It’s Not All Fun and Games: The Cannabis Industry’s Downside

Cultiva Law, PLLC
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As lawyers who specialize in cannabis-related business issues, we love working in the cannabis industry. We get to do challenging, personally satisfying work that directly helps our dedicated, hardworking, creative clients.

But we’re constantly hearing from people who want to get out of the cannabis business because it’s destroying their personal lives. They feel worn down by the pervasive stigma against marijuana and the resulting collateral consequences—from bad to worst—of working in the cannabis industry.

The Bad: Professional Backlash Against Cannabis Businesses

Despite the spread of cannabis legalization in the U.S., the general stigma against cannabis remains strong. This is both baffling and completely predictable. Yes, there’s a strong, continuously growing base of public support for marijuana legalization. But we also have a long history of excessive punishment for marijuana possession, with heavy racial undertones. There are still people in the U.S.—like Allen Russell in Mississippi—serving life sentences for possession of a few ounces of marijuana. Research has shown that those countries that harshly penalized cannabis possession and use experienced the most intense stigma. That negative public sentiment won’t evaporate overnight.

The professional consequence of anti-cannabis stigma is that if you—or any of your business partners—maintain any type of professional licensure, it may be tarnished by the implication that you’re involved in “illegal drug dealing.”

We’ve even experienced this firsthand as cannabis attorneys, but we’re not the only ones. Even though marijuana has numerous proven medical uses, many doctors remain reluctant to prescribe it or sanction its use, fearing backlash from their employers or licensing boards. What if the accountant your business uses to manage the books refuses to continue working with you because they’re being threatened by their certifying agency?

Between personal fallout and the inability to keep good help, professional consequences can be discouraging and demoralizing. But it gets worse.

 Worse: Financial Consequences of Working in the Cannabis Industry

If you own or operate a cannabis-related business, don’t expect to jump on the refinancing bandwagon the next time home loan interest rates drop. In fact, your best bet is probably to purchase your home—and any other assets—outright, in cash. Because cannabis is still federally illegal, FDIC-insured banks are unlikely to consider income from a marijuana business in a mortgage application, which eliminates the possibility of homeownership for many cannabis business owners. If you can’t afford to buy a home without financing, you may need a cosigner, and you’ll probably pay higher rates and fees to offset your apparent “risk.”

In that same vein, cannabis businesses can’t generally apply for standard business loans, removing a layer of financial protection that’s available to most entrepreneurs. And you won’t get any tax breaks on your business, putting you at another disadvantage relative to other business owners. Because the Federal Government maintains you are common criminal, 280E does not allow for tax write offs. Taxes for the cannabis industry range from 50% to 90%. That is razor slim margins.

But the worst downside of the cannabis industry has to be the personal repercussions.

Worst of All: The Personal Fallout of Working in the Cannabis Industry

It’s one thing to have a bank deny your mortgage application because some suit in a stuffy office thinks you’re probably a criminal. It’s quite another to hear your soon-to-be-ex telling the judge in your custody case that you’re a degenerate drug dealer. And have the judge agree.

Should you have to go to court for anything—a divorce, child custody dispute, personal injury claim, enforcement of a contract, or even a speeding ticket—be prepared for your opponent to bring up your line of work as evidence that you’re a slacker, unreliable, untrustworthy, and more.

Whether you’re actually rolling in dough or just barely scraping by, expect people to assume that you’re perpetually carrying around a backpack full of cash. Plan on installing a security system to protect your home and family.

And get used to the looks you’ll get from people who make unwarranted assumptions about the type of person you are simply because you work in the cannabis industry. Many will assume you’re constantly high even though you work as hard on your business as any other entrepreneur. Others will take for granted that you’re a criminal. It’s heartbreaking when your kids can’t have friends over because other parents think you’re a bad influence.

Devastating collateral consequences like these are definitely the downside of working in the cannabis industry—but there are ways to set up a cannabis business to minimize those impacts. That’s part of what we do at Cultiva Law. We are here to help. All doom and gloom aside, you probably are going into this because you are passionate about the plant and see opportunity. Just be prepared that it is not going to be all sunshine dabs and unicorn smoke.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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