The Medicinal Marijuana Business and The Impact of recent Federal Changes



From 1970 and for 44 years thereafter, Congress has listed marijuana on Schedule I of the Controlled Substances Act (“CSA”), making no allowance for marijuana to be lawfully prescribed for medical purposes.  However, on December 16, 2014, Congress formally recognized the concept of “medical marijuana” in its documents and has also explicitly endorsed the medical value of marijuana and in some fashion prohibited federal prosecutions in states where medical marijuana is legal[i].

In putting a stop to the Department of Justice (DOJ) prosecution of medical marijuana patients, Congress made clear that its intent was to protect the health of patients and each state’s decision on how to tend to the medical needs of its citizens.

In enacting its medical marijuana laws, the State of California established a comprehensive scheme designed to empower local communities and officials, medical patients suffering from terminal or debilitating conditions, stimulate the economy, and generate tax revenue. Congress has decided to protect California’s comprehensive scheme by preventing the Department of Justice from spending any money that interferes with California’s implementation of its scheme. Any current, ongoing prosecution dramatically interferes with California’s implementation of its medical marijuana laws, indictments should almost mandatorily be dismissed in their entirety. Any continued prosecution almost certainly violates

(i)                  independent decision-making authority by officers of the State of California,

(ii)                the medical health of patients in the State of California,

(iii)               economic development in the State of California, and

(iv)              the State of California’s efforts to collect tax revenue.

Through the Appropriations Act, Congress requires the DOJ to stand by and let local prosecutors decide whether medical marijuana patients should face criminal sanction. Any other decision-making process robs the State of California of its sovereignty, violates California’s medical marijuana scheme, and contradicts the will of Congress.

Perhaps most devastating, by prosecuting patients of medical marijuana, the DOJ causes direct harm to the health of residents of California seeking treatment under the State’s medical marijuana scheme.  Congress has protected medical marijuana patients in certain states from the anti-health efforts of the DOJ. In those states, the DOJ is forbidden from spending any funds in contravention of the medical health of patients across those selected states.

The DOJ’s prosecution of patients with medical needs impedes the economic development created by the State of California’s medical marijuana scheme. California’s scheme allows buying and selling of medical marijuana (as long as the proper medical licenses and procedures are present). These transactions — like all lawful economic transactions in California — fuel the local and statewide economy. Every time money changes hands consensually, economic profit is created.  The seller receives additional value in money she receives while the buyer receives additional value in the medicine she receives. Such is the nature of free trade.  The voluntary exchange of money for products creates a benefit to both buyer and seller, as both parties part with something they value less in order to receive something they value more. The seller, who receives a financial benefit, is able to spend the finances back into the local economy. The buyer, who benefits medically, is a healthier citizen, more capable of contributing productively to the State’s economy. This economic boon is seen on a larger scale in the dispensaries, which sell in larger quantities to many patients.

Due to the enactment of California’s medical marijuana laws, countless dispensaries have been established for the lawful sale of medical marijuana.  The creation of these businesses — like the creation of any businesses in general in the State of California — benefits both local and statewide tax revenue. Where required, businesses must pay taxes on almost all aspects of conducting a business, including the acquisition of land, construction of buildings, personnel and payroll costs, sales tax, property tax, and myriad other forms of taxation. A necessary output of California’s medical marijuana scheme is a ubiquitous system of dispensaries which, like any other California businesses, contribute to the tax revenue.

In carefully crafting a legal system of medical marijuana, the State of California sought to empower local communities and officials to make decisions about medical marijuana, benefit medical patients suffering from terminal or debilitating conditions, stimulate the economy, and generate tax revenue.  Interference from the DOJ may disrupt every aspect of California’s implementation of its medical marijuana scheme. By preventing the implementation of California’s medical marijuana system, DOJ may be violating Congress’s pronouncement.

As of December 2014 federal agents are supposed to refrain from raiding medical retail dispensaries; however the sale of marijuana is still technically illegal at the federal level.  This means that the legality of establishing and running a medical marijuana dispensary is a complicated issue that needs to be carefully navigated.  Producing and selling marijuana in these dispensaries has become a booming industry, but there are many things to keep in mind if you decide you want to set up your own.

Hire a lawyer. Because of the unique legal situation medical marijuana dispensaries face, it’s important to seek professional legal advice before purchasing or opening a dispensary. A lawyer will also be able to help you secure the appropriate entity formations, and other relevant documents and systems in place for a seamless business strategy.

  • For example, in some states you may be required to classify your dispensary as a “non-profit organization”

A not-for-profit is stated in the AG guidelines.  A not-for-profit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.  This means you can still pay yourself and employees a reasonable salary and have your expenses covered for the business.

Our Lawyers are familiar with Medicinal Marijuana Nonprofits and those laws facing the Medicinal Marijuana industry. Many business owners have no idea the amount of power they have, when they are being advised by a legal representative in these cases. A lawyer will look at the complete situation, and then advise you on the different circumstances that are suitable for your situation.

For a free consultation regarding any issue that you might have with the Medicinal Marijuana business, call Legal Solutions 2 U today at 855 – 77 LAW 2 U (855-775-2928)




[i] Sec. 538. None of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, California, and Wisconsin, to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.