Top 10 Marijuana Industry Red Herrings

Don't get distracted by these marijuana red herrings
Don’t get distracted by these marijuana red herrings

A red herring is “something that misleads or distracts from a relevant or important issue.” Sad to say the marijuana industry has more than its fair share of red herrings, including the ten that are most prevalent these days:

  • Federal enforcement memos mean the Feds are taking it easy on the marijuana industry. We wish this were true of these memos, but it is not. Witness what the Feds just recently did to the Kettle Falls Five. The Feds continue to be active in states like California which maintain loose medical marijuana laws. Plus, federal agencies other than the Department of Justice do not care at all about the DOJ enforcement memos. For example, the IRS, the USPTO, and the Department of Treasury all continue to take relatively tough tacks with the marijuana industry. Most importantly, these memos do not legally mean a thing. They are meant to guide individual U.S. Attorneys regarding federal drug law enforcement in states with marijuana legislation. They are not meant to bolster the proliferation of marijuana businesses, they cannot be used as a defense in a marijuana criminal case, and they do not represent a change in federal drug laws.
  • Marijuana reality TV shows indicate industry credibility. Besides those based on education or serious social issues, what reality show have you seen that either has the goal of making its cast look credible or succeeds in doing so? Seriously, can you name one? Though there has been a torrent of proposals for marijuana reality TV shows (some of which have aired or are on TV now), marijuana businesses should proceed very carefully when contemplating participating. Legal concerns aside, most reality TV shows garner high ratings because of cast drama and on-air stupidity. Is that what you want for your business? Is that going to be good for the marijuana industry?
  • Third party credit card processing services are legitimate. Federal FinCEN guidelines generally apply to our financial system, including for cannabis and those guidelines have caused most banks to stay away from credit card processing for marijuana businesses. In step, “credit card processing companies” for the marijuana industry maintain dubious legality at best. Even worse is that it is not uncommon for credit card processors (especially those based offshore) to shut down in the middle of the night and keep all of your money. My law firm has actually handled a number of cases against credit card processors that have done exactly that and you should trust us when we tell you that this is anything but uncommon. Be careful out there.
  • Marijuana investment means you’ll get rich quick. No get-rich-quick scheme should be trusted and that holds double true for the marijuana industry. Any desire to franchise a marijuana business or to invest in a privately or publicly held marijuana business needs to be considered very carefully and should not be rushed.
  • CBD oil can be shipped from a legal cannabis state to a non-legal cannabis state. Um, no. All marijuana, including marijuana-based cannabidiol is illegal under federal law which means any transportation between states (even between two states where marijuana is legal, such as Oregon and Washington) constitutes federally illegal interstate drug trafficking. See Moving Marijuana Across State Lines: Still A Felony. So, why then are we seeing so many advertisements on the internet that such-and-such company can ship CBD oil to you in the great states of Kansas or Alabama? The Drug Policy Alliance summed it up perfectly:

The CBD oils that are advertised online and that say they are legal to ship to non-medical cannabis states are not made from the same type of cannabis plant as the CBD products in medical cannabis states. There are three types of cannabis – indica, sativa and ruderalis. While all three produce cannabinoids such as THC and CBD, cannabis ruderalis (also referred to as hemp) does not contain them in a high enough concentration to have a therapeutic effect. Because hemp products are legal to import to the U.S. and ship from state to state (although growing the hemp plant is federally illegal), companies are taking large amounts of hemp plants and processing them harshly to try and derive enough CBD to call their oil a ‘CBD product.’

Not to mention, CBD oil sold over the internet also warrants a strong “buyer beware” disclaimer, especially since the FDA recently sent warning letters to companies selling allegedly “cure-all” CBD oil ordering those companies to cease and desist from selling such such products.

  • California will finally legalize marijuana in 2016. Maybe. Though the majority of Californians are ready to legalize, there is so much infighting in the California cannabis industry that we are just not sure the Golden State will pull it off in 2016. There’s a real danger that competing initiatives will emerge from various cannabis political groups and then cancel each other out when it comes time to vote.
  • Any and all state marijuana legalization is positive for ending the federal war on marijuana. Though we are huge supporters of marijuana legalization and though we believe that state-by-state legalization is working to chip away at federal prohibition, we do not see all forms of state legalization as proving useful for the industry as a whole. Lawmakers, policy pros, and constituents needs to be careful about what they put into play for marijuana laws. Take Ohio. Please. Ohio’s proposed legalization that involves putting basically all marijuana into the hands of a very wealthy and politically connected ten-group cabal could prove to be a very bad idea and not just for Ohio.  As the Feds and our entire populace look on, we need states and their constituents to make sound decisions regarding cannabis laws and policies. One bad state cannabis regime could spoil the whole bunch.
  • You need a “marijuana lobbyist” to get a seat at the table with government. Retaining a lobbyist to ensure your interests are protected with governing bodies engaging in rule-making or making changes to the laws that could affect your cannabis business is oftentimes a good idea. But examine first what a lobbyist is going to give you because any lobbying on your behalf reflects on you and there is always a risk of “lobbying blowback.” It is generally far more important that your lobbyist know how government functions and those in it rather than the marijuana industry. Though the concept of “marijuana lobbyist” at first sounds appealing, if that lobbyist cannot get you meetings or face-time with key law or policy makers, there is little sense to retaining them.
  • Publicly traded cannabis companies signify progress in the marijuana marketplace. Rapidly growing and rapidly changing industries are common prey for charlatans and that has proved true time and time again in the marijuana industry, and already far too many fraudsters have taken shelter in over the counter trading of marijuana-related stocks. The publicly traded companies that have engaged in market manipulation or pump and dump schemes undermine the legitimacy of the cannabis industry as a whole and we cannot stress enough the need for you to proceed with caution in deciding whether to invest in a publicly-traded marijuana business.
  • Marijuana laws are static. Though marijuana enabling statutes typically seldom change, the marijuana rules stemming from those statutes tend to change constantly. This means you should never get too comfortable with your state’s marijuana administrative rules. Because legalized marijuana is so new, many problems were either not anticipated in the regulations, or were not handled properly the first time around. This means that state agencies are constantly changing their marijuana regulations, sometimes even on an emergency basis. Stay current on the regulations that apply to you and be prepared to go with the flow.