Cannabis Industry Risks

Goals

To help understand the risks involved with a cannabis venture in the United States, obtain details on the legal, regulatory, and operational risks associated with being a cannabis provider or retailer in the U.S.

Early Findings

  • There are conflicts between the laws that states of passed and the Controlled Substance Act of 1970 (():15 in video). Marijuana is classified as a Schedule 1 controlled substance under Act, which means that the federal government could choose to prosecute producers and retailers even if state laws make it legal.
  • The uncertainty of laws surrounding cannabis also leads to uncertainty with the size of the market and pricing.
  • As of May 2018, 46 states have legalized some form of marijuana for medicinal and/or recreational use.
  • There are also risks to the supply chain, as well as financing risks in the industry.
  • Because marijuana is still illegal at the federal level, money that can be tied to the marijuana supply chain could be considered money laundering and banks that are involved could be prosecuted.
  • Some unique risks specific to retailers include poor inventory management, unorganized or incomplete reporting, licensing issues, and illegal sales.
  • Although banks have been wary of stepping into the cannabis industry, this is less of a problem for insurers. Companies involved in the cannabis industry can often purchase insurance policies to protect them against legal issues.
  • At both the federal and state level, cannabis will be highly regulated and taxed. For companies in the U.S. wanting to do business across state lines, they will be required to know the complex laws regarding cannabis in each state they operate in which can make for a complicated process.

Proposed next steps:

You need to be the project owner to select a next step.
Our initial research indicates that there is great deal of information available on the risks associated with producing or selling marijuana in the U.S. We propose continuing the research to provide a detailed report on 6-8 risks. For each risk we will describe the risk, explain how both producers and retailers are impacted (if different), describe any ways producers/retailers can protect themselves from the risk, and explain how this risk may change going forward.
Additionally, if you are interested in specific states, we can produce a report on the legal and regulatory issues for a given state. This would be one report per state requested and would contain similar details as those described in the previous proposal.