RICO and Psychedelics

RICO (or the federal Racketeer Influenced and Corrupt Organizations Act) has been a thorn in the foot for cannabis companies since, well, the dawn of cannabis companies. RICO will be just as annoying for psychedelics companies. Today I will explain what RICO is and why RICO and psychedelics will have a rocky relationship.

What is RICO?

We’ve been writing about RICO issues forever over on our Canna Law Blog. You can check out any of the posts linked below for some good explanations. To summarize here though, RICO is an anti-organized crime law. While it’s a criminal law, RICO also lets citizens claiming a loss in property value to bring civil suits for treble damages plus attorney’s fees against any “person” or “enterprise” that has a part in any pattern of “racketeering activity”.  These plaintiffs must prove a number of elements to prevail, which are simplified below:

  1. The defendant(s) participated in a pattern of racketeering activity;
  2. The “pattern” consists of at least two acts of racketeering committed within 10 years of each other;
  3. The existence of an “enterprise,” which is the instrument or the target of racketeering activity;
  4. The enterprise must engage in or affect interstate commerce;
  5. Injury to the plaintiff’s business or property; and
  6. Causation between racketeering activity and injury.

As noted, we’ve explained this a lot in our old posts so we encourage you to read them below if you’re interested.

Precedent for RICO and psychedelics

Earlier in the cannabis legalization days, our cannabis lawyers saw a trend emerge with RICO lawsuits. These cases involved a person who owned property near a cannabis business (often a cultivator) that didn’t like the business. They’d sue the cannabis business, its owners, and anyone who did business with them. They’d allege some massive criminal conspiracy and try to get the court to force them out of business. They would often claim that strong cannabis odors affected their property value. Cannabis is federally illegal so these cases would usually survive for a while. Many would eventually be dismissed.

How RICO will affect the psychedelics industry

Psychedelics are schedule I narcotics under the federal Controlled Substances Act (CSA). Like cannabis, they are illegal. So we can expect repeats of the exact same issues we saw over the last decade or so. One of the big differences will be smell. Many RICO cases deal with odor or drifting particulates caused by outdoor (sometimes even indoor) cannabis cultivation. If the production of psychedelics is done indoors and does not yield strong smells, a lot of the grounds for alleged damages just won’t exist. And keep in mind that damages are a critical component of a RICO claim.

RICO and psychedelics will take some time to converge

Since there are no states where psychedelics are currently legal (Oregon is still ramping up), a lot of the meatier issues we’ve seen with cannabis won’t apply yet. Once Oregon and other states inevitably come online and psychedelics business start popping up all over the place, neighbors will inevitably become irritated and bring suit. We can tell you from our experience that it’s not a matter of “if,” but a matter of “when.”

As promised, here are some of our Canna Law Blog RICO posts: