Good news for all you compliance professionals secretly intrigued by those stoners from Pineapple Express: compliance in the cannabis industry is shaping up to be a fascinating, and possibly lucrative, career niche.
Earlier this week I caught up with Amy McDougal, a compliance consultant at CLEAResources who recently gave a presentation to members of the National Cannabis Bar Association about the ethics of the practice of law in the cannabis industry.
You can hear a podcast of our conversation below, and it’s thought-provoking to say the least. According to Arcview Market Research, which studies the weed business, legal marijuana sales hit $6.7 billion last year and could top $22 billion by 2021—so this industry is no joke, and it will need compliance professionals to help it navigate a thicket of licensing and tax regulation.
Still, there’s that pesky problem that marijuana is illegal under the federal Controlled Substances Act, even as one state after another legalizes at the local level. That has led to some mind-bending questions for lawyers in this field, such as…
- Lawyers and accountants are required to report large cash transactions to the federal government—but large cash transactions are common in the cannabis industry, since commercial operators don’t have easy access to the banking system. So if you report one of these transactions, are you ratting out your client to the Man? Or do you not report, and risk sanctions against yourself?
- Let’s say the Justice Department does take action against a commercial weed business. What then? Will prosecutors really seek to impanel a federal grand jury, with jurors drawn from a state where they voted to legalize? Could prosecutors ask a candidate juror whether he or she smokes weed? Could that juror invoke the Fifth Amendment?
- Should lawyers be allowed to own equity in a legally operating marijuana business? What about judges? Do the two groups need different standards?
- Professional conduct rules for lawyers require competency in rendering legal advice. What does competency even look like in this branch of business conduct, when the laws are so new and in conflict with federal law?
You could continue from there, and in my 20-minute podcast with McDougal, we do. She says “an enormous amount of mental gymnastics” is coming from high courts and bar associations in states where marijuana is legal, as people try to figure out how to make the cannabis industry work.
“We wrestle with the rules that we cannot advise on a criminal activity… So there’s this conflict under rules of professional conduct that we don’t normally see,” she says.
States are leaning toward allowing lawyers to provide counsel, so long as the feds don’t begin vigorous enforcement, McDougal says. At the same time, however, “We can’t have our rules on professional conduct at the state level hinging on enforcement policy at the federal level.”
The Career Opportunities
That is a valid question for compliance officers contemplating the cannabis field, since attorney general Jeff Sessions has generally frowned on legal marijuana sales. If he launches a crackdown that snares your client, even if that client is operating legally in your state, potentially you might face sanction yourself or consequences with your law license. (Ditto for all you corporate accountants reading this, with your CPA license.)
Your career security will really depend on the state bar and accountancy associations that control license requirements and disciplinary action. How well are those state associations answering that question? It varies. And not all state officials are as bright as the UV lights in a grow shop.
On the other hand, if the Justice Department does take action against a marijuana business under the Controlled Substances Act—that logically means the company could mitigate its punishment with an effective compliance program as defined under the Federal Sentencing Guidelines.
Nobody has tried this argument yet, because we’ve seen no federal enforcement yet. But it does feed into the idea that marijuana businesses have a need for good compliance. Enterprising compliance professionals could certainly make that argument to potential clients.
And for curious compliance officers, that’s the fundamental issue: these businesses will have enormous need for help. They are highly regulated, and generally owned by small proprietors without the experience to navigate state licensing and tax regulation themselves. So there’s opportunity here. (You may also want to follow SEC_Filings_on_Weed on Twitter.)
So enjoy the podcast. I suspect we’ll be trying to figure out this compliance niche for quite some time.