By Marc J. Ross, Esq.
Sichenzia Ross Ference Kesner LLP
By all measures, 2016 was a historic year for Cannabis. With the possible exception of 1996, when California became the first state to legalize (medical) marijuana, and 2012, when Colorado and Washington legalized recreational marijuana, 2016 was probably the best year for marijuana. Following the 2016 elections, eight states (including Washington, D.C.) have legalized recreational marijuana, doubling the number from the prior year, including California, the 8th largest economy in the world. And, five additional states have legalized medical marijuana, increasing that number from 23 to 28, with more than half the states in the U.S. having legal access to marijuana. Now the question on everyone’s mind is, what impact will be felt by Donald Trump’s election as the next President?
According to Forbes, legal sales recorded for 2016 were $6.7 billion, up 30% from 2015, and some analaysts are projecting sales of $20-25 billion in 2020, which would represent compound annual growth of 35% over the next five years. Suffice to say, the industry is booming, as everyone predicted, and perception among the public has also dramatically changed in the last 20 years -- 60% of the public want to see marijuana legalized nationally, that number stood at about 25% 20 years ago, and 84% of Americans want to see medical marijuana legalized nationwide.
However, with all the “growth” that marijuana saw in 2016, the industry now faces an unknown, Attorney General Jeff Sessions. To say Sessions is a strong opponent of the legalization of Marijuana would be an understatement. During his confirmation hearings, he stressed he will enforce federal law when asked about marijuana, after noting that marijuana is illegal under federal law. However, he was sitting in a confirmation hearing, and any answer other than “I will enforce federal law” would probably be disqualifying. After all, the job of the United States Attorney General is to ENFORCE federal law.
The immediate question on everyone’s mind is “now what?” The appointment of Jeff Sessions has struck fear in pro-marijuana groups and shaken the stock market for cannabis companies. But what can we expect will really happen?
On the one hand, the Trump administration can rip up the Cole Memorandum, which was issued during the Obama administration and provides that, given the federal government’s limited resources, if a state complies with eight enumerated points, the federal government will not interfere, and enforce federal law. After all, the Rohrabacher-Farr Amendment, which codified the Cole Memorandum, and formally prevents the federal government from enforcing federal law, is set to expire on April 28, 2017.
On the other hand, the Trump administration can continue to enforce the Cole Memorandum and seek, once again, to extend the Rohrabacher-Farr Amendment. This would allow more jobs to be created, a central theme extolled by Donald Trump, as the industry continues to grow. It will also allow the states to decide matters for themselves, which Donald Trump and others likely to serve in his cabinet, including Jeff Sessions, appear to support.
While it is impossible to predict the future, given the new administration’s emphasis on jobs and growth, it may be too tempting for them to enforce federal law, which would cripple marijuana-related businesses, not to mention eliminate a tremendous source of tax revenues for the states. Also, given the new administration’s focus on repealing and replacing the Affordable Care Act, immigration reform, building a wall, criminal justice reform, and jobs, will it also want to tackle this complicated and controversial issue? Clearly time will tell, but it seems to me that we have, or at least we should have, reached the tipping point and not go backwards.
Marc J. Ross, Esq.
Sichenzia Ross Ference Kesner LLP
Hofstra University School of Law, Business and Law of Marijuana
Marc J. Ross is a founding partner of Sichenzia Ross Ference Kesner LLP, formerly known as Sichenzia Ross Friedman Ference LLP, a firm he started in 1998 which specializes in corporate, securities, litigation and regulatory matters.
In the securities and corporate area, Mr. Ross advises companies with their 1934 Act reporting requirements as well as their NASDAQ, AMEX and NYSE and other exchange listing and compliance matters. In addition, Mr. Ross assists companies going public, whether through a reverse merger (RTO), initial public offering (IPO), or company offering (DPO). He also advises clients on investment and capital raising transactions, including private investments in public equities (PIPEs), initial public offerings (IPOs), registered direct offerings (RDs), and shelf offerings.
In the litigation and regulatory area, Mr. Ross represents clients in commercial/securities matters from arbitrations before FINRA, the AAA, and JAMS, to court cases nationwide. Mr. Ross also counsels clients in civil regulatory and possible criminal investigations before self-regulatory organizations, state agencies, or federal agencies, and he regularly appears before the SEC, FINRA, and state securities agencies in connections with their investigations.
Mr. Ross also specializes in advising marijuana and marijuana-related companies. In particular, he is very knowledgeable in, and often speaks on, the legal issues associated with marijuana and marijuana-related businesses, including the interplay between state laws which legalize recreational and/or medical marijuana uses, and federal laws which bar such uses.
Mr. Ross teaches the first law school course on marijuana at Hofstra University School of Law, titled Business and Law of Marijuana. In his course, Mr. Ross introduces students to the rapidly-developing legal questions encountered in the operation of marijuana-related businesses. The course uses a fictional business, Cannabis Inc., to explore (1) the interplay between state laws legalizing recreational and/or medical marijuana uses and the Federal Controlled Substances Act; (2) enforcement and application of other regulatory regimes governing the operation of marijuana-related businesses, such as banking and securities laws; and (3) the ethical considerations for an attorney advising a client engaged in a marijuana-related business.
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