Florida's Medical Marijuana Industry Remains Hazy.

Author:Greenberg, Jake
Position:Business Law
 
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The paradox of federal and state marijuana laws has finally reached Florida. On June 2, 2017, Florida Gov. Rick Scott executed a proclamation calling for the Florida Legislature to convene a special session from June 7, 2017, through June 9, 2017. (1) Although not originally placed on the special session agenda, the members of the legislature met to discuss the implementation of Amendment 2 to the Florida Constitution, which legalizes the use and sale of medical marijuana in Florida. (2) While Amendment 2 was approved by 71.3 percent of Florida voters, the Florida House of Representatives and Senate were divided on how it should be implemented. This led to an impasse during the regular session, which ended on May 8, 2017. (3) On June 9, 2017, the Florida Legislature passed Senate Bill 8-A, the Medical Use of Marijuana Act, which was signed into law by Gov. Scott on June 23, 2017. (4) Prior to Amendment 2, only seven businesses were licensed to cultivate and sell low-THC marijuana in the state of Florida. (5) Each of those businesses must be vertically integrated from seed to sale, requiring each license holder to be the same company cultivating, processing, and ultimately selling its marijuana to patients. (6)

Under the Medical Use of Marijuana Act, 10 additional businesses will be issued licenses to grow and dispense marijuana in Florida, bringing the total number of licensed businesses to 17.7 An additional four licenses will be issued for every 100,000 active registered qualified patients in the state's medical mari juana use registry. (8) Further, the bill permits each license holder to open up to 25 dispensary storefronts, and an additional five storefronts when the medical marijuana use registry reaches 100,000 active registered qualified patients. (9) This limitation expires in 2020. (10)

As an emerging market, the medical marijuana industry is served by a variety of small businesses. Many of these businesses are highly leveraged start-ups hoping to strike gold with cannabis. However, these businesses also face a significant risk of default and possibly bankruptcy.

Marijuana Remains Illegal Under Federal Law

Businesses working with marijuana companies may fall victim to guilt by association. Despite the growing acceptance of marijuana--29 states, the District of Columbia, Guam, and Puerto Rico have legalized marijuana for medicinal use, and eight states have legalized marijuana for recreational use--marijuana remains illegal in all forms under federal law pursuant to the Controlled Substances Act (CSA). (11) Under the CSA, marijuana is classified as a Schedule I substance along with other drugs like heroin, mescaline, and lysergic acid diethylamide (LSD). (12) The CSA prohibits the use, distribution, possession, or cultivation of marijuana (13) and [section]856 of the CSA makes it a federal crime to:

Manage or control any place, ... as an owner, ... and knowingly use and intentionally rent, lease, profit from, or make available for use, with or without compensation, the place for the purpose of unlawfully manufacturing, storing, distributing, or using a controlled substance. (14)

This has created a significant problem for many businesses that work with marijuana companies because the cultivation, processing, sale, and possession of cannabis under state law still violates the CSA. (15) For example, the Money Laundering Control Act of 1986 prevents banks from accepting funds derived from the sale of marijuana, irrespective of state laws. (16) Specifically, the act makes it unlawful to conduct financial transactions involving the proceeds from the sale of a controlled substance (e.g., marijuana) as defined in the CSA. (17) Moreover, compliance with state laws is not a defense to an individual's or business's violation of the CSA. (18)

Because marijuana is illegal under federal law, many businesses transacting with marijuana companies have found themselves in difficult legal situations. In response to the growing tension between federal and state marijuana laws, the U.S. Department of Justice (DOJ) issued a memorandum on August 29, 2013, providing guidance regarding marijuana enforcement. This memorandum, issued by then Deputy Attorney General James M. Cole, is widely known as the Cole memo. (19) The Cole memo provides enforcement priorities for the DOJ. (20)

In determining whether to prosecute CSA violations for marijuana, the Cole memo establishes how the DOJ should exercise prosecutorial discretion in enforcing marijuana laws under the Controlled Substances Act, and instructs the DOJ to look at the following eight enforcement priorities:

1) Preventing the distribution of marijuana to minors;

2) Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

3) Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

4) Preventing state-authorized marijuana activity from being used as a...

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