The medical marijuana market in Pennsylvania does not go live until, at the earliest, January 2018. However, the applicants for permits were required to develop business plans based on pro forma projections without having any “actual” information about marijuana sales in the market in which they intend to operate. Actual sales information from other states may be a useful proxy, but not necessarily a completely reliable one because of the differences in the regulations that define the marijuana markets in each state. A good example of the challenge in valuing a cannabis business is the recent proposal by Franklin Labs, which obtained one of 12 permits to grow cannabis in PA, to sell its permit for $20,000,000 months before the PA market goes live.
Know the Law: The Legal Side of a Cannabis Business
Join Duane Morris’ Patricia Heer at the October 12 NYC Women Grow event, “Know the Law: The Legal Side of a Cannabis Business,” in Duane Morris’ New York office, starting at 6:30 p.m.
The panel discussion will address the legal issues that current, future or ancillary businesses need to consider when working in the cannabis space.
Speakers
Patricia H. Heer Special Counsel, Duane Morris, LLP
Deanna Clark-Esposito, Managing Attorney, Clark-Esposito Law Firm, P.C.
Lauren Rudick, Partner, Hiller, PC
For more information and to register, visit the event website.
Patricia Heer Presenting at 4th Annual Cannabis World Congress and Business Expo in Boston
Duane Morris’ Patricia Heer will be presenting at the 4th Annual Cannabis World Congress and Business Exposition in Boston on October 4-6, 2017.
Patricia’s presentation, “Cannabis and Social Media with Some Practical and Legal Implications,” will take place on Friday, October 6 at 11:00 a.m.
The Annual Cannabis World Congress and Business Expos are the leading forums for doing business in one of the fastest growing industries in the United States. If you’re employed in the cannabis industry, a current business owner, interested in starting a cannabis business, provide private equity and investment resources, or provide professional or business services, these events provide numerous informative presentations and networking opportunities.
For more information and to register, please visit the event website.
Should We or Shouldn’t We? – That Is the Question
Over the past few years the number of states that have legalized marijuana in some form has grown substantially to the point where, as of this writing, 29 states and the District of Columbia have legalized marijuana for either medical or recreational use. This recent acceptance of marijuana by a significant number of states has created a brand new industry, which is estimated to generate approximately $7.0 billion in 2017 and $24.5 billion by 2025. This industry is clamoring for acceptance into a financial system that allows participants to bring the cash generated into the secure environment afforded by our banking system. This will not only provide security to the marijuana related businesses (“MRBs”), but will also permit better accounting, monitoring, and taxing of funds generated by those businesses.
To read the full text of this article, please visit the Duane Morris LLP website.
Law Firms Hedge Bets on Marijuana Being Legalized Nationwide
Duane Morris was mentioned in this U.S. News Best States article about law firms that have set up practices that focus on the cannabis industry, with a focus on firms in the Philadelphia area and advising companies on Pennsylvania laws related to the cannabis industry.
Is Bankruptcy An Option For Ancillary Marijuana Businesses?
On June 8, 2017, Clifford J. White III, director of the U.S. Trustee Program, proclaimed before a congressional subcommittee that “debtors with assets or income derived from marijuana may not proceed through the bankruptcy system.”
To read the full text of this article, please visit the Duane Morris LLP website.
Racial Discrimination in the Legal Cannabis Space: New Industry, Same Old Story???
Attend any of the conferences or trade shows springing up in the emerging legalized recreational and medical marijuana space, and one thing you’ll notice is an absence of racial diversity. Why?
There are a number of possible explanations for the comparatively low number of minorities participating in the space, including, high start-up costs and restricted access to capital, especially given the reluctance of commercial banks to enter the fray, and limited political ties in a highly politicized system. Those reasons alone could be creating barriers for minorities to enter the market as owners and investors. Continue reading “Racial Discrimination in the Legal Cannabis Space: New Industry, Same Old Story???”
The Federal Antitrust Laws May Not Protect Competition and Consumers In The Cannabis Industry
To assert a federal antitrust claim, a plaintiff must have standing under Article III of the U.S. Constitution and must also have suffered an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants acts unlawful. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). The Brunswick standard generally benefits consumers who have paid artificially high prices as a result of a defendant’s anticompetitive conduct, or a competitor of a defendant that abused its market power to compete unfairly.
The federal antitrust laws, including the Brunswick standard, are one of the many protections intended to keep competitors on an even playing field and striving to beat one another by offering the optimal combination of quality and price to consumers, and to protect consumers from overreaching and opportunistic manufacturers that use nefarious means to impose a price they would be otherwise unable to charge. These laws have been critical in shaping industries.
However, it may be that the federal antitrust laws are among the federal laws unavailable to cannabis industry participants, as the federal antitrust laws are limited to commerce “among the states,” i.e., interstate commerce. Because cannabis is still prohibited under the Controlled Substances Act, its legal manufacture and distribution is generally limited to intrastate activities. Thus, competition for legal cannabis is, by and large, necessarily intrastate. Fortunately, most states have antitrust laws that mirror federal antitrust laws, and borrow from the federal judicial precedent they have generated. However, as a general matter, the federal courts and federal judges are more experienced than the state courts in the complex economics underlying most antirust matters.
For the burgeoning cannabis industry, this may be yet another problem arising out of the federal prohibition of cannabis. It means that consumers of cannabis products, such as cannabis, vapes, edibles, and possibly ancillary flower-touching products, may not be protected from inflated prices resulting from anticompetitive conduct, such as price-fixing agreements or agreements to allocate markets, and competitors for those products may not be able to ensure a level playing field with the largest companies, allowing the powerful companies to take advantage of their position by inflating prices.
The bottom line is that as the cannabis industry continues its growth at breakneck speed, manufacturers of cannabis, cannabis-infused, and cannabis-related products, may be tempted to engage in the types of anticompetitive conduct the federal antitrust laws are best able to correct, with the help of experienced federal judges, and consumers of those products may unfortunately be exposed to artificially inflated price increases flowing from such conduct left unchecked. While not all cannabis manufacturers or cannabis-related products are limited to competing in a single state, the bulk are.
To this point, the role the federal antitrust laws (or state for that matter) can play in shaping the cannabis industry has not been tested. That day may be on the horizon, however, as some companies continue to grow into industry giants, while others struggle to compete. Cannabis space participants, especially the larger players, should be aware of the compliance measures taken in other industries to protect themselves from the possibility of antitrust claims brought by their competitors or consumers.
PA Governor To Defend PA’s Medical Marijuana Program Against Federal Attack
In a letter to U.S. Attorney General Sessions dated June 15, 2017, Pennsylvania Governor Tom Wolf strenuously objected to the possibility of the federal government attempting to curtail Pennsylvania’s medical marijuana program, which is scheduled to launch with the issuance of grower, processor and dispensary permits in the coming weeks. As Governor Wolf stated in the letter:
Your action to undo the protections of the Rohrbacher-Farr amendment, which prevents the use of federal funds to disrupt states’ efforts to implement “their own State laws that authorize the use, distribution, possession or cultivation of medical marijuana” is misguided… If you seek to further disrupt our ability to establish a legal way to deliver relief of medical marijuana to our citizens, I will ask the Attorney General of Pennsylvania to take legal action to protect our residents and state sovereignty.
Governor Wolf’s letter was in response to a letter that Sessions sent to Congress on May 1, 2017, regarding the Rohrbacher-Farr amendment, in which Sessions stated :
I believe it would be unwise for Congress to restrict the discretion of the Department to fund particular prosecutions, particularly in the midst of an historic drug epidemic and potentially long-term uptick in violent crime.
On May 5, 2017, President Trump extended the Rohrbacher-Farr amendment through September 30, 2017.
Valuation Trends and Investment Opportunities in the Cannabis Industry
Duane Morris partner Seth Goldberg will take part in a webcast, “Valuation Trends and Investment Opportunities in the Cannabis Industry,” to be held on June 29, 2017, from 11:00 a.m. to 12:00 noon PDT. Please visit the Expert Webcasts website for more information or to register.