Federal threats to mj businesses

‪My tweet: #Marijuana‪ industry’s federal law problems, in order of danger:‬

  1. RICO ‬
  2. Banking‬
  3. 280E tax‬
  4. Controlled Substances Act — Illegality‬

My friend Sam Kamin replied:  ‪@OglesbyPat‪ how about bankruptcy? Intellectual property? Problems securing lawyers?‬

I answered:

‪@ProfSamKamin‪: Bankrutpcy no problem for profitable cos; IP, yes, but 280E reduces mktg IP value; RICO is 1 of threats to lawyers.‬

To expand a bit (in different order):

No intellectual property protection = No Big Marijuana?

Preliminary thinking: Yes, marijuana businesses can’t protect intellectual property, because they are federally illegal. (I leave aside state law protections.)

Broadly, IP consists of manufacturing intangibles, like know-how and patents; and marketing intangibles, like trademarks and brands.

On the manufacturing side, I would think lack of IP protection means, for instance, someone can clone your plant and sell the results. That doesn’t sound fair.  But has the lack slowed down development?

On the marketing side, I would think lack of IP protection means, for instance, you can’t enforce a nationwide trademark or brand. That may not be “fair,” either, but lack of protection makes it hard for Big Marijuana to get far. We see a Marley brand developing. Where marijuana is illegal, trademark violators will have bigger problems than a suit by Marley. Where marijuana is legal, I don’t know what happens under state law.  Can some interloper really use the Marley brand with impunity?

As for lawyers, State Bar rules may indeed be a bigger threat in some states.  RICO has not been used much, so it just looms in the background.  Are there not lawyers (and accountants) willing to take all the risks?  I keep wondering why there are not more RICO suits.

Lack of bankruptcy would seem to be near the bottom of the list.  How many potential ganjapreneurs will really stay out of the game because of the calculation that failure won’t be protected?  Most of the entrepreneurs I know, who are not in the cannabis space, are pretty sure they will succeed.  Often wrongly sure.

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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