Will California’s Stance on Marijuana Affect Your Business?

Add California to the list of states where marijuana is now legal to consume as a recreational drug. Of course, it was already legal as a medicine, but now anyone can take it for any reason. What effect will this have on your business? This is an issue that has been percolating and affecting Colorado since 2012.

The new recreational marijuana laws in California have yet to be written and implemented, but when they are, businesses everywhere will pop up around the new industry. By all accounts this can mean a boon for any state’s economy. Recent estimates of how recreational marijuana has affected Colorado show a one billion dollar a year infusion into their economy.

Changing Times

The changes are not all positive for all businesses. No matter what a state does with its laws regarding marijuana, possession and use of marijuana remains illegal under federal law. This is true for two reasons:

Article VI Paragraph 2 of the U.S. Constitution establishes that the Constitution, federal laws, and other rules issued under the authority of the United States is the supreme law of the land. In practice, this means that when a state law conflicts with a federal law (as long as it is authorized by the Constitution) the federal law overrides the state law. This is exhibited plainly today by different states passing recreational and medical marijuana laws when it remains illegal under the federal code.

Despite these facts states have passed such laws, and people are right now consuming marijuana under those laws. To get that marijuana, many businesses have popped up to sell the product, but there are difficulties that are associated with dealing a product that is illegal under federal law. Included in those problems are banks and other financial institutes which deal with such businesses, while at the same time needing to follow federal law to stay viable.

Another issue that has surfaced in relation to state marijuana laws is the RICO Act. Anyone who has seen an organized crime show or movie has heard of the RICO Act. It works to prevent organized crime by punishing organizations or groups that make money off of illegal activity. Within the act is a provision allowing any citizen to bring a civil claim under the act to put an illegal business out of business, and receive damages if that business harms them.

This is exactly what has been happening to businesses in Colorado. In fact, a major suit settled last year that opened the door to this kind of litigation. In that case, a pot shop wanted to move in next to a hotel, but it was stopped by the hotel who felt it would negatively affect business. This represents just one of the challenges, and possibly defenses, that businesses face in dealing with new medical and recreational marijuana laws.

A Guide Through the Changes

Whether you are a business that is affected by these changes in a positive or negative way, our team of business law experts at Royse Law Firm can help guide your company through these changes. We know how to best advise companies on issues of compliance, litigation, and other aspects that relate to this and other new and old California laws. Contact us today so we can be your guide through changing times.

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Roger Royse

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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