Update: Cannabis Regulation

In prepping for the SILA Foundation webinar I presented yesterday, I have two items to share with you since the last time I blogged on the topic of cannabis.

Topic #1: Decriminalization

A number of states have decriminalized marijuana. Contrary to what many people infer from the term “decriminalized,” it does NOT mean a person is not guilty of a crime of possessing, growing, or selling marijuana. Unless the state has passed a law that stipulates the medical, or adult recreational, use/possession/sale of marijuana IS legal, it is still a crime.

What the term means is that if a person has a “small amount” of marijuana in his or her possession, law enforcement will not arrest and charge that person with a crime. However, law enforcement may still confiscate the marijuana and the person can be fined for possession. Each state defines “small amount” differently. The most common amount is less than 1/4 of an ounce.

So, what does this mean? Let’s say I’m driving along the road in a state that has not legalized the medical or recreational use of marijuana, but has decriminalized it. A cop pulls me over for speeding and spots the ounce of pot I have sitting in the cup holder in my console. The cop can arrest me for illegal possession, I can be charged and found guilty of a crime, and I can be fined or jailed–however the state punishes that particular crime.

But, if the pot in the cup holder is less than the “small amount” defined by that state’s law, the cop can confiscate my pot (or not) and he can issue a citation that results in a fine (not a crime) for illegal possession ( or not).

Here’s a URL that lists how each of the 50 states and the District of Columbia handle the legalization of marijuana: https://disa.com/map-of-marijuana-legality-by-state

Topic #2: Court-Enforcement of Contracts re: Cannabis Businesses

A recent ruling by the Nevada District Court shows that federal courts are handing down different findings with respect the the enforceability of contracts to which cannabis-related businesses are a party.

If you want the full story, click the link above. Here’s the short story:

When a cannabis business sues or is sued over breach of contract, the federal courts seem to be taking one of two positions:

  1. If the matter at issue relates to insurance, federal labor laws, federal intellectual property rights, and other contracts and laws not directly related to the growth, sale, etc. of cannabis, they seem to be ruling in a way that enforces the contract. Why? Because enforcement of the contract does not violate federal law under the Controlled Substances Act, which deems marijuana a Schedule I substance–and illegal under federal law. In other words, if I own a cannabis dispensary and lied on my insurance application about whether I use a safe, and my insurance company later denied my insurance claim for theft, the court will likely enforce the contract and side with the insurer (if it has proof I lied and violated the warranty about the safe).
  2. If the matter relates to a contract that are directly related the growth, sale, etc. of cannabis (such as a loan to expand the business), they seem to be ruling in a way that does not enforce the contract. In other words, if I failed to repay the loan I secured to expand my cannabis dispensary and the lender sued me to get the money back, the court will likely NOT find in favor of the lender suing me because I breached the loan agreement. Why? Because finding for the lender puts it in a position where it benefits from assisting an illegal cannabis business conduct operations–which violates federal law under the Controlled Substances Act.

Summary

How we insure cannabis risks in this country is ever-evolving and so long as federal and state laws differ with respect to legalization of marijuana, we’re in for a wild and exciting rollercoaster ride. Check back for more updates as they become available.

Feel free to share with friends.

Feel free to share your thoughts...

This site uses Akismet to reduce spam. Learn how your comment data is processed.