As marijuana becomes big business, it may be time for Wisconsin lawyers to take another look at the industry.

As Wisconsin Public Radio reporter Shawn Johnson wrote in a Dec. 21, 2022, article, “Wisconsin is on its way to becoming an island among Midwest states when it comes to recreational marijuana. Already, marijuana is legal in Illinois and Michigan, and Minnesota Gov. Tim Walz, a Democrat, said his state would pass a bill to legalize marijuana by May.”

Johnson added that 21 “states have legalized recreational marijuana, and 37 allow it for medicinal uses. It may just be a matter of time before marijuana is legalized for one or both purposes” in Wisconsin.

Marijuana is now big business. The ABA Journal reported in its December 2022 issue that the “cannabis industry generated $25 billion in revenues from legal sales in 2021 and employs more than 400,000 people nationwide. It was expected to reach $32 billion in annual sales in 2022 and could exceed $50 billion by 2030.”

As expected, lawyers’ practices are following this new business closely. More and more attorneys are confronting what some refer to as the “wild, wild west,” of the cannabis legal landscape.

Federal Law versus State Law

Despite many states’ legalization of marijuana for recreational and medical purposes, using and selling marijuana is still a violation of federal law – no exceptions.

The federal Controlled Substances Act identifies marijuana (as well as heroin and LSD) as a Schedule I drug, which means (among other things) that there is no safe dose and there is also a high likelihood of addiction. Participating with these substances in any way opens anyone to federal criminal and civil liability.

The Racketeer Influenced and Corrupt Organizations (RICO) Act provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. Meanwhile, 37 states have established separate and unique legislation to legalize marijuana growth, sales, and use.

The contradictions between state and federal law make it nearly impossible for the courageous entrepreneur to successfully navigate any part of the business of growing, selling, or using marijuana without legal services.

The Lawyer’s Dilemma

This creates a dilemma for lawyers looking to represent clients in what is proving to be lucrative business. Should a lawyer risk ethical violations and his or her law license by representing a business that is knowingly breaking federal law? Further, is it possible that the lawyer could face criminal charges under RICO?

Absent new legislation to remove marijuana from Schedule I, the executive branch further muddied the waters by issuing the “Cole Memorandum” under President Obama. It deferred the Department of Justice’s right to challenge state laws legalizing marijuana, only to have it rescinded later by the Trump administration.

The ABA and some state bar associations have made some progress, the ABA article adds. For example, “In 2020, the ABA House of Delegates adopted two resolutions urging federal legislation to shield lawyers and banks from criminal liability for providing services. …”

The Illinois and Washington state bar associations both have amended their states’ rules of professional conduct to make marijuana work ethical. For now, as one of the minority of states that has yet to legalize recreational or medicinal marijuana, Wisconsin lawyers have less cause for concern.

However, public sentiment appears to be weighing heavily in favor of legalization, and it may be inevitable. Given the slight chance of fully resolving the differences between federal and state laws in today’s political climate, it is reassuring that the ABA and state bar associations are forging a path to at least address the ethics of representing marijuana businesses.

Impacts on Insurance: Time to Ask These Tough Questions

It appears that federal legalization of marijuana is likely. It may not be in the immediate future, but public sentiment and the allure of big money tend to sway enough politicians to legislate, accordingly.

As a realistic consideration on the horizon, all those involved – businesses, lawyers, banks, and insurance companies – need to start asking those tough questions.

From an insurance perspective, the insurance company needs to decide if it wants to be involved in cannabis-related coverages. If not, it needs to put exclusions in place to protect the insurance company. If so, insurance companies may not even have application questions in place to determine if a policyholder is involved in representing cannabis businesses.

And, if the insurance company does get involved (voluntarily or involuntarily) what risks are associated with those insureds?

As more and more lawyers take on cannabis-related issues in their practice, it is time to revisit underwriting and claims handling processes to address all of these concerns.

This article was originally published on the State Bar of Wisconsin’s Solo/Small Firm & General Practice Blog of the Solo/Small Firm & General Practice Section. Visit the State Bar sections or the Solo/Small Firm & General Practice Section webpages to learn more about the benefits of section membership.