, legal marijuana businesses access to SBA loans, investors, benefits for their employees, and normal banking regulations, which among other things, forces them to rely on cash transactions with all of the dangers to them, and to the community, that result, as well as burdening them with discriminatory taxes.” said David Boies, chairman of Boies Schiller Flexner LLP.
Unlike the SAFE Banking Act for instance, this lawsuit targets the very Controlled Substances List-related laws and prohibitions that cause innumerable problems in the cannabis industry. The crucial argument that the plaintiffs are making is that the federal Controlled Substances Act’s ban on interstate cannabis commerce and technically cultivation on the state level too is unconstitutional and goes over what the act’s constitutionality is.
“While Congress has authority to ban marijuana from interstate commerce,” the plaintiffs’ attorneys wrote, “it has no general police power over marijuana grown, transported, and distributed in intrastate commerce. Neither the Commerce Clause nor the Necessary and Proper Clause of the Constitution permit this overreach by Congress.”
Although cannabis remains illegal on the federal level, there still have been several changes in the ways that the legislative and judicial branches of government approach the subject of cannabis. With the exception of the laughably short tenure of Jeff Sessions, no recent Attorney Generals have expressed any desire in enforcing the federal prohibition of cannabis on fully state-legal operators. In fact in 2013, Obama-era Deputy Attorney General James Cole authored the Cole Memo which outlawed Justice Department resources from going towards prosecution of legal and compliant cannabis businesses in fully legal states. Even when Sessions later rescinded that memo in 2018, no federal prosecutors went after legally operating cannabis businesses. Even years later, federal prosecutors going after compliant cannabis businesses is almost unheard of. Therefore, the lawsuit filed by these power players in the American cannabis industry may actually have at least a slight chance of success where other groundbreaking cannabis lawsuits were unconditionally dismissed.
https://www.jdsupra.com/legalnews/cannabis-companies-sue-attorney-general-3143744/
Sean Hocking
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