Photo: Ted S. Warren/APBig names have gotten into the marijuana business, including Microsoft, which as partnered with a firm that makes "seed-to-sale" tracking.
Of Counsel - Florida Law
A budding area: Medical marijuana attracts niche law practices
Practice groups are popping up to help businesses navigate the legal haze surrounding medical marijuana.
David Kotler, a partner at Cohen Kotler in Boca Raton, had just gotten out of the shower one morning in early 2014 when he heard that the Florida Supreme Court had approved ballot language for a constitutional amendment legalizing medical marijuana. Thinking it could be an interesting practice area, he called his firm’s IT administrator and asked him to register a bunch of pot-related website names.
One of them was medicalmarijuanabusinesslawyers.com — a trade name that Kotler admits is probably “too long” and “not forward thinking enough,” but it seemed to do the trick. Calls started pouring in almost immediately.
The frenzy died down after Amendment 2 failed, but the former prosecutor and commercial litigator dug in and devoted himself to learning the legal ins and outs of the so-called “cannabusiness.” He connected with lawyers out west, where recreational or medical marijuana is legal, and helped clients become licensed in those states. He also represented a nursery applying for a license to grow marijuana under Florida’s limited “compassionate use” law.
Today, Kotler says, his effort is “paying dividends.” As Florida prepares to implement an expanded medical marijuana market recently approved by voters, he’s been inundated with cannabis-related work. Other Florida firms — both large and small — with medical marijuana niche practices also report a flood of interest from entrepreneurs looking to get a foothold in an industry that’s expected to generate more than $1 billion in sales in Florida by 2019.
“Mostly it’s individuals and other entities interested in potentially becoming growers, processors or dispensers,” says Jonathan Robbins, an attorney at Akerman who heads the Miami-based firm’s regulated substances task force. He’s also been fielding questions from ancillary businesses, such as lighting companies, transportation providers, security companies, payroll providers and staffing agencies that will provide important services to the pot industry in Florida.
Businesses hoping to get a piece of the action face a haze of issues. Still unknown, for instance, is exactly how Florida’s expanded medical marijuana market will operate. While the amendment technically went into effect Jan. 3, the Florida Department of Health has until June to implement rules governing everything from how patients will become certified, to what qualifications prescribing physicians will need, to how medical marijuana treatment centers will be licensed and operated.
A key question that state lawmakers may address is whether to expand the number of licensed marijuana producers to keep up with expected demand. Currently, just six Florida companies are licensed to grow and distribute cannabis in Florida.
While 29 states and the District of Columbia now allow some form of legalized marijuana, it remains illegal under federal law. That incongruence creates a host of challenges and potential pitfalls for “ganjapreneurs” and the businesses that interact with them.
Many banks won’t touch the legalized marijuana market for fear of running afoul of federal law and jeopardizing their charters. Credit card companies have also shunned the industry, forcing legal pot shops to operate as cash-only businesses. Obtaining insurance coverage can also be difficult.
“There are so many challenges and hurdles. You can’t do business over state lines. You can’t get the intellectual property rights that you might otherwise have. Companies don’t have the luxury of being able to file for bankruptcy protection if they fail,” says Robbins. “To me, this is like the end of Prohibition — but yet, without Prohibition being over.”
Adding to the uncertainty is how the Trump administration will treat the pot industry. Under President Obama, the federal government took a hands-off approach to state-sanctioned marijuana operators. Businesses have been reassured by a 2013 Justice Department memorandum that essentially says the federal government won’t tangle with marijuana businesses as long as they keep it out of the hands of minors and criminal drug cartels and don’t run afoul of other federal enforcement priorities.
But marijuana industry advocates are uneasy about Trump’s attorney general pick, Sen. Jeff Sessions (R-Ala.), a staunch legalization opponent who said during a Senate hearing last year that “good people don’t smoke marijuana.” Most Florida attorneys who spoke with Trend said they are cautiously optimistic that the new administration won’t interfere.
For one, they say, Trump is a states-rights advocate — but he’s also a businessman. The business, says Howard Wander, a principal partner and COO of Kelley Kronenberg in Fort Lauderdale, “makes sense and you’re not going to want to inhibit that.”
Whatever the case, Wander says he thinks it will be difficult if not impossible for things to go backward given the national groundswell of support for legalized marijuana. “I don’t think this behemoth, this juggernaut, can ever be put back in the tube.”
» Greenspoon Marder launched a cannabis law practice last summer and is expanding around the country with new offices in New York, Denver, Las Vegas, San Diego and Portland, Ore. The Fort Lauderdale-based firm has advised more than 2,000 clients in the cannabis industry and held its First Annual Cannabis Law and Business Corporate Conference & Expo in Weston last fall.
» Kelley Kronenberg has been providing guidance to employers, insurance companies and other clients on an array of legal issues that might arise from the state’s legalization of medical marijuana. “Marijuana will touch every one of those businesses in some capacity, so our first phone calls were with those clients, and our seminars have been to make sure they’re protected, whether from an employment standpoint, wrongful hiring or discharge, drug policies and things such as that,” says Howard Wander.
» H. Steven Vogel, a Miami attorney with Hinshaw & Culbertson who advises CPAs and other professionals, has been fielding questions from accountants who are wondering what advice to give clients in the marijuana industry. It can be tricky, he says. Medical marijuana businesses can’t even take the same business expense deductions that other business might take “because the tax law doesn’t allow tax deductions for illegal businesses.”